ICLG The International Comparative Legal Guide to: Alternative Investment Funds 2015 3rd Edition A practical cross-border insight into Alternative Investment Funds work Published by Global Legal Group, with contributions from: Ali Budiardjo, Nugroho, Reksodiputro Johnson Winter & Slattery Attorneys-at-Law TRUST Ltd Jones Day Babbé Advocates Keane Vgenopoulou & Associates LLC Bonn & Schmitt Lenz & Staehelin Brodies LLP Maples and Calder Camilleri Preziosi McCarthy Tétrault LLP Cox Hallett Wilkinson Limited PricewaterhouseCoopers AG Dillon Eustace Skadden, Arps, Slate, Meagher & Flom LLP Field Fisher Waterhouse LLP and Affiliates Garrigues Steenstrup Stordrange GSG Attorneys at Law Travers Smith LLP Horten Advokatpartnerselskab WTS Tax Legal Consulting The International Comparative Legal Guide to: Alternative Investment Funds 2015 General Chapters: 1 Fundraising in 2015: Continuing Evolution – Stephen G. Sims, Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates 1 2 Regulation of Alternative Investment Fund Managers: The End of the Beginning? Contributing Editor Kirstene Baillie, Field Fisher Waterhouse LLP 4 Stephen G. Sims, Skadden, Arps, Slate, Meagher & Flom LLP Country Question and Answer Chapters: and Affiliates Head of Business 3 Australia Johnson Winter & Slattery: Shelley Hemmings & Andy Milidoni 9 Development Dror Levy 4 Bermuda Cox Hallett Wilkinson Limited: Jonathan Betts & Andrea Moniz-DeSouza 18 Sales Director Florjan Osmani 5 British Virgin Islands Maples and Calder: Tim Clipstone 26 Commercial Director Antony Dine 6 Canada McCarthy Tétrault LLP: Sean D. Sadler & Nigel P. Johnston 33 Account Directors Oliver Smith, Rory Smith 7 Cayman Islands Maples and Calder: Grant Dixon & Andrew Keast 40 Senior Account Manager Maria Lopez 8 Cyprus Keane Vgenopoulou & Associates LLC: Thomas Keane Sales Support Manager Toni Hayward & Christina Vgenopoulou 46 Sub Editor Nicholas Catlin 9 Denmark Horten Advokatpartnerselskab: Claus Bennetsen 52 Senior Editor Suzie Levy 10 England & Wales Travers Smith LLP: Jeremy Elmore & Emily Clark 58 Group Consulting Editor Alan Falach 11 Finland Attorneys-at-Law TRUST Ltd: Mika J. Lehtimäki 66 Group Publisher Richard Firth 12 Germany WTS Tax Legal Consulting: Steffen Gnutzmann & Robert Welzel 71 Published by Global Legal Group Ltd. 13 Guernsey Babbé Advocates: Robert Varley & Cian Lindsay 77 59 Tanner Street London SE1 3PL, UK Tel: +44 20 7367 0720 14 Indonesia Ali Budiardjo, Nugroho, Reksodiputro: Freddy Karyadi & Christine Hakim 83 Fax: +44 20 7407 5255 Email: [email protected] URL: www.glgroup.co.uk 15 Ireland Dillon Eustace: Brian Kelliher & Sean Murray 90 GLG Cover Design F&F Studio Design 16 Liechtenstein PricewaterhouseCoopers AG: Dr. Günther Dobrauz & Philipp Rosenauer 98 GLG Cover Image Source iStockphoto 17 Luxembourg Bonn & Schmitt: Marcus Peter & Aisling Whelan 104 Printed by Ashford Colour Press Ltd 18 Malta Camilleri Preziosi: Louis de Gabriele & Andrew Caruana Scicluna 111 June 2015 Copyright © 2015 19 Mexico Jones Day: Silvia Malagón Soberanes & Rodrigo Gómez Ballina 119 Global Legal Group Ltd. All rights reserved No photocopying 20 Norway Steenstrup Stordrange: Klaus Henrik Wiese-Hansen & Christina Riisnes 123 ISBN 978-1-910083-47-5 ISSN 2051-9613 21 Scotland Brodies LLP: Andrew Akintewe 129 Strategic Partners 22 Spain Garrigues: Luis de la Peña & Juan Ignacio González 135 23 Switzerland Lenz & Staehelin: François Rayroux & Patrick Schleiffer 143 24 Turkey GSG Attorneys at Law: Umurcan Gago & Emre Haykır 150 25 USA Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates: Heather Cruz & Anna Rips 158 Further copies of this book and others in the series can be ordered from the publisher. Please call +44 20 7367 0720 Disclaimer This publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice. Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication. This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualified professional when dealing with specific situations. WWW.ICLG.CO.UK Chapter 2 Regulation of Alternative Investment Fund Managers: The End of the Beginning? Field Fisher Waterhouse LLP Kirstene Baillie ■ Improved disclosure to investors Introduction A key aim of AIFMD was to ensure better transparency – In force now for some time, one might think that the basis for with information flows improved for both investors and regulators. implementation of the Alternative Investment Fund Managers Directive (AIFMD) should now be settled and so there may be little Improved disclosure to investors should aid investor comprehension and consequently assist investor protection to say in a keynote introductory chapter. More likely, though, the because investors are better aware of the product and the evolvement of the regulation of AIFMs is only just beginning. investment exposure which they have as a result of investing In this chapter, approaching this topic with experience from in it. Having said that, some AIFMD disclosure documents a particularly wide-ranging field of view of what is a diverse we have seen have been a little more of the “tick the box” fund marketplace acting for a broad range of fund managers approach to satisfy requirements than one might have wished. (remembering that the vast majority of the EU-based fund managers Some are not overly communicative. Maybe there is still are UK-based), we seek to highlight first where there is now a some further work to be done in this area. positive impact, or at least a clear impact – and secondly where we ■ Passports are now available are now seeing unintended consequences. Finally, we look at the There is now scope for the AIFMD management and marketing major work which remains to be done or where further change is passports to work for those now authorised as full-scope on the horizon. AIFMs. The differences in the passporting arrangements for various EU countries is unhelpful but nonetheless, overall, the Most notably, implementation of AIFMD is, as yet, incomplete. At passport position should now be viewed as a positive. the time of writing, we await papers on the third country provisions, the key issue to look at once the European Securities and Markets Positive impacts are also now arising from clarification of various Authority’s (ESMA) July 2015 Opinion is published. Also, AIFMD issues which were previously on the list of “uncertainties”. is only one of a wider set of regulatory initiatives which will likely ■ Article 6(4) MiFID type of activities can be passported result in increasing intervention and constraints which may affect The passport for management obviously relates to acting AIFs and AIFMs operating within the EU – and how EU-based as an AIFM. However, the Commission Q&As confirmed, investors can access AIF investments. when updated in June 2014, that the Markets in Financial Instruments Directive II (MiFID II) provisions would modify AIFMD in order to establish that an AIFM authorised to Positive Impacts provide the MiFID investment services mentioned in Article 6(4) of AIFMD would have the right to provide these services Both for established AIFMs which have now adjusted their on a cross-border basis under the authorisation to manage arrangements for management of their existing non-UCITS fund an AIF granted by its home Member State. Member States are required to apply such measures arising from MiFID II ranges to AIFMD, and for new AIFMs now becoming established, from 3 July 2015. It was expected though, in the interests there are some positive impacts which can be identified: of cooperation, that this would be facilitated before that ■ Better management of ManCos date. Indeed, the UK Financial Conduct Authority (FCA), With the raft of requirements for the authorisation and by way of example, has always taken the view that Article operation of fund management companies, and with AIFMD 6(4) ancillary activities could be passported and, pursuant for AIFMs, arrangements for systems and controls and to its March 2015 Consultation Paper 15/8, is expecting to management of conflicts of interest, to name but two areas, formalise this previously confirmed approach in its FUND have likely markedly improved. Sourcebook. One could argue, particularly in the UK where there is long- ■ Workable valuation arrangements established regulation of the operation of collective investment To take one initially problematic area, the position on schemes, that sound management of fund managers already valuation responsibilities is becoming clearer. The somewhat existed but, on a Europe-wide basis, we can certainly say that attractively simple wording of AIFMD proved challenging with AIFMD there is a comprehensive framework now in when applied to fund structures, but there is now a clearer place. Also, given that many mainstream managers run both delineation developing between the responsibility for UCITS and AIFs, it makes sense that there are appropriate valuation under Article 19 of AIFMD and services of third standards for management of AIFMs alongside those which parties supporting those performing such responsibility. already exist for UCITS management companies. There are some signs of pragmatic approaches being taken. 4 WWW.ICLG.CO.UK ICLG TO: ALTERNATIVE INVESTMENT FUNDS 2015 © Published and reproduced with kind permission by Global Legal Group Ltd, London Field Fisher