The Irish Funds Industry and AIFMD
The introduction of the Alternative Investment Fund Managers Directive (AIFMD) in June 2011 represented a material change in the way that alternative investment funds were to be regulated across EMEA. Specifically, the Directive created new obligations and liabilities on the Manager (AIFM) and the Depositary (formerly known as a Trustee / Custodian) and created some new regulatory reporting obligations on the fund and manager.
The Irish industry collaborated with the Irish Central Bank and Department of Finance to successfully implement the regulation into Irish law, and to create a set of industry guidance notes around key topics.
At the time of implementation, the Directive initially contemplated a review of key provisions, particularly around the concept and execution of how funds and managers located in “Third Countries” (i.e. outside of the EU) could interact with EU funds, managers and investors.
The Directive required that the review would commence by July 22, 2017 and we now welcome the consultation process commenced by the Commission.
The Irish industry is of the view that AIFMD has broadly worked well; however a number of key issues have remained unresolved, and a number of unintended consequences have presented in the period since implementation.
The importance and urgency of these items has been brought into sharp focus by the decision by the UK to leave the European Union. Within a European context, the importance of the UK fund management industry cannot be overstated, and the Irish industry, while regretting the decision of the UK, remains committed to both maintaining a regime that is compliant with EU regulation and legislation, while at the same time, ensuring that Ireland continues to provide a world class product suite that will continue to be of value to UK managers and investors.
Specifically, the Irish funds industry has been consulting with asset managers and investors and will be recommending via the consultation process that the following areas of AIFMD be included in a review. We also, of course welcome any and all commentary from impacted asset managers.
|Third Countries||The requirements and transition processes around third counties will need to be clarified, especially as we are now facing a large number of AIFMs, AIFs and distribution arrangements which will be potentially migrating from being an EU activity to a Third Country activity|
A number of the provisions around Third Country marketing are unclear – specifically in terms of how “reverse solicitation” might be interpreted and the precise terms under which a non EU AIFM of a non EU AIF might market in the EU
We also note that the policy intention around extending the marketing passport to Third Country AIFs and AIFMs remains unconfirmed
|Depositary||We note that the depositary provisions are unclear in the context of how a depositary is required to supervise the activities of a Prime Broker – specifically we are advised that a US Prime Broker in many instances cannot complete the requirements of Article 90|
We also note the potential for a depositary to “discharge” liability in certain situations – however, the circumstances where the authorities view that such “discharge” might be appropriate remain unclear
|AIFM||We are advised by a number of asset managers that Annex IV reporting requirements are not standard across the EU, with one result being that certain AIFMs are being required to file multiple Annex IV variations in different jurisdictions|
We will be recommending that the Commission ensure that, particularly in the context of Brexit, that a sensible regime for investment management and risk management “delegation” will be retained
The Irish funds industry is committed to retaining our position at the top of leading fund domiciles and will continue to engage with the industry, regulatory bodies and government agencies with a view to continuing to further the business objectives of our client base and their investors.
Irish Funds Alternative Investment Steering Group