The European Commission (the Commission) has launched a public consultation ahead of its review of the Alternative Investment Fund Managers Directive (AIFMD). This follows the Commission’s earlier report into the impact of AIFMD to date, as well as the recommendations from the European Securities and Markets Authority (ESMA), suggesting numerous changes to the AIFMD regime.
The consultation itself runs to 102 questions, covering a broad range of topics. Perhaps of greatest interest to UK fund sponsors will be the questions on delegation arrangements, national private placement regimes (NPPRs) and, for those running private equity strategies, the effectiveness of the asset-stripping rules.
- Delegation: the Commission asks whether the rules on delegation should be made more restrictive by limiting what can be delegated (for instance by imposing quantitative limits and/or prohibiting delegation of certain “core” or “critical” functions), and whether delegate portfolio managers based outside the EU should be required to comply with “AIFMD standards”.
- NPPRs: the consultation asks whether the NPPR framework creates an un-level playing field between EU and non-EU fund managers (i.e. by allowing non-EU managers to market their funds in EU member states, without having to comply with AIFMD in full); interestingly, we already know from its June report that the Commission has concluded that they do create un-level playing field.
- Asset-stripping: the consultations seeks views on the necessity, proportionality and effectiveness of the so-called “asset-stripping” restrictions, as well as of the various transparency and reporting obligations that are triggered when a fund acquires control of a non-listed company;
Aside from the NPPR question, there is nothing else on marketing more generally or on reverse solicitation.
The consultation runs until 29 January 2021, and responses can be submitted by filling in the online questionnaire accessible via the Commission webpage.
This consultation is the first step of many towards a potential revamp of the AIFMD regime. As such, it is too early to gauge the scope and extent of any rule changes the Commission may eventually propose. However, some of the questions in the consultation do appear to indicate the direction of travel.
The delegation questions reveal that ESMA’s recommendations in this area are being seriously considered, as we anticipated in our August post. The key concern for UK, and other non-EU-based sponsors, will be to ensure that any future changes to the rules in this area preserve existing industry standard delegation arrangements and do not prejudice the ability of EU-based investors to invest with global sponsors.
Similarly, non-EU-based sponsors might be concerned that the NPPR question (coupled with what we know to be the Commission’s view on un-level playing fields) could pave the way for additional restrictions or more onerous obligations when marketing to EU-based investors.
Finally, the focus on asset-stripping (and associated transparency and reporting obligations) suggests the Commission is willing to look again at this area; perhaps, with a view to facilitating investment into private companies for the post-Covid recovery, the Commission may even be prepared to streamline and/or reduce the obligations imposed on private equity sponsors.