EY and The Alternative Investment Management Association Limited (AIMA) jointly conducted a survey to assess the readiness of EU members towards the full-fledged implementation of the Alternative Investment Fund Managers Directive (AIFMD). Their analysis of results were presented in the report “AIFMD: the road to implementation” of September 2013.
A regulatory framework for AIFs in the EU
The Alternative Investment Fund Managers Directive (AIFMD) is a means for regulating entities that either run or sell Alternative Investment Funds (AIFs) in the European Union. It became effective on July 22, 2013.
AIFs include closed end listed funds such as investment trusts, private equity, RE and hedge funds.
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Implementation of AIFMD
The survey’s main thrust is on assessing the status on implementation of AIFMD with regard to transposition timing, transitional provisions and private placement stipulations.
Fifteen EU States have transposed the AIFMD. In a significant ruling in August, the European Securities and Markets Authority has allowed EU firms that have obtained AIFM authorization in a Member state to utilize it in other countries that have not yet transposed the AIFM.
A period of one year was allowed as a transitional relief period by the AIFMD post its introduction on July 22, 2013. The table below summarizes the status of AIFMD transitional relief.
Private placements are in varying degrees of implementation (see chart below) and show differing requirements being imposed by various EU states. However, one common feature is the insistence by EU members allowing private placement on at least the minimum AIFMD standards.
Some members have made it mandatory for firms to conduct a statutory audit if they are marketing non-EEA (European Economic Area) AIFS in those countries, and these audits could have a cost implication.
It may be noted that the AIFM Remuneration Code includes rules on how remuneration can be paid out to “identified staff” (that is, those staff whose professional activities have a material impact on the risk profiles of the AIFM or the AIFs it manages). EY make the point that financial groups whose employees manage a range of “regulated” portfolios “will face a remuneration conundrum in that they will have to consider and potentially comply with at least two (AIFMD and CRD III/IV), and possibly three (UCITS), remuneration standards.”