EUROPE: ESMA publishes updated Q and A on AIFMD

Thursday March 26 2015

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The European Securities and Markets Authority has published and updated Q&A on the application of the Alternative Investment Fund Managers’ Directive. The revisions concern the reporting requirements under Article 3, 24 and 42, reporting by an AIFM, and the calculation of leverage. Two new sections have also been added, on additional own funds and scope.

Reporting to national competent authorities under Articles 3, 24 and 42
Question 37, on reporting frequencies where a non-EU AIFM markets its AIFs in several Member States, has been updated.

ESMA’s guidance states that AIFMs shall take into account all the EU AIFs they manage and AIFs they market in the Union to calculate the reporting frequency. The AIFM should therefore calculate a unique reporting frequency taking into account all the AIFs it markets in the Union and apply the same reporting frequency to all Member States where it markets its AIFs.

Similarly, the assets under management in questions 33 and 34 of the consolidated reporting template for AIFM-specific information should be based on all the AIFs marketed in the Union by a non-EU AIFM and not on the AIFs marketed by a non-EU AIFM in a particular Member State. This means that non-EU AIFMs should report the same amount of assets under management to all NCAs to which they report under Article 42 of the AIFMD.

Additionally, a number of new questions were added on reporting, including on reporting of long and short value of exposures and stress tests.

Per ESMA’s guidance, AIFMs should report information on long and short value of exposures for all the sub-asset types of questions 122 to 124 of the consolidated reporting template. The information should be provided in the base currency of the AIF. This means that the sum of the short and long value of exposures in questions 129 and 130 should equal the sum of the questions 122 to 124.

As regards the reporting of results of stress tests by non-EU AIFMs marketing their AIFs in the Union, ESMA states they should report the results of stress tests insofar as this is required by the national private placement regime of the Member States where they market their AIFs or if the non-EU AIFMs have carried out such stress tests.

Notification of AIFMs
A new Question 3 has been added, on managing new AIFs in a Member State. ESMA states that an AIFM that is already managing AIFs in a host Member State under Article 33 of the AIFMD and that wishes to manage a new AIF in that host Member State should not undertake a new notification under Article 33(2) of the AIFMD every time it wishes to manage a new AIF established in a given Member State. The original Article 33(2) notification should be considered valid for all the AIFs it intends to manage in that given Member State. In such cases, an update in accordance with Article 33(6) should be sent to identify each new AIF to be managed under the original Article 33(2) notification. When the proposed new AIFs are of a different type from the ones specified in the original Article 33(2) notification, the AIFM should clarify this in the update submitted under Article 33(6).

Calculation of leverage
A new Question 4 has been added, which provides that when calculating the exposure of an AIF in accordance with the gross method under Article 7(a) of the implementing Regulation, cash held in the base currency of the AIF should be excluded. This applies to cash and also to cash equivalents that meet the requirements of Article 7(a) of the implementing Regulation.

Additional own funds
ESMA has added information to clarify that AIFMs should exclude investments by AIFs in other AIFs they manage for the calculation of additional own funds under Article 9(3) of the AIFMD. However, it is clarified that AIFMs should not exclude investments by AIFs in other AIFs they manage for the calculation of additional own funds to cover potential liability risks arising from professional negligence under Article 9(7) of the AIFMD, because investments in other AIFs managed by the same AIFM increase the operational risk.

Scope
Under Article 36(1) of the AIFMD, Member States may allow an authorised EU AIFM to market to professional investors, in their territory only, units or shares of EU feeder AIFs which have a non-EU master AIF managed by a non-EU AIFM provided that the EU AIFM managing the EU feeder AIF fulfils certain conditions as set out in Article 36(1) (a) to (c). ESMA has clarified that whether the non-EU AIFM managing the non-EU master AIFs has to be authorised under the AIFMD depends on the national law of the Member State transposing Article 36 of the AIFMD.

Click on the above link for the Q&A document.