The Alternative Investment Fund Managers Directive (AIFMD) came into force on 22 July 2013 and is the outcome of a G20 consensus for closer regulatory oversight of the alternative investment funds sector, including hedge funds, private equity funds and real estate funds. The AIFMD primarily affects EU-based alternative investment fund managers (AIFMs) and non-EU AIFMs managing EU domiciled funds. However, any non-EU manager looking to continue marketing their EU or non-EU investment funds (including BVI and Cayman Islands funds) to professional investors within the EU are also caught and will need to comply with certain provisions of the AIFMD.
Continued Private Placement
Until at least 2018 non-EU AIFMs of BVI or Cayman Islands investment funds will be permitted, subject to the national rules of each individual EU member state (applied on a country-by-country basis), to continue to market their funds to professional investors within the EU under the relevant private placement regimes. This is subject to the proviso that they comply with the transparency requirements and the reporting obligations under the AIFMD as well as (if applicable) the requirements regarding AIFMs managing investment funds which acquire control of non-listed companies and issuers. The following conditions must also be met:
- neither the BVI nor the Cayman Islands must figure on the Financial Action Task Force (FATF) list as a non-cooperative jurisdiction (both the BVI and the Cayman Islands are fully compliant in this regard); and
- cooperation agreements for the purpose of systemic risk oversight in a form negotiated and approved by the European Securities Markets Authority (ESMA) must be agreed between the regulators of the relevant EU member states in which the funds are marketed and between those member states and the BVI Financial Services Commission (FSC) or the Cayman Islands Monetary Authority (CIMA) respectively.
Further Steps Taken Towards AIFMD Compliance
On 30 May 2013 ESMA announced that it had approved regulatory co-operation arrangements to be entered into by the FSC and CIMA respectively (amongst others) with the relevant regulators of all 27 EU Member States as well as the relevant authorities in Croatia, Iceland, Liechtenstein and Norway. These arrangements were a key component in permitting EU securities regulators to oversee the way non-EU AIFMs comply with the rules of the AIFMD and allowed for the requisite cooperation agreements to be signed by the FSC and CIMA with EU member state regulators.
On 11 July 2013 the FSC and CIMA respectively announced that 25 European securities regulators of the countries listed below had entered into a Memorandum of Understanding (MOU) with the FSC concerning consultation, cooperation and the exchange of information related to the supervision of AIFMs. The list of countries includes:
- Belgium; Bulgaria; Cyprus; Czech Republic; Denmark; Estonia; Finland; France; Greece; Hungary; Iceland; Ireland; Latvia; Liechtenstein; Lithuania; Luxembourg; Malta; Norway; Poland; Portugal; Romania; Slovakia; Sweden; The Netherlands; and the United Kingdom.
The entry into the MOUs was a significant step as it enables the continued marketing of BVI and Cayman Islands investment funds to professional investors within those countries under their relevant private placement regimes.
The Cayman Islands and the BVI pride themselves on being preferred jurisdictions for the establishment of offshore investment fund vehicles and remain fully committed to fulfilling their international obligations, including satisfying all regulatory requirements under the AIFMD, so as to ensure that they retain that position.
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