Impact Of AIFM Directive In The Netherlands

On 11 November 2010, the European Parliament – after extensive discussions – adopted the directive on managers of alternative investment funds. Although particularly aimed at regulating hedge funds and private equity funds, the directive has a much broader scope, providing for far-reaching changes in the supervision of all investment institutions other than UCITS. Such institutions include not only hedge funds and private equity funds, but also real estate funds, equity funds and funds of funds, among others.

The directive, which is expected to come into force early next year, will bring about major changes in the supervisory regime for investment institutions in the Netherlands. It must be implemented in the Netherlands by the beginning of 2013.

Introduction

On 30 April 2009 the European Commission published a proposal for a directive on managers of alternative investment funds (the "AIFMD"). The AIFMD was adopted by the European Parliament on 11 November 2010 after extensive discussions.

Although particularly aimed at regulating managers of hedge funds and private equity funds, the AIFMD has a much broader scope, providing for far-reaching changes in the supervision of managers of all investment institutions other than undertakings for collective investment in transferable securities (UCITS). Such institutions include not only hedge funds and private equity funds, but also real estate funds, equity funds, funds of funds and other non-UCITS funds. The AIFMD refers to all these types of investment institutions – somewhat confusingly, given their large range – as 'alternative investment funds' ("AIFs").

At present, there are harmonised rules at EU level in place for UCITS. Other types of investment institutions are, in most cases, regulated solely at national level. This situation will change as a result of the AIFMD, which sets out extensive harmonised EU-level rules for managers of AIFs. The proposed measures include:

i. the obligation for managers of AIFs to obtain a licence; ii. a 'European passport' system; iii. extensive conduct of business rules and prudential rules; iv. specific obligations for managers of leveraged AIFs; and v. specific obligations for managers of AIFs that acquire control over one or more companies.

In this newsletter we will discuss the most important provisions of the AIFMD and their anticipated impact in the Netherlands. The AIFMD, which is expected to come into force early next year, will bring about major changes in the Dutch supervisory regime for investment institutions and their managers. It must be implemented in the Netherlands by the beginning of 2013.

Contents

Current supervisory regime in the Netherlands AIFMD – authorisation and marketing Ongoing supervision Impact of AIFMD on Dutch supervisory regime Timeframe and transitional provisions Contact

Current supervisory regime in the Netherlands Licence requirement

In the Netherlands it is currently prohibited to offer participations in an investment institution unless the manager of the institution has obtained a licence from the Authority for the Financial Markets (Autoriteit Financiële Markten, the "AFM"). If an investment institution does not have a separate manager, the obligation to obtain a licence applies to the institution itself.

Exceptions / exemptions

There are several exceptions and exemptions from the above licence requirement. A licence need not be obtained by investment institutions or their managers in any of the following situations (among others):

the participations are offered only to 'qualified investors';

the participations are offered to fewer than 100 individuals or legal entities (other than qualified investors); the participations offered each have a denomination of at least EUR 50,000; the participations offered may only be acquired for a consideration of at least EUR 50,000 per investor. On 30 November 2010 a bill was submitted to the Dutch parliament that will increase the abovementioned EUR 50,000 thresholds to EUR 100,000, in line with the recent amendments to the EU Prospectus Directive. The bill is expected to come into force no later than 1 January 2012.

An exception also applies for investment institutions that are established and subject to full supervision in a 'designated state', provided that a number of conditions have been met. At present the following jurisdictions constitute designated states: France, Guernsey, Ireland, Jersey, Luxembourg, Malta, the United Kingdom and the United States (if the investment institution is registered with the SEC).

As a result of the broad scope of the exemptions and exceptions, there are currently many investment institutions in the Netherlands that are not required to have a licence.

In this connection it is interesting to note that on 26 August 2009 a bill was submitted that will enable managers of investment institutions which offer participations solely to 'qualified investors' to apply for supervision under a voluntary regime. The new rules are expected to take effect in the beginning of 2011.

Ongoing supervision

An investment institution manager that has obtained a licence in the Netherlands is subsequently required to comply on an ongoing basis with certain conduct of business and prudential rules. A manager that is entitled to an exception or exemption from the licence requirement is, as a general rule, also excepted or exempt from the ongoing obligations. Investment institutions that rely on the 'designated state' exception are subject to limited ongoing supervision in the Netherlands.

UCITS

Most of the rules regarding UCITS are harmonised at European level. A UCITS is an investment institution with the following specific features:

it has an open-ended character, which means that it...