When the Alternative Investment Fund Managers Directive (AIFMD) was published in 2011, asset managers believed they had a full three years, until July 2014, to implement the significant changes required under the legislation.
As AIFMD evolved, fears arose that the European Commission would interpret the transitional provisions to require managers to be fully compliant as of the transposition deadline of July 22, 2013, notwithstanding that they would have a further 12 months to apply for authorisation under the AIFMD. This was a daunting prospect in light of the requirements imposed by the AIFMD and the fact that national implementing legislation was unlikely to be published until close to the transposition deadline.
To the relief of many, clarifications from national and European regulators in the lead-up to the July 2013 deadline served to allay fears that compliance with the AIFMD requirements would be required from then. It was confirmed that managers would be required to comply on a “best efforts” basis during the transitional period, but national regulators would not assess AIFMD compliance until an application for authorisation was made.
However, managers need to be wary of being overly complacent on the basis of a full 12-month transitional period, which may be a lot shorter. Statements from national regulators such as the UK Financial Conduct Authority (FCA) suggest that managers will need to move well in advance of the July 22, 2014 deadline to ensure they can continue to market their funds after that date. The FCA has information on its website regarding the timing of AIFM authorisation applications by AIFMs operating pre-July 22, 2013.
For firms seeking an authorisation or a variation of permission under AIFMD (including small authorised UK AIFMs and depositaries), the FCA directs these firms to apply no later than January 22, 2014 “in case we need a full six months to determine the application”. Firms that need to be authorised as full-scope UK AIFMs or to be registered under AIFMD are required to submit a complete application no later than April 22,2014. The FCA states that if it receives applications after 22 April 2014, it will not be obliged to determine these before July 22, 2014. Managers whose applications have not been determined by then may find they can no longer market their funds in Europe. The Central Bank of Ireland has written to all non-UCITS funds seeking confirmation of each fund’s intentions regarding AIFM selection to assist in the Central Bank’s planning for multiple submissions of applications ahead of July 2014.
Notwithstanding the flexibility afforded by the transitional period, a number of managers have sought to gain first-mover advantage to avail the pan-European marketing passport. (BlackRock is a strong example of one early mover.) Only 12 EU member states implemented the AIFMD by the July 2013 deadline, permitting AIFMs in those jurisdictions to avail of the AIFMD passport from the earliest possible date. The Central Bank of Ireland was the first European regulator to accept AIFM applications.
To avoid potential issues where an authorised AIFM seeks to market its funds in a member state which has not yet transposed the AIFMD, or to manage a fund domiciled in that member state, the European Securities and Markets Authority has issued an opinion setting out the practical arrangements that will apply should such issues arise. It remains to be seen how any such issues will be resolved in practice.
Notwithstanding the transitional period, managers who have not done so need to focus on the AIFMD and any applications required to ensure they do not run the risk of being left behind come next July.
Liam Collins is a partner in asset management and investment funds group at Matheson
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