AIMA

The Alternative Investment Management Association

Alternative Investment Management Association Representing the global hedge fund industry

Some key EU markets 'gold-plating' AIFMD - AIMA EY survey

11 October 2013

Some key European markets are “gold-plating” the marketing requirements for legacy national private placement regimes (NPPR) over and above those required by the Alternative Investment Fund Managers Directive (AIFMD), according to ‘AIFMD: The Road to Implementation’, a joint survey by the Alternative Investment Management Association (AIMA), the global hedge fund industry association, and EY.

The survey sought to develop an understanding of EU member states’ actual readiness to implement AIFMD. While several countries including the UK, Ireland, Sweden and Luxembourg are requiring non-domestic AIFMs to comply only with the minimum rules laid down by the AIFMD when using private placement in their countries, some countries have chosen to impose additional requirements.

France has elected to impose such significant additional requirements on non-domestic AIFMs seeking to market under France’s private placement regime that they will find it extremely difficult to market AIFs in France. Germany is one of a small number of EU countries that will require non-EU AIFMs of non-EU AIFs to appoint an entity to carry out the so called “depositary-lite” duties of cash monitoring, safekeeping of assets and oversight and verification, a requirement under the Directive applied only to EU AIFMs marketing non-EU AIFs.

Jiri Krol, AIMA’s Deputy CEO, Head of Government & Regulatory Affairs, said: “Investors in those jurisdictions that have gold-plated the minimum requirements set out in the Directive for the national private placement regimes will have a more restricted selection of funds to choose from compared to peers in other countries. However those Member States which sought the preservation of private placement regimes have provided transitional relief and refrained from imposing additional rules.

Other requirements across member states are not uniform. At least nine countries will require EU AIFMs marketing non-EU AIFs in their jurisdictions to engage a qualified auditor to perform statutory audits of each non-EU fund under the EU’s Statutory Audits Directive, potentially increasing those funds’ audit costs.

At least seven countries intend to allow AIFMs of EU AIFs to appoint a depositary in a country other than the country of the fund’s domicile – an option which, if introduced more widely, could generate greater competition in the depositary sector.

Benjamin Lucas, Director at EY, said: “Uncertainty and a lack of clarity have impacted the number of authorisations to date. However, the survey shows that, while managers may be hesitant, the commitment from member states to adopt AIFMD has actually been remarkably positive. AIFMD is taking root far quicker than other regulations have in the past.

Almost all ‘core’ member states have transposed the Directive and the majority are allowing transitional relief. However, it is clear from some of the changes made to private placement regimes that the transition period is little more than short-term pain-relief. Regulators are keen to incentivise firms to get authorised as soon as possible and the recent clarification of reporting requirements from ESMA appears to have acted as a trigger event for managers who have been holding back until the last minute. In the past month there has been a significant increase in firms looking for support both through the authorisation process and beyond. The extent to which this will translate into actual authorised entities remains to be seen.

The survey, which was completed on 28 August 2013, builds on an initial set of findings that AIMA and EY released two days after the AIFMD began to take effect on 22 July. That initial report focused on transposition and transitional arrangements and showed mixed progress in terms of AIFMD implementation. It can be found here.


For media enquiries, please contact:
Dominic Tonner, AIMA’s Associate Director, Communications
Tel: +44 (0)20 7822 8380; Email: dtonner@aima.org


Notes to Editors

  • Under AIFMD, the “passport” refers to the new pan-European marketing protocol. Currently the ability to use the passport is limited to EU alternative investment fund managers (AIFMs) marketing AIFs established in the EU. EU AIFMs marketing non-EU AIFs, and all non-EU AIFMs, may only market their funds in the EU if there is a private placement regime set up in the relevant country where the fund is to be sold. From 2015, it may be possible for EU AIFMs of non-EU AIFs to access the passport, but only if ESMA and the European Commission agree. If that were to happen, it may then be possible for non-EU AIFMs to access the passport from 2018, again subject to the agreement of ESMA and the Commission. If that happens, the NPPRs will also be required to be discontinued.
  • ‘AIFMD: The Road to Implementation’ can be downloaded here.

About AIMA

As the global hedge fund association, the Alternative Investment Management Association (AIMA) has over 1,300 corporate members (with over 7,000 individual contacts) worldwide, based in over 50 countries.

Members include hedge fund managers, fund of hedge funds managers, prime brokers, legal and accounting firms, investors, fund administrators and independent fund directors. They all benefit from AIMA’s active influence in policy development, its leadership in industry initiatives, including education and sound practice manuals and its excellent reputation with regulators worldwide.

AIMA is a dynamic organisation that reflects its members’ interests and provides them with a vibrant global network. AIMA is committed to developing industry skills and education standards and is a co-founder of the Chartered Alternative Investment Analyst designation (CAIA) – the industry’s first and only specialised educational standard for alternative investment specialists. For further information, please visit AIMA’s website, www.aima.org.

About EY

EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization and may refer to one or more of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.
 

 
 
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