The New AIFM Directive

Following our article in our newsletter of November 2010, we resume the subject of the Directive on alternative investment funds managers and give a more detailed overview on the rules which came into force in the meantime.

In answer to the financial crisis the European Commission (the "Commission") had been looking for measures to submit certain actors and activities connected with the financial markets and subject to considerable risks to a common and binding regulation. The draft of a directive on alternative investment funds managers ("AIFM"), established by the Commission in 2009, which was, after tedious discussions and various amendments, finally adopted on 11 November 2010 as the Alternative Investment Fund Managers Directive 2011/61/EU (the "Directive"), came into effect on the 20th day of its publication in the official journal on 1 July 2011. Upon its implementation by the EU member states within two years following that date, it will provide for a first EU-wide regulation for fund managers of alternative investment vehicles.

The innovation will be a "passport" for the mentioned fund managers of EU funds – and also for non-EU fund managers and non-EU funds managed by EU-fund managers in future –, which will enable them, once the passport is obtained in one of the EU member states, to market Alternative Investment Funds ("AIF") in all member states.

The provisions of the Directive currently apply to AIFM being either located within the EU or being located outside of the EU but managing EU funds or marketing funds onto the EU market (EU fund managers). In the years following the end of the implementation deadline however, from 2013 until 2018 approximately, regulatory provisions shall be developed step by step with regard to non-EU fund managers and non-EU funds (see further below). With regard to the AIF, the Directive applies to open-ended funds as well as to closed-ended funds, regulated or not regulated, which do not fall under the UCITS directive, and does neither differentiate between legal forms the funds may take or different kinds of alternative assets the funds may deal with. The Directive specifies however that it does not apply to holding companies or to such fund managers which exclusively manage funds whose investors are the manager itself or either its parent or subsidiary, as long as neither of these is an AIF.

The rules on AIFM, and indirectly also on AIF, as established by the Directive are outlined in the following and summarised with regard to the most important aspects of the Directive.

Authorisation procedure and "passporting"

The Directive provides that a fund may only have one AIFM, which will need to be authorised by the competent regulation authority ("regulator") in the member state where it has its registered office, upon application by the AIFM. The regulator will have to decide on such applications in due time as prescribed by the Directive (within a period of three months, which is extendable to six months if the regulator in its discretion so decides). An unauthorised AIFM will not be allowed to manage an AIF.

As part of the application procedure, the AIFM will need to provide the national regulator with information on its own structure, organisation, personnel and remuneration policy as well as on the AIFM...