UK: (AIFM)D-Day – Key Points To Note In FCA Policy Statement 13/5

Summary and implications

The Alternative Investment Fund Managers Directive (AIFMD) is transposed into UK law today. Unless alternative investment fund managers (AIFMs) are able to take advantage of the AIFMD's transitional provisions, AIFMs must comply with those parts of the AIFMD which apply to them from today.

On 28 June 2013, the Financial Conduct Authority (FCA) published Policy Statement 13/5: "Implementation of the Alternative Investment Fund Managers Directive" which was the final piece of the jigsaw in the FCA's AIFMD implementation. This briefing summarises the key points raised by the FCA in their policy statement.

1. Transitional provisions

The FCA has confirmed that the AIFMD's transitional provisions should allow an AIFM who:

  1. already manages Alternative Investment Funds (AIFs); or
  2. prior to 22 July 2013, markets an AIF in the European Economic Area,

to carry on its activities without needing to comply with the AIFMD's requirements until 22 July 2014.

Notwithstanding this confirmation, the FCA has emphasised that firms must be giving serious consideration to preparing for full compliance with the applicable AIFMD provisions when the transitional period comes to an end.

Firms should also be take note of how other EU member states have interpreted the transitional provisions and adapt their approach in each member state accordingly. The implementation of the AIFMD in some member states has not kept pace with the implementation in the UK and whilst it is useful to have the FCA's clarification, there is still much uncertainty across the EU. Firms are advised to tread carefully.

FCA Policy Statement 13/5

2. Delegation

In accordance with Recital 9 of the AIFMD, the FCA has clarified that it views the letter box entity provisions as a broad anti-avoidance measure and, as such, will apply the requirements accordingly.

Firms are reminded of the importance of being appropriately authorised when considering their structures and should consider carefully who the AIFM in a structure actually is so as to ensure that the correct entity is authorised as an AIFM.

3. Passive marketing/reverse solicitation

Passive marketing or reverse solicitation is outside the scope of the AIFMD. Building upon UK AIFMD regulation 47, the FCA's PERG guidance states that marketing restrictions do not apply to an offering or placement made at the initiative of the investor.

Moreover, the FCA has helpfully clarified that a confirmation from an investor should normally be sufficient to demonstrate that the investor took the initiative.

Firms are warned not to rely upon such a confirmation where it has been obtained in order to circumvent the rules. Firms should also ensure that they have policies and procedures in place to review and make a record of communications with their investors in order to demonstrate an audit trail.

4. Limited partnerships and joint ventures

Much of the uncertainty surrounding limited partnerships has been clarified by the FCA. Their Perimeter Guidance has been updated to acknowledge that joint ventures structured as limited partnerships can fall outside the scope of the AIFMD.

The FCA has acknowledged that it is quite common in England and Wales for joint ventures to be structured as limited partnerships under the Limited Partnerships Act 1907. To maintain the limited liability conferred by the limited partner status, the limited partners must not exercise control of the partnership in their capacity as a limited partner. The business of the partnership should be managed by the limited partnership's general partner which is controlled (through the exercise of voting rights) by the limited partner investors.

In such a structure, each investor has economic participation (through its limited partner) and strategic management control (through the general partner) but these two roles are separated and carried on through different entities. Notwithstanding the separation of these roles, the arrangement is able to remain outside the scope of the AIFMD on the basis that it is a joint venture.

It is reassuring that the FCA has clarified this key issue.

5. Limited partnerships – number of investors

The FCA has clarified that a limited partnership in which there is a single limited partner making a substantive contribution and a general partner making a nominal contribution will not be an AIF as it will not be raising capital from a number of investors.

However, it should be emphasised that if the constitutional documents of the limited partnership allow for more than one limited partner, the entity will be deemed to be raising capital from more than one investor, despite the fact that there may only, at a certain time, be one limited partner.

6. Prudential requirements

The FCA has confirmed that:

  1. group professional indemnity insurance will be acceptable so long as it provides adequate cover; and
  2. it would be proportionate for an AIFM to rely on a group-level approach to compliance, internal audit and remuneration provided that the specific circumstances of each AIFM within a group are given adequate focus.

7. Remuneration

The FCA has clarified that firms which comply with the AIFMD remuneration regime will be deemed to be in compliance with the Remuneration Code. Firms which undertake both MiFID and AIFMD activities may however choose to apply both regimes to their employees, depending on the work which each employee undertakes under each directive.

There are still uncertainties surrounding the application of the AIFMD remuneration issues under UK law as ESMA is yet to publish its official version of its remuneration guidelines. The FCA expects them to be published very shortly and once they have been published, the FCA will have two months to notify ESMA of whether it intends to comply with them.

Conclusion

The majority of the UK rules and guidance in respect of the AIFMD's transposition into UK law have been issued and firms should now be planning and preparing to be fully compliant over the next 12 months.

Firms should also exercise great caution when negotiating the AIFMD in other EU member states where the maximising harmonising directive is progressing at very different speeds.

We are able to assist our clients with AIFMD advice at every stage of the process and we would be happy to discuss any of the issues raised in this paper, or any other aspect of the AIFMD, with you in further detail.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.