After 18 months, the Economic and Financial Affairs Council (ECOFIN) have finally reached consensus in respect of the Alternative Investment Fund Managers'Directive (AIFMD). It is expected that the more formal plenary vote will be cast in November 2010 which means that the AIFMD should come into force around the start of 2013.
Adrian Moll, who heads up Moore Stephens Jersey’s Funds Department notes that “whilst the implementation of the AIFMD will, no doubt, introduce a conundrum of challenges to fund managers across the globe, some good news appears to have emerged from ECOFIN’s meeting held on 19 October 2010, especially for third country managers and its adherence to AIFMD.”
From 2013, EU-based managers of alternative investment funds will become subject to rigorous new capital and disclosure requirements and detailed rules covering, for example, depositary arrangements and pay. Offshore managers will only become subject to those same rules from 2013 where they manage EU-domiciled funds.
From now until 2018, the existing national private placement routes, by which offshore funds can currently be marketed into individual EU Member States, will remain in place.
From the implementation of the AIFMD in 2013 until 2018, in using national private placement routes into EU Member States, offshore managers will also have to meet certain minimum criteria under the AIFMD (eg the existence of TIEAs and co-operation agreements between their home jurisdiction and the relevant EU marketing destination(s), and adherence by the offshore manager to certain AIFMD disclosure requirements - thankfully NOT the full ambit of the AIFMD);
From 2015, offshore managers will also be able to avail themselves of an EU-wide marketing passport (subject to meeting the minimum criteria mentioned above) AND complying in full with the AIFMD. I have yet to see the detail to check when the same EU-wide passport will be available to EU-based managers; at the moment I am assuming it will be immediately available to them from 2013, giving them a "2 year headstart" on offshore managers, (but bear in mind they will have to comply fully with the AIFMD from that time, whilst offshore managers can still market by private placement without full compliance);
From 2019, it is likely that, for offshore managers, "passporting under full compliance with the AIFMD" will become their sole means of marketing into the EU as national private placement regimes are phased out.
The effectiveness of the third country passporting arrangements will be reviewed four years after their implementation (ie around 2019).
The AIFMD appears not to prevent "passive marketing" or "reverse solicitation" of interests in alternative funds, where professional investors approach managers/promoters to acquire interests (and are not "marketed to")
Bearing in mind where this all started in April 2009 (with an effective "shut out" of third country managers), the above would reflect a very good result and provide an ability to give a "business as usual" signal to our clients, with plenty of time for our local governments and authorities to engage with the EU and ESMA to get as many TIEAs and co-operation agreements as possible in place in time.
Although this proposal still requires the formal blessing of the European Parliament, diplomats are suggesting that such approval will be forthcoming, leaving the way clear for the AIFMD to be approved by a vote in November, at which point much of the recent uncertainty will come to an end.