AIFMD – the Alternative Investment Fund Managers Directive – was fully implemented in Europe in 2014. Managers of unregulated funds of all shapes and sizes are now governed by a pan-European regulatory regime, the benefit of which is a pan-European passport. But AIFMD’s effects aren’t just being felt by European Managers. They also impact the way that Asian Managers can market their non-retail funds in Europe.
National rules with a European twist
Non-European Managers raise capital in Europe using each country’s marketing rules – the National Private Placement Regime (NPPR). This mechanism remains under AIFMD. And, at least for now, is the only route to market. The Directive sets out three hoops that Managers need to jump through when using the NPPRs:
- first, register the fund with the Regulator of each country in which they wish to market
- secondly, make certain initial and ongoing disclosures to investors, and
- thirdly, periodically report to each Regulator (Annex IV reporting)
Some countries – notably, the UK and the Netherlands – have rolled out these requirements as drafted. Others, such as Germany and Denmark, have chosen to ‘gold-plate’ them – for example, requiring a fuller authorisation process, or the need to appoint a Depositary. France and Italy have done away with their NPPR entirely, closing the door to non-European Managers (unless they wish to be fully authorised under the AIFMD).
Asian Fund Managers wishing to raise capital in Europe need therefore to look at each jurisdiction individually – determining what’s needed, and carrying out a cost-benefit analysis.
But marketing under the NPPR isn’t as difficult as it might sound. Managers are usually able to gauge investor interest before they register their fund – this is known as ‘pre-marketing’. If they then decide to bite the bullet, there is some uniformity in the requirements: the initial and ongoing disclosures need only be drafted once (a separate version isn’t required for each country), and the information required for Annex IV reporting is almost the same throughout Europe.
What about the marketing passport?
There’s been much talk about whether the existing marketing passport will be extended to non-European Managers, and to non-European funds. ESMA – the European Securities and Markets Authority – is considering this on a country-by-country basis. It’s already provided positive advice with respect to Canada, Guernsey, Japan, Jersey and Switzerland. And has deferred its decision for Hong Kong and Singapore, along with the US, Australia and the Isle of Man.
Precisely when the passport will be extended isn’t known. Many observers suggest that the European Commission might wait until positive advice has been issued on a number of jurisdictions. So it could be a while off yet.
What we do know is that to benefit from the marketing passport Managers will need to comply with the AIFMD in its entirety. It might not therefore be the solution that Managers are hoping for. For some Managers at least, the NPPR will remain a neater solution. Of course, there is the risk NPPRs will cease once the passport is introduced.
How can Bovill help?
We can help in all aspects of AIFMD compliance:
- Determining the NPPR of each European country in which you wish to market your fund
- Completing each registration, including drafting the relevant AIFMD disclosures
- Completing the Annex IV returns in each jurisdiction