AIFMD – Alternative Investment Fund Managers Directive

What is AIFMD?

AIFMD is an EU law on the financial regulation of hedge funds, private equity funds and other alternative investment funds within the European Union. The simple reason for its creation is that institutional funds that fell under the AIFMD were previously outside of EU financial agreements for disclosure and transparency.

The directive came into force on 21st July 2011. It should have been written into national laws of EU Member states by 22nd July 2013, 16 out of the 28 member states failed to implement the rules on time.

 

What are its objectives?

It’s primary focus was to regulate the AIFM (alternative investment fund manager) instead of the AIF (alternate investment fund)

But it also aimed to:

  • Increase the transparency of AIFMs towards investors, supervisors and the employees of the companies in which they invest

  • Equip national supervisors, the European Securities Markets Agency (ESMA) and the European Systemic Risk Board (ESRB) with the information and tools necessary to monitor and respond to risks to the stability of the financial system that could be caused or amplified by AIFMs activity

  • Introduce a common and robust approach to the protection of investors in these funds

  • Strengthen and deepen the single market, thereby creating the conditions for increased investor choice and competition in the EU, subject always to high and consistent regulatory standards; and

  • Increase the accountability of AIFMs holding controlling stakes in companies (private equity) towards employees and the public at large.

 

Guernsey AIFMD and the ‘Third Country Passport’

Full AIFMD equivalent rules came into effect in Guernsey in January 2014.

Guernsey introduced its Manager Led Product (MLP) in May 2016, the MLP was aimed at AIFMs seeking to market into one or more EU member states under national private placement regimes (NPPRs). The main advantage of the MLP is the avoidance of duplicating regulator requirements over several entities.

Later in July 2016, the ESMA recommended to grant Guernsey a third country passport. The recommendation, once approved by the relevant European authorities, will further enhance Guernsey’s position to distribute funds into Europe.

For the time being Guernsey will avail on NPPRs for as long as they remain in place, and will transition to a full passport as and when it is implemented into third countries.

 

Need advice?

Midshore’s experience with AIFMD, other regulations, and the Guernsey Manager Led Product means we are well equipped with the knowledge you need to ensure your AIFMs make the right choices when structuring funds.

Please contact us to discuss your needs.