Wednesday January 4 2017
News Source: Fund Regulation
Focus: AIFMD
Type: General
Country: Ireland
The Central Bank of Ireland (CBI) has made changes to the AIFMD Q&A and AIF Rulebook to reflect updated guidance concerning loan originating Qualifying Investor AIFs.
Change to AIF Rulebook
Loan originating Qualifying Investor AIFs were prohibited from engaging in activities other than lending and related operations. The CBI has reviewed this stance and concluded that it is appropriate to allow other investments linked to the loan origination strategy, a policy which parallels European regulation particularly the ELTIF Regulation (Regulation (EU) 2015/760).
On Page 146, Paragraph 2 of Section 4 within Chapter 2 of the AIF Rulebook (Qualifying Investor AIF General Requirements) has been amended, effective 3rd January 2017, as follows:
- The loan originating Qualifying Investor AIF shall limit its operations to the business of issuing loans, participating in loans, participations in lending and to operations relating thereto, including investing in debt and equity securities of entities or groups to which the loan originating Qualifying Investor AIF lends or which are held for treasury, cash management or hedging purposes.
Updates to AIFMD Q&A
The following new questions and answers have been added to the 23rd edition of the AIFMD Q&A to clarify certain issues relating to loan originating Qualifying Investor AIFs:
ID 1117
Q. I am a loan originating Qualifying Investor AIF. Can I engage in activities other than lending?
A. No. Other than treasury, cash management and hedging, a loan originating Qualifying Investor AIF must limit its activities to lending and related activities.
ID 1118
Q. I am a loan originating Qualifying Investor AIF. Can some of my lending be structured other than as loans?
A. Yes provided the activity is related. While a loan originating Qualifying Investor AIF can only engage in lending and related activities, not all of its lending has to be structured as bilateral loans. Lending could be structured as an investment in debt securities or as participation is a syndicated lending arrangement. It can also combine lending (whether syndicated or bilateral), debt securities, subordinated debt and equity in a package of related investments. The key feature is that all such investments are related to the loan originating Qualifying Investor AIFs lending activities.
ID 1119
Q. I am a loan originating Qualifying Investor AIF. Can I invest in debt instruments or equity issued by group companies of entities that I have lent to?
A. Yes provided the activity is related. A loan originating Qualifying Investor AIF can structure its lending in a package which includes investing in debt or equity securities issued by group companies. Such investments in debt or equity securities must be related to the loan originating Qualifying Investor AIFs lending activities.
ID 1120
Q. How can I assess whether my non-lending activities are ‘related’ to my lending activities?
A. Typically a loan and a non-lending investment are ‘related’ if they form an investment package such that, for both parties, the willingness to enter into one type of investment is contingent on the other also being entered into.
ID 1121
Q. Does an equity investment related to a proposed lending have to be processed in accordance with the same credit and risk analysis as lending propositions?
A. Where requirements in the rules for loan originating Qualifying Investor AIFs apply to the assessment of individual lending proposals, these do not apply to individual related investment proposals. Where requirements apply to the management of the overall portfolio of the loan originating Qualifying Investor AIF, they apply to the management of the full portfolio of the loan originating Qualifying Investor AIF, including assets related to lending exposures.
ID 1122
Q. I am a loan originating Qualifying Investor AIF. Can I engage in treasury, cash management and hedging transactions with parties other than those I have lent to?
A. Yes. A loan originating Qualifying Investor AIF can engage in treasury, cash management and hedging transactions with third parties.
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