The Malta Financial Services Authority (the “MFSA”) has drawn up a document encompassing all the questions that it has frequently received in the past few months regarding the Alternative Investment Fund Managers Directive. The answers given represent the most up to date information that the MFSA has on the subject. Some answers are worthy of note.
Question 7 asks when the legal obligation for compliance with the Directive becomes effective. By 22nd July 2013, Member States were obliged to adopt, publish and apply the laws, regulations and administrative provisions necessary to comply with the AIFMD. Thus, AIFMs established after this date must comply with this Directive, while licence holders existing on the 22nd July 2013 must fully comply with the provisions by 22nd July 2014. All existing licence holders should therefore ensure that their Self-Assessment Form is submitted by 31st March 2014.
Another question asks about when a custodian can be held liable for lost assets in terms of the strict liability provisions prescribed in the directive. Licence Holders have one year to come in line with the provisions of the directive and obtain a full AIFM Licence. Once the Licence Holder has a Category 2 AIFM Licence, one of the obligations is to appoint a custodian for each AIF managed. Until the custodian enters into a written agreement with an authorised AIFM, it cannot be bound by the strict liability provisions prescriptive in the Directive.
Some of the questions pertained to the Assets under Management. Question 26 asks whether other AIFMs in the same group as an AIFM should be taken into account when calculating assets under management. The answer is yes, as long as the assets under management of other AIFMs are under common management and control.
In article 3(2) of the AIFMD, does the phrase “portfolios of AIFs” include portfolios of EU AIFs only? No, since when calculating the value of assets under management, a Manager would be required to include all AIFs under management, irrespective of the jurisdiction and whether or not it is marketed in the EU.
Questions 38 and 39 deal with the delegation of any functions of the AIFM. Delegation can take place, but article 20 includes specific requirements. Delegation of functions to a third country entity can take place. However, there must be a prior cooperation arrangement between the MFSA and the relevant third party supervisory authority. The EU AIFM may never outsource all of its functions to the extent that it can no longer be considered to be the AIDM of the funds.
Question 42 then looks at the entities to which delegation may be effected. The delegate would be required to dispose of sufficient resources to perform the respective tasks. Where the delegation concerns portfolio management or risk management, it must be conferred on undertakings authorised or registered for the purpose of asset management or another entity, subject to approval by the competent authority.
Questions 43 to 49 deal with the Risk Management Function. One question relates to the appointment of a Risk Manager. For a person to be appointed as a Risk Manager, the Authority must carry out a due diligence exercise upon submission of a signed Personal Questionnaire and Competency Form. The Authority would consider the work experience and academic background of the person as well as the type of funds to be managed. Importance would also be given to the proposed risk management function structure of the company.
One of the obligations of an AIFM is to compile an annual report and provide disclosure. According to the MFSA, this obligation does not extend to non-EU AIF investors. The obligation to compile an annual report and provide disclosure focuses on the country of registration of the AIF and the Member State/EEA State where the management or marketing is taking place rather than the nationality of the investors.
This is just a selection of the questions answered in the MFSA’s document. There are a total of 97 questions.
For further information and advice, contact Dr. Jonathan De Giovanni, Director of Legal and International Tax on [email protected]