The Alternative Investment Funds Managers Directive (the “AIFMD”)
The AIFMD, or Directive 2011/61/EU, came into force in July 2011 and was transposed into national law by EU Member States by 2013. The Directive came as the EU implemented G20 agreements to increase transparency for, inter alia, hedge, real estate and private equity funds in the aftermath to the financial crisis of 2008. The Republic of Cyprus transposed the AIFMD into national law in 2013 and it is referred to as the Alternative Investment Fund Managers Law of 2013 or L.56(I)/2013.
With the implementation of the AIFMD, the EU recognises an Alternative Investment Fund (AIF) as those “collective investment undertakings including investment compartments thereof, which: raise capital from a number of investors, with a view to investing it in accordance with a defined investment policy for the benefit of those investors; and do require authorisation as a UCITS.” Therefore, any Alternative Investment Fund Manager (AIFM) who manages collective investment undertakings whose assets are valued above certain thresholds, irrespective of whether these funds are established in the EU or not, are obliged to obtain the relevant AIFM license from their home Competent Authorities, thus allowing the close monitoring of Fund activities in the EU and ensuring market integrity and stability.
Moreover, the AIFMD established an “EU-passport” similar to that of the MiFID Directive. An EU AIFM who manages an EU Alternative Investment Fund (AIF) or a third-country AIF (under certain conditions) may market the AIF units/shares in the EU on a cross-border basis to clients categorised as professional clients.
Some of the main requirements under the AIFMD are:
- Robust Risk and Liquidity Management procedures and systems;
- Managing and monitoring of Conflicts of Interests;
- Requirements for Inducements;
- Increased transparency and reporting to Investors;
- Reporting to Competent authorities for each AIF under management with respect to the following main themes (non-exhaustive):
- Principal Portfolio Concentrations;
- Principal Asset Exposures, and;
- Geographical Concentrations.
- The appointment of a Depositary for each AIF (the AIFMD also defines the duties as well as the liabilities of the Depositary);
- Due Diligence in selecting and monitoring of delegates and Prime Brokers (such as Companies that provide administrative services) on an ongoing basis;
- Best Execution and duty to act in the best interest of a Fund and its investors, and;
- Rules on asset valuations.
Our team of high calibre professionals with years of experience in the financial services industry stands ready to assist with, inter alia, in the following ways:
- Setting up the entity to be authorised as an AIFM;
- Preparation and promotion of the AIFM License Application with CySEC and other EU competent authorities (such as MFSA, FCA, CSSF and CIS);
- Compliance and Risk Management Support Services;
- Staffing solutions;
- Regulatory updates;
- Internal Audit Services, and;
- Transaction reporting solutions.
For more information on our services and how we can assist you, please feel free to contact us