Applications – The Basics Timing of applications Permissions Objectives of the VOPProject Delivery – Being prepared for the submissionProject Delivery – Being prepared for post submission Content of a VOP Practical issues in demonstrating compliance with AIFMD Covering C Organisation StructureF Governance and Culture 1 General Requirements 2 Conflicts of InterestsG. Systems and Controls 1 Disclosure to investors and competent authorities 3 Risk Management 5 Prime Brokerage 7 Depository Arrangements 8 MarketingFollow up Webinars on Risk Management Independence Depository Annex IV Remuneration
FUND 3.2 . Having systems and controls in place to make these disclosures is the question and is not solely dependant on having completed documentation The requirement to have systems and controls in place is in order for the FCA to be able to grant you a license. Therefore even if you are not going to be marketing an AIF in the EU, you need to review the disclosure requirements and ensure that you have systems and controls to be able to demonstrate that you can provide the relevant disclosures as a manager, whether they are applicable to your AIFs or not.The AIF schedule contains a checklist on prior disclosures laid out in FUND 3.2.2. Not all timing issues have been worked out and if you wish to defer to last minute you will need to have arrangements in place by 21st June at the latest. However, for certain EU AIFs, e.g. Irish QAIF There will be special arrangements to allow regulators to confer. For example where both Fund Regulator needs approved AIF and Firm regulator needs approved Fund.
CPMI is a type of BIPRU FirmCPM is not a BIPRU FirmGrey Area about what other activities a AIF can undertakeResidual CIS OperatorEstablishing Operating and Winding Up a Collective Investment SchemeFSA were going to abolish permission but realised that there are some schemes which are Collective Investment Undertakings that are not AIFs as they don’t satisfy the definitions or are subject to an exemption.If a firm wants to involved in providing services to those Firms then they will be require to have this permission. Therefore it would be a permission most likely requested by CPMI firms.
AIF Schedules UK AIF EEA AIF Non-EEA AIFArticle 74 – Closed Ended Funds that make no additional investments No additional investment after 22nd July 2013Article 75 – Closed Ended Funds whose subscription periods has closed Subscription period has closed before 22nd July 2011 and constituted for a period that expires 22nd July 2016.Fund 3.2.2. Checklist
Covering C Organisation StructureF Governance and Culture 1 General Requirements 2 Conflicts of InterestsG. Systems and Controls 1 Disclosure to investors and competent authorities 3 Risk Management 5 Prime Brokerage 7 Depository Arrangements 8 Marketing
Details relating to the individuals, their controlled functions (include SIFs), location of personnel and mind and management. Include PM/trading function headcount; risk management personnel and headcount and compliance personnel and headcount – reference staff chart and individual forms.Discuss in detail the ownership structure and ultimate corporate/individual/trust controllers – reference organisation chart and controller forms.Discussion on the appointment of services providers.Consider further information will be provided on Prime Brokers and Depository later in the plan/form. This is mainly as a backdrop to your controls demonstrate ability to comply with Directive requirements
Refer to Section 4.4. Fund 3.2.2. (Prior disclosures) Having adequate and effective systems and controls to ensure disclosure extends to all firms managing an AIF. -General Basic Fund information -Highlighting -Prior disclosures including identity of the AIF depository (unless not marketing in EEA). -Compliance with the professional negligence requirements. (IPRU (INV)) -Compliance with professional liability risk (GENPRU). -Description of all fees, charges and expenses and the maximum amounts charged by investors. -Conditions for the issue and sale of unitsFund 3.2.3 (depository liability discharge disclosure) -Arrangements made by the depository to contractually discharge their liabilityFund 3.2.6 (leverage disclosures) -Changes to maximum leverage -Changes to any right of re-use of collateral -Total amount of leverage employedFund 3.3 (Annual Reports) N/a for funds not marketing in UKFund 3.4 (reporting obligations) -General Reporting obligations -Note special reporting required for firms that leverage 3 times
Proportionality. Following our enquiries and submission of applications the FCA has (yesterday) made it clear that proportionality will apply to risk management along similar lines as remuneration. However, firms will still need to ensure that they can satisfy the other provisions of 3.7 appropriately. If not functionally and hierarchically independent, then the firm needs to work harder to demonstrate the follow on provisions.What is an appropriate, documented and regularly updated due diligence process? This can simply be a diagramatic representation of your investment process. Do you screen your investment ideas, do you limit scope of investment to narrow bands, do you divide responsibilities between investment personnel so that the is appropriate quality control and challenge in the decision making.
We have spoken to some of the prime brokers who are willing to assist with the provision of wording for AIFMD applications to ensure that you can satisfy these requirements but again you need to ensure that you can answer positively and highlight any issues where you cannot answer in the positive. While you already have arrangements in place and this is a one size fits all approach, you need to go only into the detail to demonstrate that you took appropriate steps on appointment and that you have confirmed that the prime broker has appropriate process in place to assist you in satisfying the obligations under AIFMD.You should already have a contract in place with them which formalises the terms.You should already know the levels of transfer and reuse that will occur and whether this is or will be in the fund documentation.You may need to highlight that the arrangements for the notification of depositories are being agreed pending depository agreement.
FUND 3.11.19R states that contractual arrangements are put in place between the AIFM and the depositary but this is subject to current discussions, availability of those agreements from lawyers and strategies necessary. We are seeing increasing preparedness of depositories who are producing the required documentation. Final arrangements can be satisfied closer to authorisation and we believe thatthe difficultnature of the market is currently understood by the regulator. However, they expect the industry to work together to obtain a solution.
UK AIF - UK depositoryEEA AIF – Depository in AIF jurisdictionNon EEA AIF – Expectation that the services highlighted (Cash Management, Oversight and Custody) are provided by an appropriate provider regulated in that country and generally covered by an MoU.
In the form you will note the FCA discuss Marketing before Depository but we feel that it is natural to resolve the depository issues before you lay out the position on Marketing.What does the FCA expect in terms of due diligence on depositoriescontacts/meetings with the depositary;information on the services provided;contract negotiation;assessment of reputation;copy of report and accounts obtained.Depositories in different jurisdictions are offering more and more support on provision of responses to the regulator without requiring contractual arrangements being finalised as they are required to perform some form of due diligence exercise on firms.I am slightly tentative about the position that in depository light, nothing really changes, as the entities continue to provide the same services that they always have,but I have been assured on countless occasions this is the case, and my cynicism is starting to abate on this issue. However, the FCA would expect firms to have completed extensive diligence on their options if they are not finalised by the time of submission and would expect the applicant to have a programme in place to identify an appropriate depository who can enable it to answer the various VOP questions in a positive way.
AIFMD Surgery Webinar VoP and Business Plan
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