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AIFMD:Implementation.HM TreasuryConsultation PaperNo. 2 published14 March 2013www.cummingslaw.com
www.cummingslaw.comIntroductionFurther to its first consultation paper publishedearlier this year on 11 January, HM Treasury hasnow published its second consultation paper(CP2) on transposing the AIFMD into nationallaw, which considers those issues it was unableto address previously. CP2 was accompanied bydraft Regulations (The Alternative InvestmentFund Managers Regulations 2013), whichare intended to be combined with the draftRegulations attached to CP1.The issues addressed in CP2 cover mattersconcerning common investment funds, therecognised scheme regime, the financialcompensation scheme and the approvedpersons regime and are briefly described in thefollowing summary.Common Investment Funds (CIFs)and Common Deposit Funds (CDFs)CIFs and CDFs are funds established undercharities legislation and fall within the UCISdefinition and are, in principle, AIFs. Theyare regulated by the Charity Commission,but the managers and corporate trustees areFSA authorised. The Government intends tomaintain this system of regulation. The managersand corporate trustees will be required tobe authorised under AIFMD, subject to theregistration (“regulation lite”) regime for AIFMswith AUM below certain thresholds, whichmeans that there will be fewer requirements forthose AIFMs.Marketing of non-UK retail AIFsunder sections 270 and 272 FSMAThe existing financial promotion regimeregulates the promotion of funds to retailinvestors and the CP1 set out the way in whichthe existing regime is proposed to interactwith the new regime regulating the marketingof AIFs. After transposition of the AIFMD, therequirements of both regimes would need tobe met for marketing to retail investors. Non-EUregulated AIFs are currently marketed under the“recognised schemes” regimes under sections270 (for the “designated territories” schemes)and 272 of FSMA and the Government proposesto reform the regime in order to address someof the weaknesses in the current approach bycombining the two regimes into one under amodified section 272, discarding section 270.It is proposed that all existing s.270 schemeswould be treated as s.272 schemes from 22July 2013 and from that time, the reformeds.270 regime would apply and during theAIFMD transitional period (ending on 21 July2014), the operators of such schemes wouldbe required to provide confirmation to the FCAas to whether the scheme was compliant withrequirements comparable to the current UKregulatory requirement for retail funds. Anyfund not providing such confirmation wouldlose recognition. The Government expects thatthe proposed reform will result in additionalcompliance costs on AIFMs of such schemes.Approved persons regimeThe approved persons regime is a FSMA conceptand the AIFMD permits, but does not require,the UK to apply the approved persons regimeto AIFMs. Directors in internally managedinvestment companies (for instance, investmenttrust companies without external managers) arealready subject to company law requirementsand, where applicable, the Listing Rules, whichimpose corporate governance requirements,and imposing the additional requirements of theapproved persons regime could be consideredas unnecessary gold-plating. The Governmentproposes that the approved persons regimewill not apply to internally managed investmentAIFMD: ImplementationHM Treasury Consultation PaperNo. 2 published 14 March 2013
www.cummingslaw.comcompanies (both above and below the deminimis threshold), but that it will continueto apply to external managers of investmentcompanies (both above and below the deminimis threshold).Financial Services CompensationSchemeThe FSCS currently covers most UK authorisedpersons, certain EEA firms which have passportedinto the UK and others which have decided toprovide ‘top-up’ participation. Under the AIFMD,EEA AIFMs will be able to make use of the AIFMDpassport to establish a branch or provide servicesin the UK and, under the current legislation,would be required to participate in the FCSC. TheGovernment proposes to restrict FSCS coverageso that it only applies compulsorily to non-UKEEA managers of UK authorised AIFs, to ensurethat investors in all UK authorised funds receiveprotection, and allowing EEA AIFMs under apassport to opt to participate in the FSCS if theyso wish. The cost of FSCS coverage to incomingEEA managers would be calculated in the sameway as for UK managers.ConclusionThe deadline for responses to the consultation is5 April 2013.The FSA will set out more detailed proposalsin respect of some of the issues above in itsforthcoming consultation paper, which is due tobe published this month.
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 adviceMarch 2013