Draft Guidelines On Key Concepts Of The AIFMD

On 19 December of last year the European Securities and Market Authority (ESMA) issued two consultation papers - "Guidelines on key concepts of the AIFMD" and "Draft regulatory technical standards on types of AIFMs" - with a view to clarify certain criteria and key terms of the upcoming regulatory regime for AIFM and to give guidance as to the scope and applicability of the AIFMD.

Both consultation papers are based on a prior discussion paper, published by ESMA back in February 2012, together with the comments and input from interested parties, and will eventually result in valuable and much-expected guidance for the alternative investment fund industry and other market players concerned by the new regulatory regime.

In the following we will highlight the most significant aspects of both consultation papers.

1. CONSULTATION ON GUIDELINES ON KEY CONCEPTS OF THE AIFMD

According to the definition of the AIFMD the term "alternative investment funds" (in the following referred to as "AIF" or "AIFs") means "collective investment undertakings, including investment compartments thereof, which raise capital from a number of investors with a view to investing it in accordance with a defined investment policy for the benefit of those investors; and do not require authorisation pursuant to Article 5 of Directive 2009/65/EC".

Unfortunately the definition does not give concluding guidance, so that in many cases it is not clear whether a specific investment structure qualifies as an AIF or is to be considered out-of-scope of the AIFMD. Against this backdrop EMSA tries to clarify each of the criteria of the definition, stating that all of these must be met by an investment structure in order to qualify as an AIF under the AIFMD.

1.1 Proposed clarification of term / criterion "Collective Investment Undertaking"

ESMA proposes that an investment structure or entity will qualify as a "collective investment undertaking" if all of the following characteristics are met (i.e. in a cumulative manner):

The entity is not an ordinary company with general commercial purpose. The entity pools capital which is raised from its investors for the purpose of investment in order to generate a "pooled return" for those investors resulting from this investment. In this regard "pooled return" means the return generated by the pooled risks arising from acquiring, holding or selling investment assets. This is not the case when the entity in question is acting for its own...