Overview of Anticipated Proposals in the AIFMD Draft Proposal
Below is a high level overview of anticipated proposals contained within the upcoming AIFMD Draft Proposal announcement. This document is for Brooklands internal reference.
No significant changes are planned for the AIFMD rules on delegation – delegation will continue as an accepted practice, however there will be additional administration and supervision requirements.
The proposals confirm that the Article 20 requirements apply to both AIFM functions and MiFID ‘top-up’ permissions.
When seeking authorisation, AIFMs should provide details of the human and technological resources deployed to monitor the delegate in their performance of the delegated function.
The draft proposal does not prescribe a minimum proportion of activities to be kept in-house by an AIFM.
Delegation to third country entities will necessarily entail increased reporting requirements and supervisory mechanisms.
The proposals will empower ESMA to evaluate delegation provisions five years from the anniversary of the Directive coming into force.
It is being proposed that a non-EU AIF cannot be domiciled in either a non-cooperative tax jurisdiction as defined by the EU council or a high risk country pursuant to the AML Directive.
These changes will be included in all of the Articles which relate to third country passporting.
Liquidity Risk Management
It is being proposed that AIFMs will have to select a Liquidity Risk Management tool (LRM) and include this within the instruments of incorporation of the fund. These tools will be mandated to be made available to AIFMs within a new Annex within the AIFMD.
There is some doubt as to whether this proposal will be supported by NCAs and Member States.
Key proposals for Loan Granting Funds (LGFs):
– LGFs are required to be closed-end if more than 60% of their loans were originated by the LGF
– LGFs are to keep 5% of exposure of any loan they originated if they sell the loan
– LGFs cannot lend to their own AIFM
– LGFs will be limited to 20% per obligor on loans granted to financial undertakings and UCITS
– LGFs must establish detailed policies for the granting of loans
Data reporting requirements are to be broadened by the removal of restricting language, such as the referral to reporting of “main instruments traded” rather than “instruments traded”, which is much broader.
Proposals that third country depositaries should not be established in a no-cooperative tax jurisdiction as defined by the EU Council or in a high risk country pursuant to the AML Directive.
Fees and Charges
The proposal includes an obligation to disclose fees and charges relevant to the cost of operations of the fund. This includes all direct and indirect fees and charges and will be disclosed to investors in a quarterly report.