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AIFMD Countdown: Breakfast Briefings

AIFMD Countdown: Breakfast Briefings. One year to go. Gus Black Stuart Martin. Timetable and implementation Key impact areas Planning strategies Questions . Agenda Today . AIFMD Countdown:. Timetable and implementation. Level 1: Primary Directive became EU law on 21 July 2011.

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AIFMD Countdown: Breakfast Briefings

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  1. AIFMD Countdown:Breakfast Briefings One year to go • Gus Black Stuart Martin

  2. Timetable and implementation Key impact areas Planning strategies Questions Agenda Today

  3. AIFMD Countdown: Timetable and implementation

  4. Level 1: Primary Directive became EU law on 21 July 2011. Must be implemented by Member States by 22 July 2013. Timetable – Level 1

  5. ESMA issued technical advice to the Commission on 16 November 2011. Level 2: ‘regulations’ – publication delayed Have ‘direct effect’ Contain wide ranging implementing measures Timetable – Level 2

  6. Level 3 Committees comprise representatives of national regulators Level 3 Committees give advice, recommendations and guidance on development of Level 2 measures Timetable – Level 3

  7. Timetable – Marketing Directive in force (P) 2011 2012 2013 2014 2015 2016 2017 2018 EU AIF obtain passport Non-EU AIF obtain passport? No more private placements? IF ESMA make positive recommendation, and requisite implementing legislation is passed

  8. Timetable - FSA • Discussion Paper earlier this year (DP12/1) – general concepts • Consultation Paper expected towards end of this year

  9. 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

  10. 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)

  11. 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? Timetable – Authorisation

  12. AIFMD Countdown: Key Impact Areas –Questions to Consider

  13. 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

  14. 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?

  15. 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?

  16. 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?

  17. Risk and Liquidity Management • Who will monitor? • How will functional separation be ensured? • Are my systems compliant?

  18. 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?

  19. 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?

  20. Delegation • What is my current delegation structure? • Is it compliant? e.g. • “objectively justified”? • sufficiently resourced and authorised? • third countries? • New relationship with administrator

  21. 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?

  22. Depositary • Who will be depositary (where required)? • Interaction with prime broker and trading arrangements? • Impact on pricing? • Should I re-domicile onshore funds offshore?

  23. 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)?

  24. 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?

  25. Transparency • What will the impact on fund documents be? • Interaction with existing investor reporting? • Who will monitor compliance?

  26. AIFMD Countdown: Planning

  27. 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?)

  28. 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?

  29. House – general risk • Group risk and liability profile changes? • Insurance update? • Impact on group tax arrangements and planning?

  30. 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?

  31. Counterparty – Planning • Will I need new counterparties (e.g. depositary)? • How do I manage the ‘paper blizzard’?

  32. Planning – Product • Will funds need re-structuring? • Process for documentation updates? • How will new rules affect: • Fees? • Product viability? • Investor base?

  33. 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? Product outcomes (cont)

  34. 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?

  35. Gus Black and Stuart Martin Dechert LLP gus.black@dechert.com stuart.martin@dechert.com QUESTIONS? • 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.

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