Opalesque Industry Update - After a protracted period of negotiation the AIFM Directive was finally approved by the European Parliament on 11 November 2010. The Directive is expected to be brought into force shortly and will regulate the activities of managers of alternative investment funds (“AIF Managers”) as follows:
(a) if the AIF Manager is based in the EU, on its worldwide activities; and The position of Third Country AIF Managers was initially contentious but has now been resolved by creating a dual system of allowing the existing private placement rules to continue until at least 2018, while also phasing in an option for Third Country AIF Managers to qualify under an EU passporting regime.
Private Placement Rules
1) Regulatory Co-operation
2) Financial Action Task Force (“FATF”)
3) Transparency and Reporting Private placement has been the standard distribution model for the marketing of alternative investment funds both within and outside the EU for a number of years. Jersey or Guernsey general partners of limited partnerships established in the Channel Islands and Jersey and Guernsey incorporated managers of corporate funds set up in the Channel Islands will continue to be able to rely on private placements for marketing of alternative investment funds in the EU, until at least 2018 when the Directive will be subject to review. However, once the Directive comes into effect, EU AIF Managers will no longer be permitted to use the private placement rules for marketing alternative investment funds, even on a domestic distribution basis. Instead, EU AIF Managers will be required to comply with the more onerous requirements of the proposed passporting regime. This may lead arrangers to prefer to use a Third Country AIF Manager formed in the Channel Islands.
Passporting In addition to the requirement for supervisory co-operation agreements to be in place (similar to those provided above in relation to the private placement rules), the Third Country AIF Manager must also appoint a representative in the EU Member State with which it has the most substantive connection.
2) FATF
3) Tax Information On the basis of current regulatory policy in the Channel Islands, Jersey and Guernsey should comfortably satisfy the equivalence requirements as their regulatory standards conform to international best practice and in many respects are more developed than those of a number of EU Member States. However, the costs of complying with the full requirements of the Directive, in terms of capital adequacy, leverage restrictions, appointment of external valuation agents, depository and other requirements may impact adversely on a fund’s total expense ratio. The benefits of passporting are likely to accrue principally to retail funds which are marketed on a pan-European basis. However, alternative investment funds have traditionally been marketed on a selective distribution basis to professional and institutional investors and for such funds the benefits of passporting may prove to be illusory.
Passive Marketing
Marketing outside the European Union (press release)
Corporate website:Source |
Industry Updates
Ogier: Impact analysis for Jersey and Guernsey Investment Funds
Friday, November 12, 2010
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