AIFMD one year on –Where are we at?

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On 22 July, the AIFMD turned one. InvestmentEurope‘s has collected a range of comments from the industry on the anniversary of the legislation that affects alternative managers.

After a year of anxious run-up to 22 July 2013 – the day of the AIFMD implementation – and an equally frantic one after that to make sure that compliance was undertaken correctly, alternative investment fund managers (AIFMs) have hit their first year with the legislation in place.

According to the Association of the Luxembourg Fund Industry (Alfi) the Commission de Surveillance du Secteur Financier (CSSF) received a total number of 773 applications submitted according to the law of 12 July 2013 on AIFMs, with a total of 215 requests for authorisation and 558 requests for registration.

In its report to Alfi, CSSF said that of the 215 requests for authorisation, 105 have been received from existing Ucits management companies, 48 from existing non-Ucits management companies and 62 from other existing or newly created entities. “With regard to the existing non-Ucits management companies which have not applied for authorisation or registration in Luxembourg, it should be noted that they have designated or are in the process of designating a third-party AIFM established mainly within the EU,” the report also reads.

However, despite the official numbers, a series of surveys have started to be published by a number of research organisations arguing that AIFMs were still unprepared and do not fully understand why it is in place at all.

For instance, Confluence, a firm providing investment data management automation for the asset management industry, has found that with one week to go to the deadline, respondents believed that a third of the fund managers targeted by the Alternative Investment Fund Managers Directive (AIFMD) Transparency Reporting requirements were unprepared to meet the 22 July deadline.

The survey, which included 116 responses from asset managers and fund administration service providers, was conducted between 16 June and 1 July as part of a research in the run up to the AIFMD July deadline when European Union (EU) AIFMs are required to submit their application for authorisation.

The survey also found that 34% of AIFMs felt still unprepared to meet the AIFMD Transparency Reporting requirements, while 28% of respondents said they believe AIFMs are still undecided and reviewing options. Not surprisingly, almost a third of respondents feel regulatory burden is the single greatest challenge.

Melvin Jayawardana, Confluence’s European markets manager said: “The Confluence survey highlights the lack of readiness within the industry ahead of the AIFMD deadline despite being less than a fortnight away. European asset managers and fund administrators face big challenges getting up to speed on the full ramifications of the directive and the scope of work it will require of their back-office operations.”

Chris Collins (pictured), global director, head of Regulatory Risk Response at Sapient Global Markets says many bankers his firm has worked with kept asking the same question along the way: “Why have regulators put this in place?”

Sapient Global Markets has helped asset management firms put in place systems and processes to report the data to the regulators and help them comply with the whole new set of risk requirements that have been put in place not only by the AIFMD, but also by other legislations like Mifid I and II.

“We have worked with UK and North American asset management companies. Some of them decided to ‘play the game’ with the regulations, taking the opportunity the new rules presented and use them to implement changes to their operating and reporting processes. Others, and generally this has been the smaller, Tier 2 firms haven’t done as much work and have had problems understanding how and sometimes why they had to comply,” he says, adding that with many reporting rules in place, the focus will now be on meeting investor protection requirements.

From inside the industry, Andrew Shrimpton, global head of regulatory compliance at Kinetic Partners, the global professional services firm, comments on what the next focus for UK AIFMs should be following the end of the AIFMD transitional period:

A key focus for UK AIFMs should be the reporting which they must adhere to. A second area of focus for UK AIFMs who manage and market EEA AIFs, is to work out which countries they want to market to. Regulators in a number of countries will charge fees for passporting into their country and as such firms should only apply for the countries in which they definitely intend to market.

“For UK AIFMs managing and marketing non-EEA AIFs, they will have to submit an Article 36 notification to the FCA and each country will have an equivalent application process that should be completed ahead of marketing in that country.”


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