The AIFMD: Deadlines and Conversion from Non-AIFM to AIFMD

Directive 2011/61/EU on Alternative Investment Fund Managers (the ‘AIFMD’) effectively sets out the rules for authorization, ongoing operation and transparency for alternative investment fund managers (the ‘AIFM’) and the rules for managing and/or marketing alternative investment funds (the ‘AIF’) within the EU. The AIFMD imposes certain requirements for the authorization and supervision of the AIFM and consequently is applicable to all European Union (the ‘EU’) AIFMs managing EU AIFs or third country AIFs (‘non-EU AIFs’), irrespective of whether or not they are marketed in the Union. The AIFMD applies also to non-EU AIFMs managing EU AIFs, irrespective of whether or not they are marketed in the EU and also to non-EU AIFMs marketing EU AIFs or non-EU AIFs in the Union. However, whereas the EU AIFM managing EU AIF have the benefit of a European passport for marketing EU AIF to professional investors, this passport will only be available to non-EU AIFMs and non-EU AIFs from July 2015 subject to ESMA Report. The applicability of the AIFMD rules is not immediate but staggered under three (3) distinct timeframes. Such timeframes are intrinsically related to the availability of the passporting regime and the eventual termination of the national private placement regime rules (‘NPPR’) in the various EU Member States.

Applicability of the AIFMD

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The AIFMD is not relevant only to EU AIFMs but also to non-EU AIFMs if they market AIFs to investors which are established in the EU. Thus the AIFMD captures non-EU AIFMs irrespective of whether they manage AIFs established inside or outside the EU. What makes the AIFMD so particular is the fact that it provides different set of rules premised on the scenario envisaged through the interplay of three (3) main factors:

• the location of the AIFM,

1. the place of establishment of the AIF and;
2. the AIF’s target market.

Obligation for Authorisation

The date of entry into effect of the obligation to become an authorized AIFM under the AIFMD is not the same for all AIFMs. EU AIFMs which commenced their activities on or after the 22 July 2013 (the date of coming into force of the AIFMD) have to apply for authorization as a fully compliant AIFM as from that date. Those AIFMs which started their activities before the 22 July 2013, had till the 22 July 2014 to become authorised under the AIFMD.

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Management

• EU AIFMs marketing EU AIFs

AIFMs based in an EU Member State wishing to manage an EU AIF must apply with the competent authority of the home Member State of the AIFM and be fully compliant with the provisions of the AIFMD.

• EU AIFMs managing non-EU AIFs

In such scenario, the EU AIFM will be subject to the full provisions of the AIFMD with the exception of the depositary provisions. The EU AIFM may appoint a depository lite . As from mid-2015 (subject to ESMA deliberations) the EU AIFM may choose to be fully compliant with the provisions of the AIFMD and also benefit from passporting rights.

• Non-EU AIFM managing an EU AIF

A Non-EU AIFM may manage an EU AIF provided that the Non-EU AIFM complies with the transparency provisions of the AIFMD (articles 22-24 and articles 26-30). This will change in mid-2015 when the Non-EU AIFM is expected to comply with the provisions of the AIFMD and be subject to authorisation by the Member State of Reference as described in article 37 of the AIFMD.

• Non-EU AIFM managing a Non-EU AIF

The provisions of the AIFMD would not be applicable in such case, provided the Non-EU AIFM does not intend to market the Non-EU AIF in an EU Member State.

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Passporting

• EU AIFMs marketing EU AIFs

Authorised EU AIFMs may market EU AIFs in EU Member States subject to a notification letter to the home Member State of the EU AIFM. The competent authority of the home Member State has a twenty day deadline to submit the notification letter, together with applicable documents, to the Member State in which the EU AIFM wishes to market the EU AIF. It is to be noted that a Member State may impose a fee for the marketing of AIFs.

• EU AIFMs marketing non-EU AIFs

The EU AIFM marketing a Non-EU AIF in the EU may continue to market subject to NPPR in the Member State(s), provided the Member State in question still allows marketing through private placement . As from mid-2015 (pending ESMA deliberations), the EU AIFM may choose to be subject to the full provisions of the AIFMD and thus benefit from passporting rights.

• Non-EU AIFM marketing an EU AIF in the EU

A Non-EU AIFM may market an EU AIF provided that the Non-EU AIFM complies with the transparency provisions of the AIFMD (article 42), there are cooperation agreements between the third country in which the Non-EU AIFM is registered and the EU Member State in which the Non-EU AIFM intends to market and the third country is not blacklisted by FATF.

As from mid-2015 (subject to ESMA deliberations) the Non-EU AIFM would need to be authorised and fully compliant with the provisions of the AIFMD and thus also benefit from passporting rights under the AIFMD.

• Non-EU AIFM marketing a Non-EU AIF in the EU

The NPPR would apply to the Non-EU AIFM subject to compliance with the transparency provisions of the AIFMD, that there are cooperation agreements between the third country in which the Non-EU AIFM is registered and the EU Member State in which the Non-EU AIFM intends to market and the third country is not blacklisted by FATF.

As from mid-2015 (subject to ESMA deliberations) the Non-EU AIFM would need to be authorised and fully compliant with the provisions of the AIFMD and thus also benefit from passporting rights under the AIFMD.

Exemption from Authorisation (De Minimis)

AIFMs which are exempted to be authorized under the AIFMD include the following:

• AIFMs which manage portfolios whose AUM do not exceed EUR 100m (including any assets financed through leverage);
• AIFMs which manage portfolios whose AUM do not exceed EUR 500m when the portfolio is unleveraged and redemption rights are only exercisable 5 years or more after the date of initial investment.

These AIFMs (“de minimis”) would only be subject to register with the competent authorities in their home Member State as de minimis AIFMs. As a consequence, de minimis managers would not benefit from any of the rights granted under the AIFMD, including passporting rights.

Summary Implementation of Regulation

21 July 2011 - AIFMD enters into force

22 July 2013 - Transposition deadline of Directive’s rules into National law of the MemberStates

By 22 July 2015 - ESMA reporting on functioning of passport system, NPPR rules and possible extension of the passporting system to third country AIFs and AIFMs

October 2015 (or at the latest, 3 months after ESMA Report) - Specification of date when passports for third country AIFs and AIFMs will be available (Commission to adopt the act based on ESMA report and advice)

October 2018 (3 years after entry into force of Commission delegated act) - ESMA to issue the second report on the functioning of the passport and ending of NPPRs

January 2019 (or at the latest, 3 months after ESMA Report) - Commission to adopt a second delegated act based on ESMA report and advice, specifying termination date of the NPPRs

Our Experience

lecocqassociate provides a full range of financial regulatory, corporate and commercial advice in relation to the structuring and incorporation of entities.

This newsletter is for information purposes only. It does not constitute professional advice or an opinion. Please contact Mr. Dominique Lecocq on info@lecocqassociate.com for any questions.

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