A rocky road to acceptance
07 August 2013
The July deadline for AIFMD has been and gone—but what has really changed? AST investigates
Image: Shutterstock
The directive seemed so bright when it was introduced in 2011, but after two years of confident press releases, seminars and specifically-hired staff, progress in implementing the Alternative Investment Fund Managers Directive (AIFMD) across the EU has been fairly uneven.
According to a joint study by the Alternative Investment Management Association (AIMA) and Ernst & Young, although a majority of EU member states have either already transposed AIFMD into law ahead of the transposition deadline of 22 July 2013, or have drafted the final legislation and are awaiting parliamentary approval, only 12 member states have completed full legislative transposition.
At least five member states are known to have made little or no progress towards drafting or finalising the required legislation. The AIMA/Ernst & Young study also found that at least 15 member states are allowing managers more time to comply with the directive under transitional periods of up to one year from the transposition deadline, although two of those appear to be extending this relief only to their domestic managers.
Jiri Krol, AIMA’s deputy CEO, head of government and regulatory affairs, said: “It rarely happens that all member states transpose on time but we are encouraged by the progress that is being made by some of the key asset management and fund jurisdictions in implementing the directive. That said, there are still significant areas of uncertainty even in those jurisdictions that have transposed the text.”
Twelve member states have so far transposed the directive into law: the Czech Republic, Cyprus, Denmark, France, Germany, Ireland, Luxembourg, Malta, the Netherlands, Slovakia, Sweden and the UK.
Austria, Bulgaria, Hungary, Italy, Latvia and Romania have drafted laws that are awaiting parliamentary approval, while Belgium, Finland, Portugal, Slovenia and Spain are yet to begin transposing the directive into law.
AIMA also stated that Estonia, Greece, Lithuania and Poland are still awaiting clarification.
For non-EU member states, the question remains whether to comply with AIFMD at all.
One island that has opted in is Guernsey. Fiona Le Poidevin, chief executive of Guernsey Finance, says that the domicile is now operating dual regimes, which will enable distribution of Guernsey products into both EU and non-EU countries via normal marketing routes, including EU national private placement regimes where they remain available.
The island is also weighing up the pros and cons of operating a Guernsey ‘opt in’ regime in order to access (on a bilateral basis) EU member states that align their private placement rules with AIFMD.
On top of this, Le Poidevin asserted that the island will participate in future consultations on how third country ‘passporting status’ will operate from July 2015. This is related to the opt-in rules, which may allow bilateral marketing of an alternative investment fund product to certain EU member states prior to the implementation of a third country passport regime.
In most countries, the use of the passport will be voluntary in the sense that until late 2018/early 2019, non-EU firms will have a choice between becoming authorised and benefitting from the passport on the one hand, and continuing to market under national placement regimes on the other.
In some countries, national regimes will be abolished and marketing will only be available under the passport.
If national placement regimes are terminated in 2018/19, authorisation will be the legal regime applicable for all firms that want to actively solicit EU investors.
Gibraltar is another territory, that, while not strictly considered an EU member state, is keen on implementing the directive.
“Gibraltar, for the purposes of AIFMD, is in the EU and as such transposition has the same effect as if it were a member state,” says Paul Astengo, senior executive at the Gibraltar Finance Centre.
“Delivered on schedule, Gibraltar has fully embraced this important change; it is committed to the directive and sees the advantages that it provides to the funds industry particularly to prospective firms wishing to redomicile.”
Fundamentally, he says, it provides the opportunity of automatic access to the EU single market, which is not the case with other overseas territories as they are not part of the EU.
“Gibraltar is an onshore, fully compliant, internationally cooperative and G20 white listed European finance centre. [The island] has regulations specific to redomiciliation which permit this to occur from all of the major non-EU fund centres including the Cayman Islands, the British Virgin Islands and the Channel Islands.”
Though some countries have yet to implement (and with cases such as Greece one guesses that they have far more to worry about), the progress was always estimated to be slow.
Julian Young, a partner at Ernst & Young, co-author of the study, says that the directive is a complex piece of legislation, and that the task facing member states and national regulators in implementing it within the required timeframe is not small.
“Even though the number of member states that have already implemented AIFMD may not look impressive, more progress has been made toward transposition than had been expected.”
“However, it’s clear from the survey results that the directive has not yet achieved the single market for non-UCITS products it was aiming for, and so firms will have to operate across a patchwork quilt of regulatory standards for the next few years at least.”
According to a joint study by the Alternative Investment Management Association (AIMA) and Ernst & Young, although a majority of EU member states have either already transposed AIFMD into law ahead of the transposition deadline of 22 July 2013, or have drafted the final legislation and are awaiting parliamentary approval, only 12 member states have completed full legislative transposition.
At least five member states are known to have made little or no progress towards drafting or finalising the required legislation. The AIMA/Ernst & Young study also found that at least 15 member states are allowing managers more time to comply with the directive under transitional periods of up to one year from the transposition deadline, although two of those appear to be extending this relief only to their domestic managers.
Jiri Krol, AIMA’s deputy CEO, head of government and regulatory affairs, said: “It rarely happens that all member states transpose on time but we are encouraged by the progress that is being made by some of the key asset management and fund jurisdictions in implementing the directive. That said, there are still significant areas of uncertainty even in those jurisdictions that have transposed the text.”
Twelve member states have so far transposed the directive into law: the Czech Republic, Cyprus, Denmark, France, Germany, Ireland, Luxembourg, Malta, the Netherlands, Slovakia, Sweden and the UK.
Austria, Bulgaria, Hungary, Italy, Latvia and Romania have drafted laws that are awaiting parliamentary approval, while Belgium, Finland, Portugal, Slovenia and Spain are yet to begin transposing the directive into law.
AIMA also stated that Estonia, Greece, Lithuania and Poland are still awaiting clarification.
For non-EU member states, the question remains whether to comply with AIFMD at all.
One island that has opted in is Guernsey. Fiona Le Poidevin, chief executive of Guernsey Finance, says that the domicile is now operating dual regimes, which will enable distribution of Guernsey products into both EU and non-EU countries via normal marketing routes, including EU national private placement regimes where they remain available.
The island is also weighing up the pros and cons of operating a Guernsey ‘opt in’ regime in order to access (on a bilateral basis) EU member states that align their private placement rules with AIFMD.
On top of this, Le Poidevin asserted that the island will participate in future consultations on how third country ‘passporting status’ will operate from July 2015. This is related to the opt-in rules, which may allow bilateral marketing of an alternative investment fund product to certain EU member states prior to the implementation of a third country passport regime.
In most countries, the use of the passport will be voluntary in the sense that until late 2018/early 2019, non-EU firms will have a choice between becoming authorised and benefitting from the passport on the one hand, and continuing to market under national placement regimes on the other.
In some countries, national regimes will be abolished and marketing will only be available under the passport.
If national placement regimes are terminated in 2018/19, authorisation will be the legal regime applicable for all firms that want to actively solicit EU investors.
Gibraltar is another territory, that, while not strictly considered an EU member state, is keen on implementing the directive.
“Gibraltar, for the purposes of AIFMD, is in the EU and as such transposition has the same effect as if it were a member state,” says Paul Astengo, senior executive at the Gibraltar Finance Centre.
“Delivered on schedule, Gibraltar has fully embraced this important change; it is committed to the directive and sees the advantages that it provides to the funds industry particularly to prospective firms wishing to redomicile.”
Fundamentally, he says, it provides the opportunity of automatic access to the EU single market, which is not the case with other overseas territories as they are not part of the EU.
“Gibraltar is an onshore, fully compliant, internationally cooperative and G20 white listed European finance centre. [The island] has regulations specific to redomiciliation which permit this to occur from all of the major non-EU fund centres including the Cayman Islands, the British Virgin Islands and the Channel Islands.”
Though some countries have yet to implement (and with cases such as Greece one guesses that they have far more to worry about), the progress was always estimated to be slow.
Julian Young, a partner at Ernst & Young, co-author of the study, says that the directive is a complex piece of legislation, and that the task facing member states and national regulators in implementing it within the required timeframe is not small.
“Even though the number of member states that have already implemented AIFMD may not look impressive, more progress has been made toward transposition than had been expected.”
“However, it’s clear from the survey results that the directive has not yet achieved the single market for non-UCITS products it was aiming for, and so firms will have to operate across a patchwork quilt of regulatory standards for the next few years at least.”
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