To whom does this apply?
To any entity which will, after 22 July 2013, Market to EEA Investors and/or Manage Alternative Investment Funds in the UK. The FSA’s interest is concentrated on those UK entities which Manage and Market AIFs in the UK and additionally AIFs which are Marketed to UK investors from any other jurisdiction (EEA and Non-EEA).
The second of three FSA Consultation Papers
This is the second FSA consultation, the first having been issued in November 2012, regarding the UK’s implementation of AIFMD. The first consultation stated the FSA’s intention to deal with this by way of two consultation papers. However, certain aspects of AIFMD’s implementation in the UK cannot, at this time, be concluded and hence the FSA announced in this its second Consultation Paper (CP) the intention to issue a third CP after April 2013. This second CP is issued after the EU Commission’s official publication of the Level 2 Regulations (AIFMR), which was published on 19 December 2012, and ESMA’s various guidance documents.
A Summary of the Second FSA Consultation Paper (CP13/9)
The FSA issued its second AIFMD Consultation Paper (CP13/9) on 19 March 2013. The main features of this most helpful document are as follows:
- The FSA announced that a third Consultation Paper would be necessary in order to properly reflect the changes necessary as a consequence of AIFMD implementation in regard to:
- Accommodating these in the FCA and, as necessary, the PRA’s Handbooks following the cut over on 1 April 2013; and
- Non-EEA AIFM/AIF Marketing under the AIFMD Passport (which is not possible until the Third Country Passport and Member State of Reference Regulations are transposed in to effect – no sooner than July/September 2015).
- Clarification in regard to the UK’s intentions to maintain a Register of AIFs (both EEA and Non-EEA) in order to permit these to be Managed/Marketed in the UK. As a consequence the process for either the Authorisation or Notification of AIFMs to the FSA of their intention to Manage/Market AIFs in the UK.
- For EEA AIFs Managed by UK AIFMs, some further details concerning the AIFMD Passport process (similar to that of UCITS). SUP 13 for UK AIFMs and SUP 14 for Non-UK EEA AIFMs, wishing to Passport into the UK, will be altered in order to permit the provisions of the AIFMD Passport.
- Clarification of the FSA’s expectations in regard to Annex IV AIFMR Reporting to the FSA by AIFMs from January 2014. ESMA is due to publish Technical Standards in this regard. The FSA is proposing certain changes to SUP 16 in regard to these Reporting obligations which apply, in the context of the FSA, to UK AIFMs and Non-EEA AIFM Marketing AIF in the UK. A new chapter, SUP 16.18 will deal specifically with AIFMD Reporting.
- The FSA’s intention to have Cooperation Agreements in place by 22 July 2013 with at least the key Non-EEA jurisdictions. This is vital in the critical path as without these no Non-EEA AIF or EEA AIF Managed by a Non-EEA AIFM can be Marketed or Managed in the UK.
- Most helpfully the FSA clarify their intentions in regard to determining ‘letter-box entities’. Whilst the FSA states they will take each situation on its own merits, the FSA does clarify that their assessment will be more Qualitative than Quantitative. It is not the FSA’s stated intention to deem an AIFM a ‘letter-box entity’ simply because of the amount of Portfolio Management it has delegated. The FSA also confirms that a key determinant will be that AIFMs should retain responsibility for all activities it delegates/outsources and to make sure it has appropriate due diligence and ongoing supervisory processes in place to ensure the delegate is performing its functions to the standards necessary.
- It is the FSA’s intentions to include AIFMD related aspects in PERG, the Perimeter Guidance in the FSA’s Handbook. The intention being to clarify the FSA’s thoughts in regard to what is meant by certain elements such as capital raising, defined investment policy and what a Collective Investment Undertaking is. The FSA is proposing changes to PERG 8 and 16, the latter being an entirely new chapter.
- The FSA confirms what HMT has already stated, that the provisions of AIFMD do not apply after 22 July 2013 at all until a UK Firm nominated as an AIF’s AIFM is formally Authorised as such, or 22 July 2014 if sooner.
- Following comparison between SYSC and COBS with the provisions required by AIFMD and as Regulations under AIFMR, the FSA has concluded that these are essentially the same. Where there is a conflict, for AIFMs, the AIFMD provisions apply. It is therefore the FSA’s intention to apply those elements of SYSC and COBS where it is necessary, as a consequence of bringing into effect the provisions of AIFMD (i.e. not covering those which are subject to the AIFMR’s Regulations – Member States are not permitted to implement Rules in their Handbooks and/or domestic legislation which are covered by EU Regulations).
- However, SYSC applications will be by altering the application Table at SYSC 1 Annex 1. The FSA’s intention is to cover the specific COBS Rules applicable to AIFM by way of a dedicated Special Regimes chapter (COBS 18.5).
The consultation period runs to 10 May 2013.
Disclaimer: The opinions expressed herein are those of the authors and other contributors and do not necessarily reflect the views of the Firm. This is not intended as specific legal advice for any purpose.
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