2
Agenda Today
1. Timetable and implementation
2. Key impact areas
3. Planning strategies
4. Questions
4
Timetable – Level 1
• Level 1: Primary Directive became EU law on 21 July 2011.
• Must be implemented by Member States by 22 July 2013.
5
Timetable – Level 2
• ESMA issued technical advice to the Commission on 16 November 2011.
• Level 2: ‘regulations’ – publication delayed– Have ‘direct effect’
– Contain wide ranging implementing measures
6
Timetable – Level 3
• Level 3 Committees comprise representatives of national regulators
• Level 3 Committees give advice, recommendations and guidance on development of Level 2 measures
7
Timetable – Marketing
2011 2012 2013 2014 2015 2016 2017 2018
Directive in force (P)
EU AIF obtain passport
Non-EU AIF obtain passport?
No more private placements?
IF ESMA make positive recommendation, and requisite implementing legislation is passed
Timetable - FSA
• Discussion Paper earlier this year (DP12/1) – general concepts
• Consultation Paper expected towards end of this year
8
Timetable – New FUND Sourcebook
To cover:
• AIFM of UK and non UK AIF
• UK managers of UK and non UK UCITS
• UK UCITS and non UCITS retail funds
9
Timetable – Other FSA to-dos
• Refine concepts (e.g. “AIF”)
• New regulated activity of “managing AIF”?
• Amend other Sourcebooks; Listing Rules etc.
• Amend secondary legislation (e.g. financial promotion regime)
10
11
Timetable – Authorisation
• FSA should accept applications “from Q2 2013”
• Existing EU managers: submit application by 22 July 2014.
• Interim compliance obligations are unclear.
• Best timing for new managers?
A change in role?Pre AIFMD
• AIF legally responsible for fund operation
• manager responsible for investment management and promotion (MiFID)
Post AIFMD
• AIF's legal responsibilities remain
• But EU manager assumes more of an “operator” role
13
Are you in scope?
• Do you manage AIFs?
• Is your business an AIFM?- risk management or portfolio management
• Can you rely on any exemptions?- de minimis exemptions?
- MIFID carve out via 3rd country AIFM or self-managed AIF?
14
Authorisation
• For each fund consider:– Management and delegation structure
– Who (if anyone) is the AIFM?
– Marketing in EU?
• How possible is offshore or MiFID-only structuring?
15
Authorisation (cont’d)
• Group planning:– should your current MiFID manager be the AIFM?
– should you create a new AIFM?
• When should you submit your application?
• Will additional regulatory capital be required?
16
Risk and Liquidity Management
• Who will monitor?
• How will functional separation be ensured?
• Are my systems compliant?
17
Valuation
• Will I value internally or externally?
• External: who will do it and at what cost
• Internal: how will I ensure functional separation?
• Are my systems and policies compliant?
18
Other Operational / Compliance
• How will I deal with new requirements on:– conflicts?
– due diligence?
– inducements?
– execution, etc?
• What changes are required to compliance / internal audit function?
19
Delegation
• What is my current delegation structure?
• Is it compliant? e.g.– “objectively justified”?
– sufficiently resourced and authorised?
– third countries?
• New relationship with administrator
20
Marketing
• Will private placement still work for me after 2013? For which products?
• Do I see value in the passport on day one?
• Should I re-domicile funds onshore?
21
Depositary
• Who will be depositary (where required)?
• Interaction with prime broker and trading arrangements?
• Impact on pricing?
• Should I re-domicile onshore funds offshore?
22
Remuneration
• Which rules will apply to me?– Proportionality guidance awaited
• Will current arrangements be compliant?
• Are new arrangements future-proof?
• Will I need new compensation structures (e.g. RemCom)?
23
Specific Issues
• Are any of my funds “significantly leveraged”?– guidance awaited, 3x NAV?
• Will the “asset stripping” rules affect me and how will I comply?
• Will rules on investment in securitisation provisions affect me?
24
Transparency
• What will the impact on fund documents be?
• Interaction with existing investor reporting?
• Who will monitor compliance?
25
House – stock-take
• Which entities are in my group?
• How are they capitalised and regulated?
• Interaction with investment decision making process?
• What is status of my portfolios? (AIF or not AIF?)
27
House – group structure
• Group structure changes?
• New entities and authorisations?
• Will service provider contracts, employees, IP rights, software licences etc. be in the right place or easy to change?
28
House – general risk
• Group risk and liability profile changes?
• Insurance update?
• Impact on group tax arrangements and planning?
29
Counterparty – stock-take
• Who are my service providers? What do they do?
• Contract database?
• How will existing terms be impacted by new requirements?– Counterparty terms?
– Investment strategy and objectives?
30
Counterparty – Planning
• Will I need new counterparties (e.g. depositary)?
• How do I manage the ‘paper blizzard’?
31
Planning – Product
• Will funds need re-structuring?
• Process for documentation updates?
• How will new rules affect: – Fees?
– Product viability?
– Investor base?
32
33
Product outcomes (cont)
• Will my strategy work in a platform that is outside the scope of AIFMD?– UCITS / Newcits?
– managed accounts?
• Dual fund ranges – EU and a second cheaper, better performing non EU range?
• Development of an AIFMD brand?
Planning – general
• Who is responsible?
• Are senior management onboard?
• Strategy for staying informed?
• “First mover advantage” or “wait and see”?
• Are different jurisdictions joined-up?
• Staffing needs?
34
dechert.comAlmaty • Austin • Beijing • Boston • Brussels • Charlotte • Chicago • Dubai • Dublin • Frankfurt • Hartford Hong Kong • London • Los Angeles • Luxembourg • Moscow • Munich • New York • Orange County • Paris Philadelphia • Princeton • San Francisco • Silicon Valley • Tbilisi • Washington, D.C.
35
QUESTIONS?
Gus Black and Stuart MartinDechert LLP