Guernsey's AIFMD Regime - Rules, Forms, Guidance & FAQs
Guernsey's AIFMD Regime
Following discussion with industry the general consensus indicated that a dual regime would be the best solution for Guernsey not least because there are AIFMs currently managing Guernsey funds which fall outside the scope of the Directive and in the future it is likely that promoters will continue to use the Bailiwick as a base for such products. In practice this will mean operating two regulatory regimes; an AIFMD focussed regime and a non-AIFMD regime.
The AIFMD (Marketing) Rules, 2013
There are two aspects to Guernsey's AIFMD Regime the first being The AIFMD (Marketing) Rules, 2013 ensure that Guernsey funds and Guernsey fund managers established in Guernsey who wish to market into the EEA meet the requirements of Articles 42 and 43 of AIFMD. These Rules introduce minimal notification requirements to the Commission by Guernsey fund managers and Guernsey funds in respect of marketing into the EEA. These Rules will also allow the Commission to co-operate effectively with the relevant EEA securities regulator. The Rules became effective on 22 July 2013.
Form AIFM should be used when making the required notification to the Commission.
The AIFMD Rules, 2013
The second part of the Bailiwick's AIFMD focussed regime, prior to the introduction of the pan-European passport, is that the Bailiwick will operate an equivalent opt in AIFMD regime for Guernsey fund managers and depositaries. The AIFMD Rules, 2013 governing this opt in regime became effective from 2 January 2014. Please find here the accompanying forms; Form GAIFM and Form DAIFM.
The AIFMD Rules, 2013 state that the Commission will have regard to the provisions of AIFMD and AIFMD Level 2 in interpreting these Rules. Any guidance issued by ESMA, for example, in respect of remuneration practices, or the definition of an AIF may be used by the Commission to interpret the obligations created by these Rules. The Commission however, has been requested to issue guidance on key topics such as outsourcing, cash monitoring and reconciliations. The Commission has commenced, and will continue to, work with the Guernsey investment fund industry in developing relevant guidance for the Bailiwick of Guernsey. In the meantime, the Commission has updated its FAQs below and will continue to provide updates by this medium.
AIFMD applies to AIFMs established in EEA Member States, but also to non-EEA AIFMs that manage or market AIFs in the EEA, subject to a number of conditions. For the first time in EEA financial legislation, the Directive provides for an EEA passport for non-EEA AIFMs. This passport could potentially be applicable from 2015 or 2016. The principle of the passport is that, in order to enjoy the same rights, non-EEA AIFMs should comply with the same obligations, which means that non-EEA AIFMs will be able to benefit from the European passport so long as they abide by the rules of AIFMD. This does not mean that the non-EEA country where an AIFM is established would need to have AIFMD-equivalent rules, but that non-EEA AIFMs willing to operate in the EEA will have to comply with the AIFMD rules of a nominated EEA Member State of Reference as if they were European AIFMs. As a consequence, European competent authorities will have responsibility for supervising compliance with the AIFMD by AIFMs situated in non-EEA countries. In order to do this the European authorities would need the co-operation of the relevant non-EEA authority.
|Belgium||Financial Services and Markets Authority|
|Bulgaria||Financial Supervision Commission|
|Cyprus||Cyprus Securities and Exchange Commission|
|Czech Republic||Czech National Bank|
|Estonia||Estonian Financial Supervision Authority|
|France||Autorité des marchés financiers|
|Germany||Bundesanstalt für Finanzdienstleistungsaufsicht|
|Greece||Hellenic Capital Market Commission|
|Hungary||Pénzügyi Szervezetek Állami Felügyelete|
|Ireland||Central Bank of Ireland|
|Latvia||Finanšu un kapitāla tirgus komisija|
|Lithuania||Bank of Lithuania|
|Luxembourg||Commission de Surveillance du Sector Financier|
|Malta||Malta Financial Services Authority|
|The Netherlands||Autoriteit Financiële Markten|
|Poland||Polish Financial Supervision Authority|
|Portugal||Comissão do Mercado de Valores Mobiliários|
|Romania||Financial Supervisory Authority|
|Slovak Republic||Národná banka Slovenska|
|United Kingdom||Financial Conduct Authority|
The co-operation arrangements include the exchange of information, cross-border on-site visits and mutual assistance in the enforcement of respective supervisory laws. This co-operation will apply to Bailiwick of Guernsey alternative investment fund managers (AIFMs) that manage or market alternative investment funds (AIFs) in the EU and to EU AIFMs that manage or market AIFs in the Bailiwick of Guernsey. The arrangements also cover co-operation in the cross border supervision of depositaries and AIFMs’ delegates. The agreement takes the form of a Memorandum of Understanding (MoU) between the national securities supervisors in EU countries and the GFSC.
|Competent Authority||Procedure for National Private Placement|
|Finanzmarktaufsicht (FMA)||Austria has transposed AIMFD in Austrian legislation. The Alternative Investmentfonds Manager-Gesetz (“AIFMG”) sets out the requirements to market AIFs to both professional and retail investors in Austria. Article 47 permits a Non-EU AIFM to market an AIF to professional investors via a legal representative with a registered office in Austria. Article 49 permits five types of AIF to be marketed to retail investors in Austria. A fund manager that intents to market to professional or retail investors in Austria must send a Notification Letter to the Austrian FMA together with a confirmation from the home country competent authority and the relevant information as required in Annex II of the AIFMG. These notifications and attachments can be sent to [email protected].|
|Financial Services and Markets Authority (FSMA)||The AIFMD has not yet been transposed into Belgium law. A 'questions and answers' document is on FSMA's website regarding the transitional period provided for by the AIFMD. This document draws a distinction between the transitional period from 22 July 2013 to the entry into force of the Belgian Law transposing the AIFMD ("Period A") and the period starting from the entry into force of the Belgian Law transposing the AIFMD ("Period B"). During these two periods, the process may be different for different for marketing alternative investment funds to professional or retail investors in Belgium.|
During Period A for marketing to professional investors it is recommended that Guernsey AIFMs voluntarily adhere to the conditions provided for by Article 42 of AIFMD. In this context the Guernsey AIFMs are encouraged to submit a dossier to us demonstrating that the conditions of Article 42 are fulfilled. Marketing to retail investors in Belgium is possible as long as AIFMs comply with the Law of 3 August 2012 Articles 160 to 185 and the Royal Decree of 12 November 2012 Articles 221 to 225.
During Period B Guernsey AIFMs marketing to professional investors will be obliged to adhere to the provisions of the Belgian Law transposing Article 42 of the AIFMD. Marketing to retail investors in Belgium will only be possible if, in addition to the above-mentioned conditions, the additional rules provided for by the Belgian Law transposing the AIFMD are complied with. AIFMs are requested to submit a dossier to us demonstrating that the above-mentioned conditions are fulfilled.
|Bulgaria Financial Supervision Commission (FSC)||AIFMD has been transposed into Bulgarian legislation, however an English translation is not yet available.|
|Cyprus Securities & Exchange Commission (CySEC)||AIFMD has not yet been transposed in Cyprus.|
|Finanstilsynet (Danish Financial Supervisory Authority)|
The Executive Order nr.821 of 29 June 2013 applies to the marketing of third country AIFs by fund managers established in a third country. The executive order is currently available only in Danish but an authorised English translation will be available soon.
A fund manager that intends to market an AIF established in a third country to professional investors in Denmark is required to send a Notification Letter (application form) to the Danish FSA together with relevant information as required in article 3 of the executive order. The application processing time can take up to 3 months after the complete application file has been submitted to the Danish FSA. The Notification Letter (application form) referred to above is available on the Danish FSA’s website (see link to left).
Question 6) of the Notification Letter (application form) requires a statement from the supervisory authoritites of the non-EU AIF to the effect that the home country is prepared to grant similar Danish AIFs access to market their units ore shares in the country in question. An overarching statement dated 31/10/13 has been issued to the Danish FSA stating that the Commission is willing to permit the promotion of the Danish Alternative Investment Funds into the Bailiwick of Guernsey through an entity licensed under the Protection of Investors (Bailiwick of Guernsey) Law, 1987 as amended. Reference to this statement may be made in response to question 6) in any application to the Danish FSA.
Marketing to retail investors in Denmark of AIFs is currently not permitted for fund managers established in a third country. Neither is it possible for third country managers to apply for authorisation to market its funds to retail investors.
|Estonian Financial Supervision Authority (FSA)||AIFMD has not yet been transposed in Estonia. The full transposition of AIFMD is expected to take place in the second quarter of 2014.|
|Finassivalvonta (FIN-FSA)||AIFMD transposition is expected by the end of 2013.|
|Authorite des Marches financiers (AMF)||Following the AIFMD implementation into French law completed last July, the applicable rules for the marketing to professional investors of non-EU AIFs by non-EU AIFMs in France without a passport are set out in Articles L. 214-24-1, L. 214-138, and D. 214-32 of the French code monétaire et financier (see attached, the text is only available in French at present).|
You should refer in particular to article D. 214-32. For a non-EU AIF to be marketed in France by a non-EU AIFM (to professional investors), the following preconditions should be met :
- a prior notification to the AMF for each AIF the marketing of which is contemplated in France ;
AMF are currently preparing a guidance note which they plan to issue in the coming weeks.
Bundesanstalt fur Finanzdienstleistungsaufsicht (Bafin)
On 22 July, the Act Implementing the Alternative Investment Fund Managers (AIFM) Directive entered into force. By virtue of the Act Implementing the AIFM Directive, the Investment Act was repealed and replaced by the Investment Code (Kapitalanlagegesetzbuch –KAGB).
Attached are translations of the most relevant passages of the Investment Code and of a guidance notice on marketing third-country AIF in Germany. However, please note, that these are only convenience translations. In case of deviation, the German version shall prevail.
|Hellenic Capital Market Commission (HCMC)||AIFMD has been transposed in Greek legislation, with the exception of Article 42 regarding the conditions for marketing into Member States without a passport of AIFs managed by a non-EU AIFM which has not been transposed.|
Central Bank of Ireland (CBI)
Marketing of non-EU AIFs managed by non-EU AIFM to professional investors in Ireland is subject to Regulation 43 of the AIFM Regulations, guidance on this process will shortly be published on the Central Bank of Ireland website.
Marketing of AIFs to retain investors in Ireland is subject to Regulation 44 of the AIFM Regulations and the Central Bank AIF Rulebook (Chapter 1, Part III) sets out the requirements which need to be satisfied in order to market into Ireland. The policy which was applied to marketing AIFs to retail investors pre-AIFMD in Ireland is currently still in force for the time being.
Finansu Un Kapitala Tirgus Komisija (FKTK)
|All the rules and procedures for the non-EEA alternative investment funds that are wishing to market in Latvia are established in the Law on Alternative Investment Funds and their Managers. The Law came into effect on 8 August 2013. When a non-EEA manager (registered or licensed in its home country) intends to market or manage AIFs in Latvia it has to undergo a registration or licensing process according to the Law.|
|Liechtenstein, being a member of the EEA, has implemented the AIFMD by its Act on Alternative Investment Fund Managers. The incorporation of the AIFMD into the EEA agreement has not yet been completed. This incorporation is essential for obtaining the European passport. Therefore it has been necessary to postpone the effective date of the relevant provisions in the Liechtenstein Act until the incorporation in the EEA agreement is completed.|
During the interim period the foreign AIF will be treated in Liechtenstein as an Investment Undertaking to the Law on Investment Undertakings of May 19, 2005 and not as an AIF pursuant to the Act on Alternative Investment Fund Managers. As a consequence the AIFM has to appoint a representative and a paying agent in Liechtenstein.
|Commission De Surveillance Du Sector Financier (CSSF)||Article 42 of the AIFMD has been transposed into Luxembourg domestic legislation by the Luxembourg law transposing the AIFMD. Offerings to professional investors under article 42 of AIFMD require that the conditions under this article are being fulfilled. Any retail offering will be required to undergo a formal approval process with the CSSF.|
Transitional provision: With respect to non-EEA AIFMs marketing AIFs in Luxembourg prior to 22 July 2013, marketing under the existing Luxembourg placement rules will continue to be permitted until 22 July 2014 and will not be affected by the Luxembourg law transposing the AIFMD.
|Malta Financial Services Authority (MFSA)||Article 42 of the AIFMD has been transposed into Maltese legislation. Any Guernsey AIFM wishing to market into Malta should approach the MFSA directly or through an appropriate legal adviser.|
|Autoriteit Financiel Markten (AFM)||The Dutch Government has stated that Guernsey will remain designated as an equivalent country until 2018.|
A notification form for managers of alternative investment funds, has recently been released by the AFM. The annex to the form makes the following statement:
"The following document needs to be submitted with this notification form:
An attestation of the competent authority of the AIFM in which it confirms that it is able to effectively comply with the cooperation agreement between that competent authority and the AFM as set out in article 1:13b section 1 and 2 Wft in respect of the specific AIFM identified under question 1.
This attestation does not need to have a specific format. Any form of attestation is acceptable as long as its content satisfies the AFM and DNB that the notified entity is a ‘covered entity’ under the cooperation agreement and that the competent authority of the AIFM is consequently able to effectively impose the agreed terms under the cooperation agreements in relation to the particular non-EU AIFM which is notified pursuant to this notification form."
September 2014 Update
The AFM has accepted an overarching statement from the Commission, therefore, individual attestations will no longer be required, however, the AFM requires confirmation that Guernsey AIFMs are appropriately licensed under the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended. The AFM has confirmed that a screen print from http://www.gfsc.gg/Investment/Regulated-Entities/Pages/Licensees.aspx would satisfy this requirement.
|Polish Financial Supervision Authority (PFSA)||AIFMD has not yet been transposed in Poland.|
|Comissao do Mercado e Valores Mobiliarios (CMVM)||AIFMD has not yet been transposed in Portugal.|
|Romanian Financial Supervisory Authority (CNVM)|
AIFMD has not yet been transposed in Romania. Until this national legislation is in place fund managers from third countries may perform marketing activities in Romania under the current applicable legal framework. Article 176 of Regulation no. 15/2004 covers the authorisation and functioning of investment management firms, collective investment undertaking and depositories. Article 10 of Executive Order no. 9/2010 covers the marketing activities of collective investment schemes. Attached are English versions of the relevant provisions. However, please note, that these are only convenience translations. In case of deviation, the Romanian version shall prevail.
Narodna banka Slovenska (NBS)
Slovakia has transposed AIFMD into Slovak legislation under Act No. 206/2013 amending Act No. 203/2011 on Collective Investment Schemes.
An AIFM which intends marketing in the territory of the Slovak Republic is obligied to notify the National Bank of Slovakia of its intention. The notification should be in writing, in language common in the sphere of the international finance and should contain information listed in the Annex III of the AIFMD Directive as well as documentation which proves the fulfilment of the requirements listed in Article 42(1)(a) of the AIFMD Directive.
National Bank of Slovakia shall review the completeness of the notification and documentation sent by the non-EU AIFM and in the period of 20 working days shall notify the non-EU AIFM whether it may commence the marketing of the units or shares of the relevant AIFs listed in the notification. National bank of Slovakia may prohibit such marketing only if the requirements listed in Article 42 (1) of the AIFMD Directive are not complied with or the management of the AIFs is not compliant with the requirements of the AIFMD Directive. The non-EU AIFM may commence the marketing of the units or shares of the relevant AIFs only after receiving the notification of the National Bank of Slovakia confirming that the marketing may commence. Marketing to retail investors requires an additional licence issued by the National Bank of Slovakia.
|The Swedish regulator will contact the Commission once an application from a Guernsey entity has been received.|
|Financial Conduct Authority (FCA)|
Firms based in non-EEA (3rd country) jurisdictions wishing to market AIFs in the UK will be required to comply with the FCA’s National Private Placement Regime as well as the FCA’s financial promotion rules. The Treasury has put in place transitional arrangements for the regime, for firms to be able to continue to carry on non-EEA activities on the basis of existing requirements.
EEA firms or full scope UK AIFMs managing non-EEA AIFs and wishing to use the National Private Placement Regime can find more information on the FCA’s NPPR page.
To be able to market under NPPR, the AIFM needs to satisfy a number of conditions, as detailed in regulations 57, 58 and 59 of the UK Alternative Investment Fund Managers Regulations 2013 (the Treasury’s Regulations). For example, for full-scope AIFMs, there needs to be a memorandum of understanding on supervisory co-operation arrangements (MoU) between the UK (or EEA member state in the case of an EEA AIFM) and each relevant non-EEA competent authority. For further details of the current status of MoUs see the FCA’s latest news. Another condition for non-EEA AIFMs is that the AIFM is the person responsible for complying with the implementing provisions relating to the marketing of the AIF.
Guernsey fund managers and Guernsey self-managed funds should check their distribution networks to ascertain whether their funds are marketed to investors in EEA.
Firms marketing through private placement are required to comply with a number of provisions of the AIFMD. These include certain disclosure and reporting requirements and the so-called 'depositary-lite' regime. Reliance on, and compliance with, reverse solicitation (i.e. at the initiative of the investor) will avoid a number of these requirements altogether. Those wanting to market through private placement will need to monitor the private placement rules in the countries they are targeting, many of which are still unknown. Those relying on reverse solicitation will require clearly defined procedures, as well as enhanced compliance monitoring and oversight, to ensure that they do not undertake marketing.
The AIFMD (Marketing) Rules, 2013 do not apply to sub threshold AIFMs as reflected in Article 3 of the Alternative Investment Fund Managers Directive.
Rule 7.1 of The AIFMD (Marketing) Rules, 2013 states: -
"Persons within the scope of these Rules who with effect from or after 22 July 2013 commence management of and propose to market AIFs and/or Guernsey AIFs to professional and/or retail investors in one or more Member States, shall comply with these Rules in their entirety with effect from the commencement of the above activities of management and/or marketing."
The Commission has been requested to provide a clarification on Rule 5.3 of the AIFMD (Marketing) Rules, 2013. Rule 5.3 states that the Guernsey AIF or Guernsey AIFM should notify the Commission when marketing has ceased. This rule had been drafted with open-ended schemes in mind and the Commission is not expecting to be advised when the final closing had been reached in respect of a closed-ended fund.
Guernsey depositaries must comply with the Licensees (Capital Adequacy) Rules, 2010. Depositaries of open-ended AIFs must have net assets of £4,000,000 and Guernsey depositaries of closed-ended AIFs must have net assets of £25,000 or net assets equal to the expenditure based requirement, whichever is the greater and minimum professional indemnity insurance cover of £250,000, (or three times total revenue, whichever is greater), the excess of which must not exceed 20% of the total insured. However whilst this is Guernsey’s regulatory framework, industry participants should take into account that some EEA Member States’ national private placement regimes may impose stricter depositary requirements.
The existing regulatory regime remains the same. An open-ended authorised or registered collective investment scheme is required to have a Guernsey Designated Custodian, unless it is subject to the Commission’s flexible hedge fund policy. In the case of a closed-ended authorised or registered scheme, providing that there is full disclosure of the provisions that are in place to ensure the assets of a scheme are adequately safeguarded, the Commission will give consideration to the appointment of a custodian/trustee that is either domiciled or not domiciled in the Bailiwick of Guernsey. Currently, some licensed Designated Managers provide safekeeping services to closed-ended schemes and the Commission will continue to accept fund applications on this basis. However, whilst this is Guernsey’s regulatory framework, industry participants should take into account that some EEA Member States’ national private placement regimes may impose stricter depositary requirements.