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As the Alternative Investment Fund Managers Directive (AIFMD) moves ever-closer, Jonathan Wilson, Director of Project Consulting at Cordium UK, addresses the personal position of managers leading up to the transposition into domestic legislation.
How can fund managers/firms prepare?
If you decide that you are in scope of AIFMD, then it should be recognised that this will be a significant project which will require proper governance and control within the organisation with steering from the top. A proper plan around all the areas considered in the checklist below needs to be established. This is not a simple compliance issue. Firms should be asking themselves how their business model can change from being a manager of offshore funds to an EU-based AIFM with depositories and more formal responsibilities regarding risk.
I would encourage firms to appreciate that there is a lot of work that can be done now to prepare. The Financial Conduct Authority (FCA) has published its forms for authorisations, so drafting work can begin straight away--the forms explain clearly most of the steps that need to be taken at this stage. One thing I can guarantee is there will be some bottlenecking or clustering of applications--I saw this from the Dodd-Frank process. This might come from the delays at the FCA itself, and you don't want to be in that queue. My advice is to get preparing now so you control the timing of your application, rather than being forced into it by the deadline.
What needs to be done? What questions need to be asked? Here are 8 things to get going:
1. Review whether you in the scope of AIFMD
2. Consider your timing for application
3. Review your marketing and fundraising activity. Where are you marketing to? Where are you fundraising?
4. Start discussions with depositories
5. Assess your risk management and compliance functions
6. Assess your reporting capabilities
7. Consider delegation arrangements
8. Benchmark client disclosures against what you currently provide in your prospectus against what the AIFMD requires
There are minor changes to operational procedures (eg best execution requirements) but these are still changes that need benchmarking.
Jonathan Wilson joined Cordium in 2006 and currently works with a range of investment management firms on project assignments covering s 166 reviews, client money requirements, investor due diligence, UCITS requirements, prudential regulation, ICAAP and operational and compliance infrastructure reviews. Jon represents Cordium on industry working groups and led the development of our UK response to Dodd Frank and our prudential and capital adequacy training.
Jonathan was interviewed by Duncan Wood of LexisNexis for a Legal Analysis News item on LexisPSL Financial Services. The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor. )
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