Latest AIFMD Alert – 1 February 2012 –
AIFMD - towards level II rules - FSA launched a new debate
ESMA's final advice has been published. It's time to consider the implications and opportunities.
Late January 2012, UK Financial Service Authority (“FSA”) published a discussion paper on implementation of the Alternative Investment Fund Managers Directive (“AIFMD”). This newly launched debate aims to gather views from “alternative” players on a number of somewhat controversial issues, such as depositaries, valuation, remuneration, regulatory capital, risk management and the special regime potentially applicable to smaller managers. The deadline for the response is March 2012. The discussion paper can be consulted here.
16 November 2011 - ESMA's final advice has been published. It's time to consider the implications and opportunities. For advice on preparing for the AIFMD and assessing its impact please contact our experts listed below.
ESMA published its final technical advice (final-report.pdf, 3.4 MB) on the (“AIFMD”) on 16 November 2011. This 500-page, largely technical document, brings further clarity to many fundamental issues of the Directive.
During the annual ALFI European Alternative Investment Funds conference which took place on 22 and 23 November 2011, Luc Frieden – Mininster of Finance of the Grand Duchy of Luxembourg, sent a strong signal to the “alternative” community by emphasising that Luxembourg will be one of the first EU countries to implement the Directive as it was done for UCITS in the past.
KPMG Luxembourg prepared a 2-page overview (level2-ESMA-final-advice.pdf, 378 KB) that summarises major points of interest contained in ESMA’s final advice as well as key notes to the attention of Asset Managers, Depositories and Administrators.
Earlier in September 2011, ESMA published responses to its second consultation paper (ESMA-consultation-paper.pdf, 151 KB) on possible implementing measures of the Alternative Investment Fund Managers Directive (“AIMFD”) in relation to supervision and third countries which were submitted by the industry on 23 September 2011. This draft technical advice provides a technical note on the topics relating to supervision and third countries, including marketing of third country alternative investment funds to EU investors, supervisory required for the delegation of certain functions to third country entities, and the appointment of third country depositaries.
The matters addressed in this second consultation paper are very important to the “alternative” community and affect not only alternative investment fund Managers (“AIFM”) established outside EU and those managing third country alternative investment funds (“AIF”) but also those decided to delegate.
On 26 September 2011, many stakeholders attended a public hearing at ESMA regarding these implementation measures.
Main topics of this hearing session were re-introduction of notion of equivalence and definition of the Member State of reference in cases where there are several Member States of reference.
Draft responses on an earlier Consultation Paper on ESMA's draft technical advices to the European Commission which deal with several implementing measures of the Alternative Investment Fund Managers Directive (AIFMD), such as authorisation, general operation conditions, depositaries, leverage and transparency have been also published.
Original consultation paper can be consulted here (ESMA-consultation-paper-part1.pdf, 3.6 MB).
What’s AIFMD?
The Alternative Investment Fund Managers Directive (“AIFMD”) aims at regulating the distributions / marketing of alternative investment funds and the organizations / operations of their managers. The Directive, approved in November 2010 by the European Parliament, has been adopted by the EU Council on 27 May 2011.
The directive has been published in the Official Journal on 1 July 2011 and entered into force on July 21, 2011.Member States will then have 2 years (until July 21, 2013) for the transposition into national law.
The press release (press-release.pdf, 87.7 KB) summarising the main key points of the directive can be consulted on the Council website.
Where is the EU regulator in the process?
After the first round of responses from alternative investment market players including regulators to the first call for evidence (first-call-for-evidence.pdf, 92 KB) issued by the European Securities and Markets Authority (ESMA), a discussion paper was issued by ESMA on 15 April 2011 on possible implementing measures under Article 3 of the Alternative Investment Fund Managers Directive (AIFMD). This discussion paper does not yet include any formal proposals, it is rather seeking to receive additional views of market participants on various topics (ESMA-discussion-paper.pdf, 181 KB).
The European Commission has requested advice from ESMA on the content of implementing measures by 16 November 2011 and this advice was provided by ESMA on this date (final-report.pdf, 3.4 MB).
The European Commission is expected to finalise level II measures by November 2012 as latest.
KPMG in Luxembourg actively participates in AIFM working groups of Luxembourg Private Equity Association (“LPEA”), The Luxembourg Bankers' Association (“ABBL”), Commission de Surveillance du Secteur Financier (“CSSF”) and Association of the Luxembourg Fund Industry (“ALFI”) and participated in through those bodies in the responses to the ESMA discussion papers. As part of the Luxembourg delegation, we have also participated in various meetings with chairs of the task force, such as task force 2 on authorisation, delegation and organizational requirements.
Below is the list of four out of four work forces, formed by ESMA, which dealt with the following main streams:
- Task force 1 – Scope / Opt-in regime / Types of AIFM, chaired by the Central Bank of Ireland;
- Task force 2 – Authorisation, delegation, organizational requirements, chaired by the German regulator – BAFIN;
- Task force 3 – Depositories, chaired by the French regulator – AMF ;
- Task force 4 – Transparency, leverage, risk and liquidity management, leverage – chaired by the UK regulator – FSA.
Side effect of the directive:
On 16 June 2011, The European Commission, launched a consultation on new rules for venture capital funds which can be consulted here (consultation-paper-en.pdf, 80 KB).
This consultation document focuses on the creation of an Internal Market for venture capital and presents the core elements of a possible European framework in relation to the venture capital funds in the context of AIFM framework and a tailor-made system as a stand-alone alternative to AIFMD.
The consultation closed on 10 August 2011. .
Read the full KPMG e-Alert on AIFMD:
KPMG in Luxembourg actively participates in AIFM working groups of Luxembourg Private Equity Association (“LPEA”), The Luxembourg Bankers' Association (“ABBL”), Commission de Surveillance du Secteur Financier (“CSSF”) and Association of the Luxembourg Fund Industry (“ALFI”) and participated in thorugh those bodies in the responses to the ESMA discussion papers. As part of the Luxembourg delegation, we have also participated in various meetings with chairs of the task force, such as task force 2 on authorisation, delegation and organizational requirements.
Even if the final approval of level II implementing measures will take place mid/end 2012, the final ESMA’s technical advice clearly brings more certainty on which decisions can be based and actions taken.
2012 is therefore the year when most of the strategic work should be carried out in order to determine the main impacts on the organizations and to consider any first mover advantage.
This is not only relevant for the managers but also for many service providers such as administrators and custodians.
Decisions of importance such as appointment and/or redomiciliation of the Managers or their funds and operational requirements’ alignment need time and careful analysis to assess all implications: whether it is operational, financial, tax or human.
New fund launches should anticipate the regulatory developments and this is equally important to assess the impacts on existing funds and investment vehicles.
We are part of the debate at many levels and we are happy to assist our clients in this first key phase of the regulation. We have the experience to assist you in thinking through the various aspects of the regulations and the impact on your organizations, cutting through complexity.
Our solution framework which looks like:
