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Central Bank Issues Consultation Paper on AIFMD

The Central Bank of Ireland (the “Central Bank”) has issued Consultation Paper CP 60 (the “Consultation Paper”) in relation to the Alternative Investment Fund Managers Directive (the “AIFMD”) and its implementation in Ireland.

AIFMD

The AIFMD will come into effect on 22 July 2013 and will apply to all alternative investment fund managers. The transposition of the AIFMD into Irish law will be by means of secondary legislation, meaning a statutory instrument which can be expeditiously signed into law by the relevant government minister once it is finalised.

All investment funds falling outside the definition of an Undertaking for Collective Investment in Transferable Securities (”UCITS”) will fall within the scope of the AIFMD. It can be noted that the AIFMD does not regulate such investment funds directly. However, as the AIFMD deals specifically with alternative investment fund managers (the “AIFMs”) this in turn leads to certain requirements being imposed on the alternative investment funds (“AIFs”) to which the AIFMs provide services.

AIF Handbook

In order to ensure Ireland’s regulatory regime, as it applies to non-UCITS, is in full compliance with the provisions of the AIFMD, the Central Bank’s non-UCITS Notices and Guidance Notes will require substantial revision. To facilitate this the Central Bank proposes introducing a completely revised framework in the form of a single “AIF Handbook” and the Consultation Paper seeks comments on its draft contents.

The proposed AIF Handbook is made up of six chapters, as follows:

  1. Retail Investor AID (“RIAIF”) Requirements;
  2. Qualifying Investor AIF (QIAIF”) Requirements;
  3. AIFM Requirements;
  4. AIF Management Company Requirements;
  5. Fund Administrator Requirements; and
  6. AIF Depositary Requirements.

Upon completion of the consultation process, an interim AIF Handbook will be compiled by the Central Bank. It is intended that the interim AIF Handbook will be indicative of the framework that will apply following the commencement of the AIFMD regime.

It can be noted that while certain AIFMs are not required to be authorised by the Central Bank where thresholds outlined in the AIFMD are not met, certain registration requirements must still be complied with. The Central Bank proposes issuing information on the applicable registration procedure at a later date. In addition, in the event that an AIFM wishes to “opt in” to the provisions of the AIFMD, which is specifically permitted, the relevant chapters of the AIF Handbook will apply.

Overall approach

The overall aim in drafting the AIF Handbook has been to eliminate duplication and to ensure clarity by only including specific requirements and prohibitions. The following points also reflect its underlying principles:

  • Reliance on the specific requirements in the AIFMD;
  • Creation of a new retail AIF which allows for higher risk parameters; and
  • Ensuring QIAIFs are free from restrictions which do not substantially protect investors.

Key Questions for Consideration

In addition to comments on the AIF Handbook, the Consultation Paper seeks responses to 16 key questions dealing with the current regulatory regime and the changes proposed on foot of the introduction of the AIFMD regime.

Some of the key issues addressed by the questions include:

  • Potentially removing the Central Bank’s current promoter approval process and instead only placing reliance on the AIFM when considering the support in place for those AIFs that may experience difficulties;
  • The introduction of new requirements relating to the use of side-pockets on an on-going basis;
  • The restrictions to be applicable to RIAIFs both in comparison to UCITS generally but in relation to potential investment in commodities in particular; and
  • A potential role for third parties, other than the depositary, to verify the performance fees payable by RIAIFs and QIAIFs.

Responses to the Consultation Paper

Responses to the Consultation Paper must be submitted to the Markets Policy Division of the Central Bank no later than 11 December 2012. All of the responses received by the Central Bank will be made available on its website.

A copy of the Consultation Paper is available here.