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Jon Watson, Director of Project Consulting at Cordium, answers questions about the FCA’s sanctioning powers under the Alternative Investment Fund Managers Directive. Important to know where you stand, particularly, it seems, if there’s a highly leveraged fund involved.
Just in case you’ve been away for a while:
Following consultation on the implementation of the Alternative Investment Fund Manager’s Directive (AIFMD) and analysis of the responses the government is going ahead with proposals to include Common Investment Funds (CIFs) and Common Deposit Funds (CDFs) within the scope of Alternative Investment Funds (AIFs); amend charities legislation so charities in the European Economic Area would be able to invest in CIFs and CDFs; and not to apply the Approved Persons Regime to Internally Managed Investment Companies.
What are the sanctions available for breach of the new rules?
The AIFMD states that the regulatory authorities may disclose to the public any measure or penalty imposed in infringement of the provisions within the legislation. There is nothing within it relating to sanctions. I take this to mean that the imposition of sanctions will be left to the discretion of the national regulators, though that is not to say that at some point a sanctions regime might be coordinated at EU level.
How is the Financial Conduct Authority (FCA) likely to approach enforcement of the new rules?
It’s difficult to say. If the FCA was to take a more active and interventionist approach at this point in time it would be in respect of products available to retail investors, a group to which AIFMD is not targeted at.
If, for example, there was a fund being marketed in the EU that took excessive risks and ‘blew up’, the FCA has more extensive powers to take action against the fund manag
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