On 19th October 2010, the European Union Council of
Ministers (the "Council") announced that
the Council had reached agreement on compromise text (the
"Proposal") of the controversial
Alternative Investment Fund Managers Directive (the
"Directive"). With the level of
consensus reached on this Proposal, it is hoped that the European
Parliament will approve the Directive without much need for further
amendments or debate.
Briefly, the Directive aims to:
establish "...a framework for monitoring and supervising
the risks that alternative investments fund managers
("AIFM") pose to their investors, to counterparties, to
other market participants and to the stability of the financial
allow AIFMs to provide services and to market funds throughout
the EU single market subject to compliance with strict
If approved by the European Parliament when it votes at
theplenary session scheduled for Thursday 11th November 2010, the
Directive will come into force following a 20 day publication
period in the Official Journal of the European Union, potentially
as early as January 2011. EU member states will be required to
implement the measures into local law within two years of the
Directive coming into force (possibly by as early as January
Assuming that the Directive is implemented based on the
Proposal, it will allow EU AIFMs (from the date of implementation
by their respective home countries), to obtain an EU-passport from
their "home" regulator
("Passport"). The Passport will allow EU
AIFMs to market funds ("AIF") across the
EU, subject to full compliance with the Directive.
EU AIFMs marketing EU AIFs will no longer need to use private
EU AIFMs marketing Non-EU AIFs will need to ensure compliance
with special conditions relating to co-operation between the
supervisory authority of the non-EU AIF (e.g., CIMA) and its home
When the Directive is implemented, Cayman AIFs would, subject
to certain conditions outlined below, continue to utilize the
individual EU member countries' private placement regimes to
market themselves to Europe based investors.
Non-EU AIFMs will be unable to apply for a Passport to market
their AIFs for at least two years after the Directive is
Therefore, not before 2015 and then only after technical advice
is received by the European Commission from the European Securities
and Markets Authority, will a decision be made as to whether the
Passport should be made available to non-EU AIFMs. Until such time,
the private placement regimes will remain available (unless
individual EU member countries opt to discontinue it).
Three years after the introduction of any such Passport for
Non-EU AIFMs (i.e., no sooner than 2018), an informed decision is
scheduled to be made by the European Commission on private
placement regimes, and whether they should be compulsorily phased
Impact on Cayman Funds
For Fund managers wishing to market Cayman funds into the EU,
the following conditions will have to be met:
they must continue to use the private placement regime (at
least up to 2015);
they will have to comply with the European Parliament's
condition which require a cooperation agreement to be in place
between CIMA (i.e., supervisory authority where the AIFM and/ or
the AIF is setup) and the supervisory authority of the country into
which private placements are being made (e.g., UK FSA); CIMA
website holds a list of current International Agreements
with other supervisory authorities.
the Cayman Islands should not be on the FATF money laundering
blacklist (it is not);
the Cayman Islands will need to have in place a signed Tax
Information sharing agreement (that complies with the OECD
Model Tax Convention) with its tax counterparts in EACH EU member
state into which the Cayman fund is marketed;
they will have to comply with the Directive's Chapter
IV -Transparency requirements (Annual report, Disclosure to
investors, regulatory reporting obligations) and Chapter V -
Portfolio Company Requirements (notification of acquisition of
control, asset stripping, content of annual report).
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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