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AIFMD Countdown: Breakfast Briefing No. 4

AIFMD Countdown: Breakfast Briefing No. 4. Gus Black Richard Frase Stuart Martin December 6, 2012. Doc No. 18840021. Implementation: European Backdrop FSA/Treasury Consultations CP12/32 Scope Proposed UK AIF Regime New Authorisation Structure Authorisation and Transitionals

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AIFMD Countdown: Breakfast Briefing No. 4

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  1. AIFMD Countdown:Breakfast Briefing No. 4 Gus Black Richard Frase Stuart Martin December 6, 2012 Doc No. 18840021

  2. Implementation: European Backdrop FSA/Treasury Consultations CP12/32 Scope Proposed UK AIF Regime New Authorisation Structure Authorisation and Transitionals Transparency Operating Requirements Agenda Today

  3. Implementation: European Backdrop (1) • AIFMD Level 1 (Directive): • adopted July 2011 • Member States must implement by July 2013 • FSA Discussion Paper DP12/1 (January 2012) • Assumed greater flexibility offered by Level 2 Directive Implementation • AIFMD Level 2 • Regulation with “direct effect”/wide ranging measures • Less discretion on implementation for member states • Publication still delayed

  4. Implementation: European Backdrop (2) • Regulatory Technical Standards. For example:- • ESMA Consultation on types of AIF • Expected Q4 2012 • Level 3 Guidelines. For example:- • ESMA Consultation on Remuneration Policies and Practices • Final Guideline Expected Q1 2013 • Other ESMA Work Streams include:- • Co-operation Agreements with Third Countries • Relevant to Article 36/42 Marketing and Permitted Delegations

  5. FSA/Treasury Consultations • FSA Consulting at Two Stages:- • CP 12/32 (Responses due 1 February 2013) • CP2 Targeted for February 2013 (8 week consultation period) • CP2 Timing depends on Level 2/RTS/Level 3 Progress • Single Policy Statement to be published June 2013 • Treasury Consultation Expected Imminently • Draft Implementing Regulations • New Regulated Activities, Framework for Financial Promotion/Marketing etc.

  6. FSA CP12/32 Consultation Scope • Implementing Prudential Regime for AIFM including: • Capital Requirements • Professional Negligence Risk • Liquid Assets Requirement • Changes Affecting UCITS Management Companies • Eligibility to act as Depositary/Capital Requirements/Independence Requirements • Implementing Level 1 Requirements on AIFM

  7. Proposed UK AIF Regime • AIFM subject to conduct of business and Prudential Supervision by FCA • FSA will consult on changes to Handbook (expected to be adopted as part of initial FCA Rule Book) • SYSC/COB etc. • New Investment Funds Sourcebook covering • UCITS Management Companies • Regime for UK Authorised UCITS • Regime for UK authorised AIF (NURS and QIS) • AIFM of UK and Non UK AIF

  8. New Authorisation Structure Regulated Activities • New Regulated activities of: • Managing AIF • Managing a UCITS • Acting as a depositary of an AIF • Acting as depositary of a UCITS • ACD category abolished • Operating a CIS largely abolished (only for non-AIF or UCITS) AIFMs may be UCITS management companies and vice versa and may provide the MiFID services permitted by UCITS and AIFMD

  9. New Authorisation Structure (continued) • AIFMs and UCITS management companies cannot be MiFID firms (CP 12/32 para 4.17) • Interaction of AIFMD and MiFID on passporting of “MiFID services” not clear but ability of AIFM to passport such services is expected to continue • Trustees of AUTs will need to be authorised as depositaries • External valuers not required to be authorised

  10. Authorisation and Transitionals • New regime effective 23 July 2013 (AIFMD Level 1 66(1)) • Firms wishing to begin managing an AIF for the first time on or after this date must be authorised as AIFMs • Similar requirement for depositaries • 12 month transitional period for existing AIFMs (Level 1 article 61(1)) • Existing AIFMs must apply for VOP by 22 July 2014 • UCITS management companies will be automatically transferred to new permissions but will need a VOP to manage AIFs • Possible further grandfathering for existing CIS operators or ACDs. • No transitionals for marketing.

  11. Transparency (1) • Annual report • Investor reporting • Regulatory reporting

  12. Transparency (2) • Side letters • “Substantially leveraged” funds • Portfolio companies – disclosure obligations • Practicalities as yet undefined.

  13. Operating Requirements • Fair treatment • Conflicts • Staffing changes and functional separation (compliance, internal audit, risk etc.) • Delegation/ letter box • Remuneration

  14. Dechert LLP • Definitive advicePractical guidancePowerful advocacy • dechert.com • Almaty • 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. Dechert practices as a limited liability partnership or limited liability company other than in Almaty, Dublin, Hong Kong, Luxembourg and Tbilisi.

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