AIFMD: frequently asked questions

With the AIFMD now in force, we thought it would be helpful to cover some of the questions we are frequently being asked across all of Ashurst's offices.

Remind me again, what is it

The aim of the AIFMD is to harmonise and increase the regulation of funds which are managed and marketed in Europe. The scope of the AIFMD relating to AIFs is potentially much wider than the concept of a fund currently understood in many Member States and will include hedge funds, private equity funds and real estate funds.

Are there exemptions?

There are express exemptions (including for employee schemes, holding companies and securitisation special purpose entities (although what this may constitute is still not clear)) contained in article 2 of the AIFMD. Group schemes should not be caught (article 3) and joint ventures will not be caught assuming they do not meet the definition of a collective undertaking (see article 4(1)(a)). Lastly, there are also express transitional provisions (see article 61 of the AIFMD) which mean that certain funds which are not making new investments (for example) will not be bound by the directive. There are also certain size and threshold (partial) exemptions.

Does the AIFMD really apply from now?

Yes. In fact it came into force on 22 July 2013. There is a transitional regime in place (which expires soon), however the application of this regime differs markedly in respect of whether or not the manager is new or existing, the fund has been marketed pre-22 July 2013 and, of course, the relevant jurisdiction in question.

Can you provide more detail?

In short, European managers have until 22 July 2014 to apply for authorisation. However, some Member States are requiring that authorisations are submitted before this date. Up until this date, such fund managers do not need to comply with the directive. New fund managers would need to be authorised in order to carry out any fund management activity moving forward. For non-European managers, the situation is more complicated. Non-European managers do not need to be authorised under the directive. However, they must comply with what is known as the "disclosure and transparency" rules under the directive, when they market the fund into Europe. Whether or not they will need to comply with the disclosure and transparency requirements now will depend on the state in question and whether or not the particular fund has been marketed into that jurisdiction before.

What are the disclosure and transparency rules

Broadly, these rules require upfront notifications (and, in some cases, a form of application) to be made to the regulator in each Member State where the fund is to be marketed; disclosures (upfront) to investor; regulator reporting requirements; and control and asset-stripping rules in relation to portfolio companies.

What is the difference between the passport and the private placement exemptions routes?

Only authorised EEA fund managers can use the passport which will allow them to market a fund freely in other Member States via a simple notification procedure. No other rules will apply (assuming marketing is to professional investors only). Conversely, non-European domiciled funds, or any fund managed by a non-European manager, can only be marketed under private placement (there is no marketing passport). Local private placement rules will apply in each country and the requirements vary markedly from one jurisdiction to another. For example, in countries such as France and Germany the new private placement regimes look set to effectively close off the ability of non-European fund managers to market there.

So are all countries doing the same thing?

No, they are not. Moving forward, marketing funds into France and Germany, for example, will be extremely tricky for non-European fund managers.

Please click on the links below for the other articles in this issue of Credit Funds Insight.

• CLO update: EBA publishes Final Draft RTS on Securitisation Risk Retention
• Unitranche facilities: one to watch?
• Investment in credit funds by French insurance companies (and similar institutions)
• Securitisation vehicles subject to AIFM Law in Luxembourg