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© 2012 Dechert LLP
AIFMD Countdown:
Level Two Is Here
© 2012 Dechert LLP
AIFMD Countdown:
Timetable Recap
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Timetable Recap
• AIFMD became EU law on 21 July 2011
• Must be implemented by 22 July 2013
• Transitional period until July 2014
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Level 2: Regulations
• Published on 19 December 2012
• Have ‘direct effect’
• Contain wide ranging implementing measures
© 2012 Dechert LLP
AIFMD Countdown:
Scope
Scope and Authorisation
• Do you manage AIFs?
• Can you rely on any exemptions?- de minimis?
- delegate only?
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© 2012 Dechert LLP
AIFMD Countdown:
Key Impact –Marketing Funds in Europe
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Timetable – Marketing
2011 2012 2013 2014 2015 2016 2017 2018
Directive in force (P)
EU AIF marketed by EU AIFM
obtain passport
EU AIF managed by non-EU AIFM and Non-EU AIF obtain
passport?
No more private placements?
IF ESMA make positive recommendation, and requisite implementing legislation is passed
Changes to national private
placement regimes?
Marketing by Asian managers in Europe
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Non-EU AIFM marketing 2013-2015– Member states may allow if:
• The AIFM complies with the AIFMD’s disclosure, reporting and transparency requirements and with requirements on control of non-listed companies
• Its home state meets the cooperation requirements
– Member States may impose stricter rules...
18794858_1.PPTX
Marketing summary
Non-EU Funds or EU Funds with Asian AIFMs
Extension of passports to non-EU AIFMs and non-EU AIFs.
EU Funds with EU AIFMs
Dual marketing system – EU passport or private placement
Implementation date. Passports made available to EU AIFMs for EU Funds.
2010
2011
2012
2013
2014
2015
2016
2017
2018
ESMA to review the passport regime. Possible end of national private placement regime. Passport only ? Passport only ?
Dual marketing system – EU passport or private placement
Private placement only
Transparency
New disclosure requirements:
• Impact on fund documents and IR?
• Who will deliver compliance?
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© 2012 Dechert LLP
AIFMD Countdown:
Key Impact – Delegation
Delegation
• What is your current delegation structure?
• Is it compliant? – e.g. “third country” issues
– Delegation by EU AIFM to non-EU sub-manager
– Delegation by non-EU AIFM to EU sub-manager
• Letter box entities
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Delegation
FundPrimary Manager
Sub-manager
or
AIFM?
?
© 2012 Dechert LLP
AIFMD Countdown:What EU AIFMs are facing over the short term, and Asian managers may face in the long term…
© 2012 Dechert LLP
AIFMD Countdown:
Key Impact Areas –Organisational changes
General Operating Principles (1)
• What are “operating conditions”?
• Derived from operating conditions for MiFID and UCITS managers – so reflect compliance policies, such as best execution and personal account dealing
• Some obligations relate to the AIF itself, and not the AIFM
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General Operating Principles (2)
• Quality and commitment of governing body/personnel
• No “undue costs” charged to investors
• Fair treatment of investors
• Due diligence requirements
• Appointment of prime brokers and counterparties
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Organisational Matters – Conflicts of Interest
• AIFM/MiFID investment managers/UCITS management companies convergence – business as usual?
• Key features of conflicts policy
• Disclosure and internal reporting
• Impact on personnel structures
• AIF voting rights
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Organisational Matters – Risk Management
• Tracks equivalent requirements for MiFID investment managers and UCITS management companies
• What does “functional and hierarchical separation” mean?
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Organisational Matters – Liquidity Management
•A new requirement under AIFMD
•Match portfolio liquidity to redemption profile and counterparty commitments
•Guidance on liquidity measurement arrangements, liquidity limits and use of redemption gates and other liquidity management
tools
•Guidance for funds of funds
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Organisational Matters – Internal Procedures and Valuation
• Internal business arrangements
• Data processing and record keeping
• Permanent compliance/Internal audit functions
• Personal transactions
• Valuation/Calculation of NAV
• Use of models/Frequency of valuation/Professional guarantees for external valuers
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© 2012 Dechert LLP
AIFMD Countdown:
Key Impact Areas –Depositary and Other Issues
Immediate concerns for EU AIFMs – 2015 concern for Asian AIFMs
• Depositary provisions
• Transparency and disclosure requirements
• Other
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Depositary
• Who?
• New prime broker model?
• Impact on pricing?
• Re-domicile onshore funds offshore?
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Other Issues
• Remuneration
• Private Equity Restrictions
• Leveraged Funds
... and more!
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QUESTIONS?
