Onshore regulation after G20

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On-shore regulation after G-20

• Anja Breilmann

• September 09

• AIFM ante portas?

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Overview of the AIFM Directive

• Regulates managers, not funds themselves
• Requires managers to be come authorised if they
• Manage EU funds, or
• Manage offshore funds which are purchased by EU
  investors
• Prohibits EU offering or purchase of funds
  managed by non-regulated managers
• Creates a single EU passport for the offering of
  AIFM managed funds to professional investors
• Imposes reporting and disclosure requirements and
  leverage limits on AIFM
• Requires funds managed by AIFM to appoint an EU
  depositary (and valuer) and imposes a high duty
  of care on that depositary

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Significant Issues

• EU based managers of any fund will be subject to
  regulation unless
• Fund under 100m EUR in size
• Fund is an SWF
• Only authorised managers will be permitted to
  sell AIF units
• Leverage restriction of 200 of asset value
  regulatory permission required to go beyond this
• Provisions for mutual recognition of non-EU AIFMs
  subject to equivalent regulation
• Very limited grandfathering existing EU
  managers must obtain authorisation within one
  year of transposition date

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Specific Fund Types

• Private equity funds
• Required to produce quasi-listing material on
  each company in which they have an interest over
  30, continuing for two years following
  delisting
• Leveraged funds
• Funds which are over 100 leverage are highly
  leveraged
• Must provide detailed information to regulators
  as to leverage position and funding sources
• Regulators may impose limits on leverage levels

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Offshore issues three-year period

• No non-EU established AIF may be marketed in the
  EU (even if its manager is an AIFM)
• No AIFM may delegate to an offshore service
  provider
• No AIFM may use an offshore valuer
• No AIFM may use an offshore depository

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Offshore issues Post-three year period

• No non-EU AIF may be marketed in any EU state
  unless it is established in a jurisdiction with
  an information sharing agreement with that EU
  state
• Delegation to offshore service provider permitted
  only if there is a co-operation agreement between
  the supervisor of the AIFM and the supervisor of
  the delegate
• Use of offshore valuers permitted only if subject
  to equivalent standards
• Use of offshore depositories permitted only if
  regime recognised as equivalent
• No AIFM established offshore may be authorised
  under the directive unless it is subject to
  equivalent regulation

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Timetable

• 2 Apr 2009
• G20 agreed that all systematically important
  financial institutions, markets and instruments
  should be subject to an "appropriate degree of
  regulation and oversight"
• 29 Apr 2009
• European Commission published proposal for AIFM
  Directive, text was sent to the European
  Parliament and Council for adoption under the
  co-decision procedure
• 2 Sep 2009
• Jean-Paul Gauzès MEP (EPP, France) chosen as
  rapporteur in the European Parliament's Economic
  and Monetary Affairs Committee (ECON).
• May 2010
• Second reading of AIFM Directive or 'trialogue'
  meetings between the Parliament, Council and
  European Commission to allow adoption in a single
  reading
• July 2010
• European Parliament plenary session (Strasbourg)
  - possible completion of legislative process
  assuming agreement has been reached with Council

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Anja Breilmann, Frankfurt

• Anja Breilmann is a is a senior associate in the
  banking and capital markets practice of Clifford
  Chance Frankfurt. She advises domestic and
  foreign credit institutions, investment firms and
  investment companies with respect to various
  questions of regulatory law. She focuses on asset
  management activities (on a fund basis and
  managed account basis), client-facing activities
  (such as distribution and ancillary services) as
  well as on insurance supervision and
  intermediation.
• Recent experience includes
• Advising in relation to German financial market
  stability measures
• Advising in relation to potential changes due to
  the draft UCITS IV Directive
• Advising in relation to compliance and rules of
  conduct implementation projects
• Advising on requirements for banking business and
  financial service providers including application
  procedures with the German regulator

Anja Breilmann
Mainzer Landstraße 46 60325 Frankfurt am
Main Germany
Tel [phone] Fax [phone]
4000 Email anja.breilmann_at_cliffordchance.com
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On-shore regulation after G-20