EU regulated AIFMs promoting EU domiciled AIFs – We have lived with AIFMD since the full implementation date of 22 July 2014 with the marketing passport being available from that date for EU regulated AIFMs promoting EU domiciled AIFs.
The ESMA Opinion – Use of the AIFMD Passport – ESMA published its Opinion on 30 July 2015 on the functioning of the AIFMD passport and national private placement regimes.
While the expectation was that there would be substantial divergence in the approach taken by Member States to their private placement regimes (which is expressly permitted under AIFMD), passporting for EU AIFMs of EU AIFs should have been a simple affair involving notification by the home state regulator to the regulators of the Member States where the passport is intended to be used.
The Opinion highlighted a number of issues that EU AIFMs have encountered which reflect the fact that AIFMD has not “harmonised” the EU landscape:
- Fees – Some countries charge fees (Austria, Denmark, France, Germany, Italy, Latvia, Luxembourg, Malta and Spain) while others do not (the UK, Ireland and the Netherlands, for example). One of the respondents to the call for evidence reported to ESMA that if an AIF is marketed in all 28 Member States, the total fees would be circa €168,000 with the appointment of centralising agents (see immediately below) bringing the overall cost to €200,000.
- Centralising Agent – France requires the appointment of a local bank through which payments must be channelled (which is not envisaged by AIFMD and therefore could be considered unlawful).
- Pre-Marketing – A lack of homogeneous interpretation of when “marketing” occurs. In the UK and Germany final form documents are required before “marketing” occurs however France, for example, considers that “marketing” of an AIF may occur before it is formed. For PE funds, this is a real issue given that documents are negotiated substantially in advance of a fund being incorporated or registered.
- Time to Market – The UK, for example, will permit marketing on receipt of passport notification from other Member States without any additional requirements but that is not necessarily the case in other Member States which delays access to the local market (fees may need to be paid in advance while BaFIN and the AMF, for example, may make additional checks that are not permitted under Article 23 of AIFMD).
- Material Changes – There is no consensus amongst regulators on what a “material change” is and the timing for notifying the regulator of that change (in advance, promptly, etc).
Marketing to “professional investors” – Both EU AIFMs using the AIFMD marketing passport and EU and non-EU AIFMs marketing funds under the national private placement regimes of Member States may only market to MiFID “professional investors” unless they have top up marketing permissions from each regulator (where permitted).
Unless a qualitative and quantitative analysis is carried out to opt up a natural person to “professional investor” status, the passport and AIFMD related national private placement regimes will not be able to be used when marketing to natural persons and therefore most family offices.
Marketing to non-professional investors is at the discretion of each Member State so separate registrations may be required or non-professional investor marketing may not be permitted altogether.
Managers should also note that MiFID II will be throwing another spanner in the works by reclassifying local government (and therefore local government pension schemes) as retail investors with each Member State having the ability to decide whether or not to permit an opt up to professional investor status.
The Future – ESMA has taken on board the experiences highlighted by the respondents to the call for evidence and will now need to decide if it should issue guidance on unclear areas (such as when “marketing” is deemed to occur) and/or take action against those Member States who have adopted policies and procedures contrary to AIFMD that hamper the operation of the passport.