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1. Background

1.1. The deadline for implementation of Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers1 (“AIFMD“), by the EU Member States is 22 July 2013. However, there are various transitional provisions and special provisions on the transposition of certain rules in relation to third countries, which make the application of such rules dependent on a positive advice / opinion from ESMA, and a delegated act from the European Commission. For the relevant timeframes, see Annex I.

1.2. The AIFMD will concern, essentially:

• Fund managers established in the EU managing and / or marketing Alternative Investment Funds (“AIFs“), and outside the EU, if they market and/or manage AIFs in

the EU (subject to transitional arrangements);

• Collective investment schemes other than UCITS, marketed in the EU or managed by an EU / EEA manager of alternative investment funds (“AIFM“), even though the

AIFMD is said to apply to AIFMs. For a schematic overview, please refer to Annex II. The AIFMD will also affect the AIFM’s / AIF’s relationship with and the role of service providers such as custodians, prime brokers,

fund administrators and external valuers (see sections 5 to 7 below).

1.3. Various implementing measures are yet to be issued. ESMA issued its first technical advice related to possible implementing measures to the European Commission in November

2011; such measures concern, for example:

• Article 3 exemptions (“light regime”) – see point 2.3 below;

• operating conditions for AIFMs2 (including, conflicts of interest, risk management, liquidity management, organisational requirement, valuation, delegation, etc.);

• limits to leverage for AIFs3;

• depositaries;

• supervision and third countries.

The European Commission is expected to issue implementing (“Level 2”) measures mid-


1.4. The UCITS IV Directive4 is currently under review (referred to as “UCITS V“), in order to

ensure alignment with the AIFMD, particularly as regards depositaries and remuneration

of managers.

1.5. In December 2011, the European Commission published proposals for a Regulation on European Venture Capital Funds (“EVCFs“) and a Regulation on European Social Entrepreneurship Funds (“EuSEFS“), which set out uniform rules and requirements for these types of funds and their managers. Once the requirements defined in the proposals are met, qualifying fund managers and managers of social investment funds will be able to market their funds across the EU using the label “European Venture Capital Funds” and “European Social Entrepreneurship Funds” respectively. The scope of application of the proposed Regulations is restricted to non-UCITS fund managers, established within the EU and registered with the competent authority in their home Member State in accordance with AIFMD, provided that the manager manages portfolios of EuSEFS or EVCFs whose assets under management (“AuM“) in total do not exceed EUR 500 million. Passporting rights are granted to managers for the marketing of their funds under the designation “European Social Entrepreneurship Funds” or “European Venture Capital Funds”, subject to registration of the manager with the competent authority of its home Member State. The proposed Regulations are intended to become applicable on 22 July 2013, which would coincide with the implementation deadline of the AIFMD.

2. Scope of application of the AIFMD

2.1. The AIFMD lays down the rules for authorisation, ongoing operation and transparency of AIFMs which manage and / or market AIFs in the EU.5 AIFMs will require authorisation under the AIFMD,6 and will enjoy passport rights for the management and/or marketing of AIFs throughout the EU.

2.2. In the case of internally managed AIFs (under Maltese law, SICAVs may be organised as self-managed funds), the AIF is also considered to be the AIFM and should therefore comply with all requirements for AIFMs under the AIFMD and be authorised as such. The self-managed AIF would be subject to the rules on delegation, including the requirement that delegation concerning portfolio management or risk management, may be conferred only on undertakings which are authorised or registered for the purpose of asset management and subject to supervision or, where that condition cannot be met, only subject to prior approval by the competent authorities of the home Member State of the AIFM. Thus, it appears that if the self-managed AIF would delegate day-to-day management functions to a third party investment manager, the latter would not per se be required to be an AIFM authorised under AIFMD (subject to certain conditions).

2.3. A “light regime” (the so-called “Article 3 exemption“) will apply to:

• AIFMs which directly or indirectly manage portfolios of AIFs whose total AuM (including assets acquired through the use of leverage) do not exceed EUR 100

million; or

• AIFMs which directly or indirectly manage portfolios of AIFs whose total AuM do not exceed EUR 500 million, when the portfolios of AIFs consist of AIFs that are unleveraged and have no redemption rights exercisable during 5 years following initial investment in each AIF. Registration and reporting requirements apply, but no passport rights, unless the AIFM opts in7 (or if the manager can market its EVCFSs or EuSEFs to eligible investors within the EU under the proposed Regulations; see point 1.5 above). AIFMs that fall under the Article 3 exemption, will not be subject to any requirements imposed by the AIFMD other than the said registration and reporting requirements; this means, for instance, that the requirement to appoint a local depositary (see section 6 below) will not apply to the AIFs managed by such AIFMs.

2.4. Excluded from the scope of application of AIFMD are:

(i) holding companies;

(ii) institutions for occupational retirement provision which are covered by Directive 2003/41/EC, including, where applicable, the authorised entities responsible for managing such institutions and acting on their behalf referred to in Article 2(1) of that Directive or the investment managers appointed pursuant to Article 19(1) of that Directive, in so far as they do not manage AIFs;

(iii) supranational institutions, and similar international organisations, in the event that such institutions or organisations manage AIFs and in so far as those AIFs act in the

public interest;

(iv) national central banks;

(v) national, regional and local governments and bodies or other institutions which manage funds supporting social security and pension systems;

(vi) employee participation schemes or employee savings schemes;

(vii) securitisation special purpose entities. The AIFMD does not apply to AIFMs in so far as they manage one or more AIFs whose only investors are the AIFM or the parent undertakings or the subsidiaries of the AIFM or other subsidiaries of those parent undertakings, provided that none of those investors is itself an AIF.


This document does not purport to give legal, financial or tax advice. Should you require further information or legal assistance, please do not hesitate to contact Dr. Katya Tua or Dr. Nicholas Micallef .