Requirement for authorisation
A core requirement of the Directive is that no AIFM to which the Directive applies may manage or promote one or more AIF unless it has been authorised by the competent authorities of the Member State in which the relevant AIFM has its registered office.1
Standards for authorisation
Authorisation will only be granted if the relevant competent authorities are comfortable that the AIFM can comply with the Directive. Further information on registration requirements are set out here.
Restrictions on the activities of AIFM
The Directive imposes restrictions on the activities that an authorised AIFM may conduct. These include the core functions (as described in Annex I to the Directive) of portfolio management and risk management. AIFM are also permitted to provide in the course of their management business: administration (including legal and fund management accounting services; customer enquiries; valuation and pricing; regulatory compliance; maintenance of registers; distributions of income and redemption proceeds; contract settlement and record keeping); marketing; and activities related to the assets of the AIF.
Member States may also permit AIFM to provide the following services:
- management of portfolios of investments including those owned by pension funds (i.e., segregated account management);
- as non-core services:
- investment advice;
- safekeeping and administration in relation to shares or units of collective investment undertakings; and
- reception and transmission of orders in relation to one or more financial instruments.
An AIFM may not be authorised only to conduct these activities under the Directive (i.e. such a firm that was not also conducting the core activities of a fund manager would instead be required to seek authorisation under MiFID).
Restrictions on the listed AIF
Recital (60) provides that AIF may only be listed on a stock exchange in the EU if the AIFM which manages the AIF is itself permitted to market the units or shares of the AIF in that Member State. This could result in some listed funds needing to restructure themselves on implementation to the full scope of the Directive.
The authorisation procedure requires the applicant AIFM to provide certain information about itself, its compliance systems and controls and its AIF to its competent authorities.
Disclosure of AIFM information
AIFM must disclose:
- the identities of the persons in charge of the AIFM, as well as of the AIFM's shareholders;
- a program of activity setting out the organisational structure of the AIFM; and
- remuneration policies and practices and arrangements made for the delegation and sub delegation to third parties.
Disclosure of AIF information
As part of the application process, an AIFM must make disclosures related to each AIF that it wishes to manage to its competent authority. This includes, in particular:
- information about the investment strategies;
- information on where the master AIF is established (if the AIF is a feeder AIF2);
- the AIF's rules or instrument of incorporation (i.e., its constitutional documents); and
- information on the arrangements made for the appointment of the depositary.
Footnotes: 1. Article 6(1).
2. Pursuant to Article 4(1)(m), a feeder AIF is defined in the Directive as one which invests at least 85% of its assets in one or more master AIF.