Today, 22 July, marks the day that the Alternative Investment Fund Managers Directive (AIFMD), must be transposed into national law. With the rules now technically in force, UK-based firms have a year to become compliant and apply for authorisation with the FCA.
However, this apparently generous deadline disguises the fact that many managers may need to make the changes earlier, especially if they operate internationally within the EU, and the complexities of AIFMD compliance. Additionally, the FCA has reserved the right to demand early compliance of non-EEA AIFMs before the EU issues its own timeline for implementation.
To make things more complicated, there is no single UK rulebook; the rules have been transposed in a fractured manner through a combination of amendments to the FCA’s handbooks and two statutory instruments: the AIFM Regulations, dealing with EU AIFMs, and the AIFM (Amendment) Regulations, dealing with non-EU AIFMs. This, combined with the many different possible control structures – non-EU AIFM managing an EU AIF, EU AIFM managing a non-EU AIF, etc. – means that Legal will have a lot of work to do in determining what ‘compliance’ means for their firm.
On the plus side, the UK legislation does deliver some promised clarity to the rules in relation to application (with SPVs firmly out of scope) and meaning (providing a clearer definition of what qualifies as ‘marketing’, for instance).
But the industry clearly has a long way to go. A recent Preqin survey of 220 hedge funds (one of the main targets of the AIFMD) found only 22% were already compliant and 3% expected still to be non-compliant by the July 2014 deadline. With so much work to do, firms cannot afford to wait. The choices are clear: restructure to avoid being affected or get help now.