In addition to the operating conditions (described here), the AIFM will be subject to specific organisational requirements.
General principles – compliance resources
AIFM are required at all times to use adequate and appropriate human and technical resources that are necessary for the proper management of AIF. In particular, the AIFM must have sound administrative and accounting procedures, together with control and safeguard arrangements for electronic data processing and certain other internal control mechanisms regulating things such as personal account dealing by employees.
Valuation of AIF
AIFM are required (by Article 19(1)) to establish appropriate and consistent procedures so that a proper and independent valuation of the assets of the AIF can be performed.
Local law to apply to valuations
The Directive provides that local accounting laws will apply to the valuation of assets and the calculation of the net asset value per share or unit of the AIF. The relevant local law for an AIF is the law of the country where the AIF has its registered office and/or as stipulated in the AIF rules or instruments of incorporation.
If the AIF is open-ended, such valuations and calculations must also be carried out at a frequency which both is appropriate to the assets held by the fund and its issuance and redemption frequency (i.e., a fund that deals daily and invests in liquid securities is likely to require more frequent valuations than a fund that holds highly illiquid assets and only deals a few times a year).
If the AIF is closed-ended, such valuations and calculations must also be carried out in the event of an increase or decrease of the capital by the relevant AIF (i.e., following additional shares and distributions of capital).
Pursuant to Article 19(4), the valuation may be performed by:
- an external valuer; or
- the AIFM itself, provided that the valuation task is functionally independent from the portfolio management and the remuneration policy and other measures ensure that conflicts of interest are mitigated and that undue influence upon the employees is prevented.
The external Valuer must be a legal or natural person independent from the AIF, the AIFM and from any other persons with close links to the AIF or the AIFM.
If the AIFM chooses to appoint an external valuer (referred to in the Directive as a valuator), it must be able to demonstrate that:
- the external valuer is subject to mandatory professional registration recognised by law or to legal or regulatory provisions or rules of professional conduct; and
- the external valuer can furnish sufficient professional guarantees to effectively be able to perform the relevant valuation function they have been appointed to do; and
- the appointment of the external valuer complies with the requirements of Article 20(1) and (2) and the implementing measures that are yet to be announced.
The appointed external valuer may not delegate its function to a third party.
Verification by authority
If the AIFM undertakes valuations itself, the AIFM's competent authorities may request verification of the valuation procedures by an external valuer or auditor.
Regardless of any delegation of valuation functions to third parties, Article 19(10) stresses the AIFM remains responsible for proper valuation and calculation of the net asset value of the AIF.