By Michael Jackson and Tara Doyle, partners in the Asset Management and Investment Funds Group at Matheson
The Central Bank of Ireland has announced that it is accepting applications for the authorisation of alternative investment fund managers (AIFM). It is the second European regulator to do so and this move will enable Irish-authorised AIFMs to avail of the AIFMD passport from 22 July 2013. Formal application forms, an “AIF Rulebook” and an AIFMD questions and answers document clarifying important policy issues have all been published by the Irish regulator on its website and are now available. We have highlighted below some key points arising from these publications by way of update.
Key points addressed in the Q&A include:
Non-EU managers of Irish AIFs
The Central Bank will authorise AIFs which have a non-EU AIFM. Any such non-EU AIFM will not be required to fulfil the obligations imposed on AIFMs immediately but will benefit from a transitional period, as follows:
- Any qualifying investor alternative investment fund (“QIAIF”) authorised before 22 July 2013 with a non-EU AIFM must ensure that it has an AIFM capable of carrying out all of the tasks of an authorised AIFM by 22 July 2015. Such QIAIFs may continue to operate under the existing regime during the transitional period.
- Any QIAIF authorised after 22 July 2013 with a non-EU AIFM must ensure that the non-EU AIFM is capable of carrying out the tasks of an authorised AIFM within two years of the QIAIF’s date of launch. Such QIAIFs must comply with the provisions of the AIF Rulebook that apply in the case of QIAIFs with a registered AIFM. This means that the QIAIF will have to comply with the AIFMD depositary requirements, with the important exclusion of the AIFMD depositary liability provisions.
The Central Bank may extend the transitional period if the AIFMD passport is not applied to non-EU AIFM in 2015 under the provisions of the AIFMD.
A retail investor AIF (“RIAIF”) must have an authorised AIFM and therefore cannot have a non-EU AIFM until such non-EU AIFMs are permitted to be authorised under the AIFMD, which will not be until 2015 at the earliest. However, managers of RIAIFs will benefit from the twelve-month transitional period (see below).
An existing EU AIFM must submit an application for authorisation within one year. During that one-year transitional period, AIFMs are expected to comply on a best efforts basis with the AIFMD as implemented by national law. The pre-existing Irish rules will continue to apply to the AIF until the AIFM is authorised.
Existing umbrella qualifying investor funds (“QIFs”) can continue to launch new sub-funds during the transitional period and such sub-funds can operate under the existing rules until the AIFM is authorised. An existing EU AIFM can establish a new AIF during the transitional period and the AIF Rulebook will apply to such AIFs, with the exception of the AIFMD depositary liability regime, which will not apply to these new AIFs during the transitional period.
An AIFM which is subject to the transitional arrangements may delegate portfolio and risk management to a third country entity notwithstanding there are no co-operation agreements in place between the Central Bank and the third country regulator.
Transitional period for registered AIFMs
AIFMs managing AIFs with assets under management under the €100 million threshold (or €500 million threshold in the case of closed-ended funds that do not employ leverage) will not be obliged to register with the Central Bank on 22 July 2013 but will be afforded time to consider whether to opt into the AIFMD. These AIFMs will have until 21 July 2014 to register with the Central Bank.
Depositaries of existing AIFs must comply with the national law implementing the AIFMD from the date of authorisation of the AIFM of that AIF.
Definition of “qualifying investor”
The Q&A also clarifies that an Irish investor who is currently permitted to invest in a QIF may invest in a QIAIF notwithstanding that the investor does not fall within the definition of professional investor in the AIFMD. The AIF Rulebook defines the categories of investors who may invest in QIAIFs in identical terms to the qualifying investors in a QIF, to include investors who have been deemed to have, or who self-certify that they have, the appropriate expertise, experience and knowledge to invest. The marketing passport afforded by AIFMD authorisation will only apply to marketing to professional investors; marketing to other qualifying investors will be subject to the laws of the Member State into which the QIAIF is marketed.
The AIF Rulebook
The AIF Rulebook sets out all of the rules that will apply to RIAIFs, QIAIFs, AIFMs, AIF management companies, AIF administrators and AIF depositaries under the new regime. The format of the AIF Rulebook differs to the earlier draft versions, and the intention is that the Central Bank guidance in relation to the AIF regime will be published on the Markets Update section of the Central Bank website in future.
The Central Bank has published new application forms to be completed by AIFs and AIFMs. The Central Bank will accept applications for authorisation as AIFM from now, so that Irish AIFMs will be in a position to avail of the marketing passport from the earliest possible date ie, 22 July 2013.
The publication of the AIF Rulebook, application forms and Q&A ahead of the AIFMD implementation date by the Central Bank is a welcome development. The path is now clear for authorisation of Irish AIFMs enabling them to avail of a full European passport at the earliest possible opportunity. The Central Bank has also provided much needed clarity to other AIFMs who wish to avail of the transitional period afforded by the AIFMD.