1 Update of the ESMA Q&As relating to the application of AIFMD
On 16 November 2016 and 16 December 2016 respectively, the European Securities and Markets Authority (“ESMA”) updated its Questions and Answers with regard to the application of the Alternative Investment Fund Managers Directive (“AIFMD”) (Ref. ESMA/2016/1669) (“AIFMD Q&As”). The new points concern (i) notification of material changes relating to an alternative investment fund (“AIF”) in case of cross-border marketing, (ii) reporting obligations by non-EU AIFMs, and (iii) delegation of functions by an alternative investment fund manager (“AIFM”).
- Section II of the AIFMD Q&As, Questions 6 and 7: ESMA clarifies that the creation of a new share class within a sub-fund of an AIF (which is already marketed in a host Member State by way of the AIFMD marketing passport) should not be regarded as a material change entailing a new notification. ESMA further clarifies that in case of notification of a material change, an AIFM should provide the full set of documentation with the revised notification letter.
- Section III of the AIFMD Q&As, Question 1: ESMA clarifies that when non-EU AIFMs report information to the national competent authorities of a Member State under Article 42 of AIFMD, they should also include information on EU master AIFs which are not marketed in the EU.
- Section VIII of the AIFMD Q&As, Questions 2 and 3: ESMA states that where a third party performs a function stated in Annex I of AIFMD, such function should be considered as having been delegated by the AIFM to the third party. Furthermore, ESMA takes the view that an external AIFM may not delegate any function set out in Annex I of AIFMD to the governing body (or any other internal resource) of the AIF it manages, as the AIF is not a “third party” in accordance with Article 20(1) of AIFMD.
The latest version of the AIFMD Q&As is available on ESMA’s website.
https://www.esma.europa.eu/sites/default/files/library/2016-1669_qa_on_aifmd.pdf
2 Update of the ESMA Q&As relating to the application of the UCITS Directive
On 21 November 2016, ESMA updated its Questions and Answers with regard to the application of the UCITS Directive (Ref. ESMA/2016/1586) (“UCITS Q&As”). The UCITS Q&As now include some clarifications on how investment limits should be applied where a UCITS wants to invest in an umbrella fund:
- Section I of the UCITS Q&As, Question 4a: Pursuant to Article 56(2)(c) of the UCITS Directive, a UCITS may not acquire more than 25% of the units of any single UCITS or other undertaking for collective investment (“UCI”). Where the underlying UCITS or UCI (the “Target Fund”) is an umbrella fund, ESMA clarifies that this limit should be applied at the level of the individual sub-funds within such umbrella fund.
- Section I of the UCITS Q&As, Question 4b: Pursuant to Article 55(1) of the UCITS Directive, no more than 10% of the assets of the Target Fund should be invested in units of a single UCITS or other UCI. Where the latter is an umbrella fund, ESMA clarifies that this limit should also be applied at the level of the individual sub-funds within the umbrella fund.
- In respect of the above limits, ESMA further states that where an existing UCITS fund or management company applies a different interpretation, it must at the earliest convenience adjust the relevant fund’s investment portfolios.
The latest version of the UCITS Q&As is available on ESMA’s website.
https://www.esma.europa.eu/sites/default/files/library/2016-1586_qa_on_ucits_directive.pdf 1
3 Guidelines on sound remuneration policies under UCITS and AIFMD
On 14 October 2016, ESMA published (i) the “Guidelines on sound remuneration policies under the UCITS Directive” (Ref. ESMA/2016/575) (“UCITS Remuneration Guidelines”) and (ii) the “Guidelines on sound remuneration policies under the AIFMD” (Ref. ESMA/2016/579) (“AIFMD Remuneration Guidelines”) which are effective from 1 January 2017:
- UCITS Remuneration Guidelines: ESMA provides clarity on the UCITS V requirements to be complied with by UCITS management companies and self-managed investment companies when establishing and applying a remuneration policy for key staff. The purpose is two-fold: to ensure a convergent application of these provisions and to provide guidance on the governance of remuneration, risk alignment requirements, and appropriate disclosures.
- AIFMD Remuneration Guidelines: ESMA introduces an amendment to the first set of AIFMD Remuneration Guidelines issued in July 2013 (Ref. ESMA/2013/232) concerning the application of remuneration rules in a group context. More specifically, Section VIII of the AIFMD Remuneration Guidelines has been rephrased to provide that there should be no exception to the application of AIFMD remuneration rules to AIFMs which are subsidiaries of a credit institution. Furthermore, ESMA clarifies that in a group context, non-AIFMD sectoral prudential rules applying to group entities may lead certain staff of the AIFM which is part of that group to qualify as “identified staff” for the purpose of these sectoral remuneration rules.
The UCITS Remuneration Guidelines and the AIFMD Remuneration Guidelines are available on ESMA’s website.
https://www.esma.europa.eu/sites/default/files/library/2016-575_ucits_remuneration_guidelines.pdf 1
https://www.esma.europa.eu/sites/default/files/library/2016-579_aifmd_remuneration_guidelines_0.pdf 1
