AIFMD—the push for a common supervisory approach

Monica Gogna, partner in the financial services regulation team at Pinsent Masons, unpicks the latest guidance from the European Securities and Markets Authority (ESMA) on the developing supervisory approaches to the Alternative Investment Fund Managers Directive (AIFMD).

New questions have been added to ESMA’s Question and Answer (Q&A) document on the AIFMD (2011/61/EU). The questions relate to reporting to national competent authorities under AIFMD, arts 3, 24 and 42.

What is the background to the Q&A document?

According to ESMA, the aim of the Q&A is to promote common supervisory approaches and practices in the application of the AIFMD and its implementing measures. It does this by providing responses to questions posed by the general public and competent authorities in relation to the practical application of the AIFMD.

The document is aimed at competent authorities under AIFMD to ensure that, in their supervisory activities, their actions are converging along the lines of the responses adopted by ESMA. However, the answers are also designed to help alternative investment fund managers by providing clarity on how they should apply the AIFMD rules to their own practices.

This Q&A document is continually edited and updated by ESMA as and when new questions are received. This document is one of those updates.

Has the document produced any answers that UK firms have been most concerned about?

The new questions are questions 2 to 18 under section III of the document which concerns reporting to national competent authorities under AIFMD, arts 3, 24 and 42. These questions deal with how the AIFMD reporting templates should be completed and how certain information therein should be calculated.

Will the FCA have to amend any rules as a result of the answers given?

No, it doesn't appear so as the FCA has not yet incorporated the EMSA guidelines on the reporting obligations for AIFMs into the FCA Handbook.

According to the FCA website, the FCA will consult on integrating the 2013 ESMA guidelines on the reporting obligations for AIFMs, together with an Opinion setting out supplementary information that should be reported for systemic risk monitoring, as well as any updates, into its Handbook.

Given this, the FCA has requested that firms report using the XML v1.1 reporting template published by ESMA with the final guidelines.

Will firms have to make significant changes to their processes in view of the answers given so far?

Most likely not as the questions and answers provide further clarification of existing EMSA guidelines and recommendations. However, some firms may have to make some modifications to the way they are currently reporting to the FCA (or other competent authority) if their practices are not in line with the specific answers given in the Q&A documents.

What advice should lawyers be giving to their AIFM clients?

With respect to the ESMA Q&A document, lawyers should advise their clients to look at how they are reporting or calculating the information addressed in questions 2 to 18 of section III. For example, some of the questions deal with the calculation of the geographical exposure as a percentage of the net asset value of the alternative investment fund, the basis for the numerator and denominator, and breakdown in investment strategies. In addition, further clarification is given on how to report the information on the liquidity portfolio and the information on investor liquidity. These are just a few examples of what is covered in the Q&A document.

Interviewed by Anne Bruce.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.