Out-Law News 2 min. read

AIFMD comes into force in UK, but survey shows "mixed progress" elsewhere in EU


Only 12 EU member states have successfully transposed the new EU regulatory regime for alternative investment funds into national laws one week after the deadline for doing so has passed, a survey has found.

The joint study by the Alternative Investment Managers Association (AIMA) and professional services firm Ernst and Young (EY) reported "uneven progress" on implementing the new rules, and "significant legislative uncertainty" even amongst those states where the process was complete.

The Alternative Investment Fund Managers Directive (AIMFD) came into force in the UK on 22 July 2013. The new rules are intended to create a harmonised regulatory structure for alternative investment fund managers across the EU.

Commenting on the survey's findings, financial regulation expert Monica Gogna of Pinsent Masons, the law firm behind Out-Law.com, said that the transposition of the AIFMD "may take time", as with the implementation of other EU directives.

"This therefore means that firms will need to ensure that they conduct a complete regulatory review for each jurisdiction in which they operate to identify the rules which will be applicable to them when marketing an alternative investment fund," she said.

The AIFMD is intended to cover the management and administration of all 'collective investment undertakings' that are not subject to an existing collection of directives known as the Undertakings for Collective Investment in Transferable Securities (UCITS) regime. It applies to any person or company whose regular business is managing one or more alternative investment funds including hedge funds, private equity funds, real estate funds and a wide variety of other types of institutional fund.

Under the AIFMD, a company cannot be authorised to act as an AIFM unless it also provides portfolio management and risk management functions. The rules prohibit the marketing of alternative investment funds to retail investors by default, but allow member states to permit selective marketing and impose greater restrictions on that advertising than those that apply to professional investors.

According to the study, although only 12 member states have completed the full legislative process, the majority have either already transposed the AIFMD into law or have drafted the final legislation and are awaiting parliamentary approval. At least five member states have made "little or no progress" towards drafting or finalising the required legislation: Belgium, Finland, Portugal, Slovenia and Spain. AIMA were unable to verify the progress of the legislation in Estonia, Greece, Lithuania or Poland.

According to the research, at least 15 member states are taking advantage of a transitional provision which will give fund managers an additional year to comply with the new regime. Of these, Latvia and the Netherlands appeared to only be extending this exemption to domestic fund managers.

Jiri Krol of AIMA, the hedge fund managers' association, said that it was rare for all member states to transpose new EU rules on time.

"We are encouraged by the progress that is being made by some of the key asset management and fund jurisdictions in implementing the Directive," he said. "That said, there are still significant areas of uncertainty even in those jurisdictions that have transposed the text."

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