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We encourage firms to monitor our website for the latest information on AIFMD.

As at midnight 22 July 2014 the FCA had received 1,130 applications, of which 644 have been approved and a further 129 are ready for imminent approval. The remaining applications are being processed in line with the deadlines laid out in the directive.

Firms should ensure they are aware of how the AIFMD impacts them and ensure that they are fully compliant with all relevant AIFMD requirements from 22 July 2014. This applies even if firms took advantage of the extension of the transitional period announced by HMT in December 2013. However, firms using the extended transitional period will not be required to comply with the marketing provisions in the HMT regulations as they will not be able to market their funds into the EEA until they are authorised.

We have finalised changes to the Handbook affecting UCITS managers, AIFMs and Article 36 custodians. This work is a result of our consultation in March 2014 (CP14/4, chapter 2) and, with respect to the change in number one below, September 2013 (CP13/9, chapter 15).

We received seven responses from trade associations, law firms and compliance consultancies. Respondents agreed with the majority of proposals in our consultation. We have briefly summarised the comments received, our responses and the consequential changes to the guidance in the Handbook Notice. The main changes are:

  1. Incorporation of amendments to the Financial Services and Markets Act 2000 (Gibraltar) Order 2001, which allows AIFMs to passport between the UK and Gibraltar
  2. Incorporation of the ESMA AIFMD key concepts guidelines and the ESMA AIFMD reporting guidelines and opinion
  3. Guidance on AIFMD Reporting by AIFMs on their AIF portfolios
  4. New rules for AIFMs and UCITS managers around risk management systems related to credit ratings
  5. Clarification on how AIF portfolios are valued and how that valuation affects regulatory capital requirements
  6. Clarification to requirements governing Article 36 custodians
  7. Further detail on certain AIFMD remuneration requirements
  8. Modification of the AIFMD notification forms and
  9. Additional minor consequential changes as a result of AIFMD.

The Handbook Notice dated 1 July 2014 with the instrument updating the Handbook.

We have been asked by various stakeholders how they should determine where an AIF in the form of a limited partnership is established. Specific enquiries on AIFs include:

  • a Guernsey limited partnership with its registered office in Guernsey and its principal place of business in the UK, and
  • a UK limited partnership with its principal place of business on Guernsey

The Glossary definition of 'established' means, for an AIF, being 'authorised or registered' in a given country or, if the AIF is not authorised or registered, 'having its registered office' in a given country. So, for an AIF that is not authorised or registered anywhere in the EEA and that has a registered office, we consider its place of establishment to be the country or territory where that office is located. An AIF is not authorised or registered unless it is authorised or registered as a fund, which would not be met, for example, by a registration at Companies House. In the first example mentioned above of a Guernsey limited partnership, the AIF has its registered office in Guernsey and is in our view a non-EEA AIF.

A UK limited partnership does not have a registered office as such but is required to register its principal place of business and we regard that as the equivalent of a registered office for these purposes. Accordingly, in the second example above, the AIF is in our view also established in Guernsey and is therefore a non-EEA AIF.

Where there is no registered office, the location of the head office of the AIF is relevant in determining its place of establishment.

These views reflect our understanding of the effect of the AIFM Regulations 2013 (SI 2013/1773).

The Treasury has now made and laid before Parliament the Alternative Investment Fund Managers Order 2014 and the Alternative Investment Fund Managers (Amendment) Order 2014. Find out what this means for you if you’re an AIFM.

What does the new order affect?

This makes changes to the implementation of the Alternative Investment Fund Managers Directive (AIFMD) in the UK, including:

Transitional period for AIFMs 

AIFMs applying for a variation of permission will not be required to be authorised by 22 July 2014, provided they have submitted a completed application by then. The extension of the transitional provision will not apply to firms applying for a new authorisation. So UK firms may consider deferring their application until the end of the transitional year, but if they do must keep in mind the potential consequences.

  • We encourage firms to apply as soon as possible. This is because UK firms without the necessary authorisation on 22 July 2014:
  • Must be fully compliant with all relevant AIFMD requirements from 22 July 2014, including, where necessary, engaging the services of a depositary. However, firms will not be required to comply with the marketing provisions until they are authorised.
  • Will not be entitled to passport their activities into other EEA member states until the firm receives authorisation and the relevant notification is processed. Please note that an existing MiFID firm will not be able to continue using its MiFID passports if it has applied to be authorised as a full scope AIFM. It will need to wait until it is authorised to be able to exercise passport rights in relation to the MiFID activities in article 6(4) AIFMD.
  • May be at risk of business interruption if their application is materially incomplete or deficient and, as a result, authorisation cannot be granted.

Firms wishing to market their non-EEA AIFs in the UK via the Small Third Country or Article 42 regimes will need to have submitted a notification by 22 July 2014. Those firms submitting an Article 36 notification should do so only once they are authorised as an AIFM.

Gibraltar-based firms 

Gibraltar-based firms can carry on cross-border activities with the UK when managing and marketing of AIFs, equivalent to the entitlements to carry on cross-border activities afforded to EEA AIFMs under the AIFMD.

UK registered firm managing an AIF from outside the EEA 

Where a firm registered in the UK manages an AIF from a branch outside the EEA and the AIF is registered in, or marketed in, an EEA state, the management activity is to be regulated as if it were in the United Kingdom.

Insurance mediation activities 

From 22 July 2014, a firm carrying on insurance mediation activities within the scope of Directive 2002/92/EC on insurance mediation will not have an exemption for them. Where a firm has permission to carry on the regulated activity of managing an AIF or managing a UCITS fund, the firm is exempted from requiring permission for any other regulated activity that it may carry on in connection with or for the purpose of such management.

If your firm has applied for permission to carry on the new regulated activities of managing an AIF or managing a UCITS and wants permission to carry on insurance mediation activities tell us before 22 July 2014. This will allow your firm to obtain the necessary permissions, or have them added to its application if this has not yet been determined, without you needing to apply for a variation of permission.

Grandfathered AIFs 

The transitional provisions for grandfathered AIFs have been amended.  Managers of such AIFs need not apply for the permission of managing an AIF to manage the grandfathered AIF and will need a separate set of permissions, depending on the activities undertaken, to manage those AIFs.  However, if the AIFM has been given a Part 4A permission to manage an AIF and had other permissions removed as part of this process, the manager is treated as if the permissions had not been removed in respect of the grandfathered AIF.

The Alternative Investment Fund Managers Regulations 2013 allow us to direct new compliance requirements for funds that are recognised under s.272 of FSMA (‘recognised funds’).  
Recognised schemes are schemes managed outside the UK, but that can be promoted to retail investors in the UK as a result of being recognised by the FCA.  However, such schemes must also comply with the AIFMD marketing provisions.

Under s.277A FSMA, we have directed operators to complete and send us an annual compliance certificate relating to the recognised fund under management.  

This certification would prove that the fund continues to comply with equivalent requirements to UK authorised funds and gives adequate protection to UK investors.  This ensures that if we amend our rules, the recognised fund will maintain equivalence.

The 277A Certificate must be sent to us no later than one month following the publication of the annual report and accounts of the fund or, if that publication is delayed, the last day on which it would have complied with applicable regulation, whichever is earlier (its due date).  The operator must initially comply with this direction for any financial year for which the due date falls after 31 August 2014.

We have sent a copy of our direction  to the operators of recognised funds.

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