www.cummingslaw.comAIFMs based outside the European Union (“EU”),including for these purposes the EuropeanEconomic Area states of Iceland, Liechtensteinand Norway (“non-EU managers”), and whowish to either manage or market their AIFs(“funds”) inside the EU, will need to beginplanning and preparing as soon as possible forthe implementation of AIFMD on 22 July 2013.This Checklist deals with the position of a non-EUmanager who intends to market a fund in the EUand is managing a fund which is based either inthe EU (“EU fund”) or outside the EU (“non-EUfund”). AIFMD distinguishes between AIFMs whomanage EU funds, or who intend to market funds(whether EU or non-EU) which are managedby them in the EU (who are, broadly speaking,subject to virtually full compliance with AIFMD),and those who manage non-EU funds outsidethe EU (who must only comply with certain ofAIFMD’s provisions). This distinction is reflectedby parts (A) and (B) of this Checklist, below.The first step is for non-EU managers totalk to UK counsel to discuss their specificstructures and consider what actions needto be taken. Initially, non-EU managers inconjunction with their UK counsel should:(A) If intending to manageEU funds, or market funds(EU or otherwise) which aremanaged by them in the EU:❏❏ consider appropriate “regulator ofreference”, having regard to factorssuch as the jurisdiction of establishmentof the non-EU manager’s funds or ofany EU-based branch operations, orthe jurisdiction of residence of thelargest part of the fund investors;❏❏ review current arrangements and establishthe identities of each fund and its managerand review any delegation arrangements(e.g. with investment advisors);❏❏ review current arrangements for thecarrying out of risk management, internalaudit and compliance functions andportfolio management and considerhow such arrangements should beamended, if necessary, and put inplace necessary documentation;❏❏ review investment policy and strategyfor each fund and consider requirementswhich may attach to investments,above any relevant control threshold(see articles 26-30 AIFMD);❏❏ review all potential passportingarrangements, considering the locationof the manager and each fund and therelevant rules applying to each;❏❏ review calculations of AUM and leverageand consider possible reporting requiredto the regulator of reference;❏❏ review additional own funds and/orPI insurance requirements to ensureadequate funds and/or cover are in place;❏❏ review and negotiate administration anddepository agreements to meet directiverequirements (including depositary rules);❏❏ review and update the offeringmemorandum to take account of all changesconsequent on the AIFMD requirements andto ensure that the offering memorandumcontains full details of any changes inmaximum leverage levels, risk profile andrisk management systems employed;❏❏ review and update all marketingdocumentation;❏❏ review all internal and reporting proceduresand amend to comply with the AIFMD.These include, for example, calculatingand monitoring AUM and leverage (asper above), risk management, conflictsof interest and requirements relatingto control over non-listed issues; andAIFMD: Checklist for non-EUPrivate Equity Managers.www.cummingslaw.com
www.cummingslaw.comnotification of principal assets withsectoral and geographic breakdowns andprincipal exposures or concentrations;❏❏ review all procedures for reporting toinvestors and regulators and amendto comply with the AIFMD.(B) If not managing any EUfunds, or managing any funds(EU or otherwise) in the EU:❏❏ check the continuing application of therelevant “private placement” exemptionsfor marketing funds in the EU countriesin which they market, or intend tomarket, their funds (note that the privateplacement exemptions may be revoked,subject to ESMA advice, in 2018, but onlyif passporting has by then been introducedfor non-EU funds, for which see below);❏❏ check that no stricter requirementshave been introduced in the privateplacement exemptions of any EU countryin which the non-EU funds are to bemarketed (as permitted by the AIFMD);❏❏ check that co-operation agreementsare in place between the country (orcountries) of each fund’s and the manager’sdomicile and the EU countries in whichthe non-EU funds are to be marketed;❏❏ check that the country or countries of thenon-EU manager and non-EU fund arenot non-cooperative for FATF purposes;❏❏ review and update the offeringmemorandum and all marketingdocumentation to reflect the need tocomply with the disclosure and transparencyrequirements of the AIFMD and any localprivate placement laws in any EU country inwhich the non-EU fund is to be marketed;❏❏ review all internal and external reportingprocedures and amend to comply withthe AIFMD requirements as regardsdisclosure and transparency;❏❏ from 2015 onwards, subject to ESMA advice,non-EU funds may potentially benefit frompassporting arrangements. Non-EU managersintending to use such arrangements should,in advance of their introduction, review(in conjunction with their UK counsel) theapplicability of all potential passportingarrangements, including the existence of anOECD model tax convention between thecountry of each non-EU fund and each EUcountry in which the non-EU fund is to bemarketed, the identification of a “MemberState of reference” and compliance withthe AIFMD generally (as per (A) above).
42 Brook Street, London W1K 5DB +44 20 7585 1406 | Neuhofstrasse 3d, CH-6340 Baar +41 41 544 5549Regulated by the Solicitors Regulation AuthorityThis document is for general guidance only. It does not constitute adviceJanuary 2013