The Alternative Investment Fund Managers Regulations (UK AIFMD) provide a regulatory framework for alternative investment fund managers (AIFMs), including managers of hedge funds, private equity firms and investment trusts.
The scope of UK AIFMD is broad and, with a few exceptions, covers the management, administration and marketing of alternative investment funds (AIFs). Its focus is on regulating the UK AIFM rather than the AIF.
An AIF is a 'collective investment undertaking' that is not subject to the UK UCITS regime, and includes hedge funds, private equity funds, retail investment funds, investment companies and real estate funds, among others.
The UK AIFMD establishes a framework for monitoring and supervising risks posed by UK AIFMs and the AIFs they manage, and for strengthening the UK market in alternative funds. It also includes requirements for firms acting as a depositary for an AIF.
Aims of the UK AIFMD
- to prevent market instability and the build-up of systemic risk in the financial system
- to improve investor protection by imposing new depositary standards and enhanced transparency through new investor disclosure rules and mandatory reporting to competent authorities
Requirements included in the UK AIFMD
- the authorisation of the fund manager (full scope UK AIFM) or, alternatively, registration subject to a lighter regime for UK AIFMs managing AIFs with 'assets under management' below certain thresholds. Sub-threshold UK AIFMs have the right to opt-in to full authorisation
- conduct of business (fair treatment of investors, conflicts of interest, remuneration, risk management, valuation, disclosure to investors and regulators)
- regulatory capital – initial capital, 'own funds' and professional indemnity insurance requirements
- the safekeeping of investments (via the mandatory appointment of depositaries and custodians)
- controls over delegation of certain tasks, including portfolio management and risk management
- the use of leverage by UK AIFMs for all AIFs under management. The FCA has powers to intervene, placing restrictions on leverage and other supervisory restrictions where needed to avoid the build-up of systemic risk
- FCA: CP14/4 Quarterly Consultation on Handbook changes affecting AIFMs (March 2014)
- ESMA: questions and answers on application of the AIFMD (November 2016)
- FCA: finalised guidance on the AIFM remuneration code (January 2014)
- ESMA: final guidelines on reporting obligations (October 2013)
- FCA: CP13/9 sets out FCA’s guidance on remuneration under AIFMD (September 2013)
- HM Treasury: final regulations (July 2013)
- ESMA: guidelines on sound remuneration policies under the AIFMD (July 2013)
- FCA: PS13/5 Implementation of the AIFMD (June 2013): sets out our rules for implementing the AIFMD and provides our response to feedback to our consultation papers
- ESMA: guidelines on reporting obligations under Article 3 and Article 24 of the AIFMD (May 2013)
- HM Treasury: draft regulations (May 2013)
- HM Treasury: transposition of the AIFMD - questions and answers (May 2013): Treasury was asked questions during the consultation on AIFMD and published its answers to a number of these
- FSA: CP13/09: Implementation of the AIFMD Part 2 (March 2013): our second consultation on rules and guidance to transpose the AIFMD into UK law
- HM Treasury: transposition of the AIFMD - further consultation (March 2013)
- HM Treasury: transposition of the AIFMD (January 2013): consultation paper
- FSA: CP12/32: Implementation of the AIFMD (November 2012): CP on the rules and guidance to transpose the AIFMD into UK law