The Alternative Investment Fund Managers Directive (2011/61/EU) (“AIFMD”) must be implemented by member states of the EU by 22 July 2013. In the lead up to implementation, we will consider its likely impact, review the main issues and look at how they will affect you and your business.


The aim of AIFMD is to introduce a harmonised regulatory framework throughout the European Union for European Union established alternative investment funds managers (“AIFM”). An AIFM is defined to include both natural and legal entities whose “regular business” is to manage one or more alternative investment fund(s) (“AIF(s)”). An AIF continues to be considered as a “collective investment undertaking”; at this moment there is no formal definition of an AIF within the content of the directive. As such, it would seem that all non-undertakings for collective investment in transferrable securities (“non-UCITS”) funds, some managed funds and third party joint venture arrangements will fall into the wide description.


Initial estimates by the European Commission suggested that almost 90% of the assets of European Union domiciled hedge funds, managed by 30% of hedge fund managers would fall under the auspices of the AIFMD. In addition, it is conservatively estimated that the AIFMD would be applicable to around 50% of those who manage other AIFs, this figure is said to include private equity funds managers. It is important to note that the directive will apply irrespective of where the AIF is established. The dynamic of the extra-territorial scope means that the directive would be applicable to non-European Union alternative investment fund managers marketing alternative investment funds within the European Union.


The AIFMD will not cover those funds already covered by the UCITS IV Directive (2009/65/EC). Broadly speaking it will apply to managers of hedge funds; private equity funds; property funds; commodity funds; venture capital funds; and investment trusts. This is not an exhaustive list and those who are unsure as to whether they will be affected by the AIFMD should contact us for advice. Ostensibly, once the AIFMD is in force, your AIF will come under regulations, rules and principles as set out by the Financial Conduct Authority (“FCA”). Note that your business will not only need to be authorised by the FCA but it will also supervised by the FCA.


The key areas of your business that will be affected are: Authorisation; capital requirements; passporting; management and marketing of non-EU AIF’s; supervision; intervention and powers of the regulator; governance; systems and controls; risk management; conflicts of interest; remuneration and conduct of business; independent valuation of assets; delegation of functions; third party risk management; transparency to key stakeholders and potential investors prior to investment; disclosure; reporting obligations


The text of the AIFMD was published in the Official Journal of the EU on the 1st July 2011 and the directive came into force on the 21st July 2011. It must be implemented by member states, by the 22nd July 2013, and HM Treasury published a consultation paper on the proposals in January 2013. Work at EU level is not yet complete. At the time of this note there were 90 or more secondary measures being considered which will have to be settled before the implementation date. Both the FSA and HM Treasury are expected to publish further consultation papers on AIFMD by the end of the first quarter of 2013. In addition, the European Securities and Markets Authority (“ESMA”) is developing extensive guidance covering calculations of leverage; mixing of funds; and information exchanges between European regulators.

The FCA which will replace the FSA on the 1st April 2013, aims to be in a position to receive AIFM applications covering authorisations and the varying of permissions by the 23rd July 2013. Firms managing AIFs before the 22nd July 2013 need to ensure that they have submitted their application for authorisation by the 22nd July 2014. Passports for non-EU AIFs and AIFMs will be considered and it is currently timetabled for the European Commission to adopt implementing legislation in 2015. It is thought that final implementation of any further areas of the directive will be complete in 2018.


1. We can keep you up to date with changes and guidance to the Directive; 2. We can help you determine whether your business falls under the umbrella of the Directive; 3. We can advise you on what this means for your business; 4. We can advise you on the transition from a non-regulated business to a regulated business environment; 5. We can advise you on your application for authorisation to the FCA and the threshold conditions; 6. We can advise you on how the FCA work and what standards you will be expected to reach and attain; 7. We can advise you on the powers the FCA will have in respect of your business and what they can do if there are perceived failures.

If you would like further information, please contact Christopher Axford or Antony Cotton in our Corporate team.

This note does not constitute legal advice but is intended as general guidance only. It is based on the law in force in January 2013.

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