Thursday October 5 2017

News Source: Fund Regulation

Focus: AIFMD

Type: General

Country: European Union




The European Securities Market Authority (ESMA) has published an updated Q&A on the application of AIFMD. The AIFMD Q&A includes three new questions and answers on:

  • Application of remuneration disclosure requirements to staff of the delegate of an AIFM to whom portfolio management or risk management activities have been delegated;
  • Manner of disclosure of AIFM delegates’ staff remuneration in Annual Reports; and
  • Periodic reporting under Article 13 of SFTR for UCITS and AIFs to investors on the use of SFTs and total return swaps.

The answers to the updated questions are as follows:

Question 6: Do the remuneration-related disclosure requirements under Article 22(2)(e) of the AIFMD also apply to the staff of the delegate of an AIFM to whom portfolio management or risk management activities have been delegated?

Answer: Yes. In line with the approach followed under the AIFMD Remuneration Guidelines, AIFMs can ensure compliance in one of the following two ways:

  1. i) where the delegate is subject to regulatory requirements on remuneration disclosure for its staff to whom portfolio management or risk management activities have been delegated that are equally as effective as those under Article 22(2)(e) of the AIFMD, the AIFM should use the information disclosed by the delegate for the purposes of fulfilling its obligations under Article 22(e) of the AIFMD and Article 107 of the AIFMD Level 2 Regulation; or
  2. ii) in other cases, appropriate contractual arrangements should be put in place with the delegate allowing the AIFM to receive (and disclose in the annual report for the relevant AIF(s) that it manages) at least information on the total amount of remuneration for the financial year, split into fixed and variable remuneration, paid by the AIF and/or the AIFM to the identified staff of the delegate – and number of beneficiaries, and, where relevant, carried interest – which is linked to the delegated portfolio. This means that the disclosure should be done on a prorated basis for the part of the AIF’s assets which are managed by the identified staff within the delegate.

In both situations set out above, the disclosure may be provided on an aggregate basis i.e. by means of a total amount for all the delegates of the AIFM in relation to the relevant AIF.

Question 7: Can the information mentioned under Article 22(2)(e) and (f) of the AIFMD be disclosed in the annual report by the way of a link to a document where the relevant information is available?

Answer: No. The information prescribed by Article 22(2)(e) and (f) of the AIFMD should be included in the annual report. This is without prejudice to references in the annual report to other documents where additional information may be found.

Section XIII: Impact of Regulation (EU) 2015/2365 (SFTR)16 on AIFMD

Question 2: Pursuant to Article 13 of SFTR, UCITS management companies, UCITS investment companies, and AIFMs (“UCITS/AIF managers”) shall inform investors on the use they make of SFTs and total return swaps in annual (UCITS and AIFs) and half-yearly (UCITS only) reports. The information on SFTs and total return swaps shall include the data provided for in Section A of the Annex to SFTR.

Should this data be reported as aggregate data (with respect to the whole of the reporting period) or based on a snapshot (taken at the end of the reporting period)?

Answer: ESMA have provided a table which explains how each data item in Section A of the Annex to the SFTR should be reported. All data items should be reported as a snapshot, with the exception of the following:

Data on reuse of collateral

  • Cash collateral reinvestment returns to the collective investment undertaking.

Data on return and cost for each type of SFTs and total return swaps

  • broken down between the collective investment undertaking, the manager of the collective investment undertaking and third parties (e.g. agent lender) in absolute terms and as a percentage of overall returns generated by that type of SFTs and total return swaps

For each of the data items firms should not artificially alter their practices in a way that would lead to the reporting being misleading.

Click on the link above for further information.