When the UK said in January it would give fund managers an extra year to get their houses in order for the Alternative Investment Fund Managers (AIFM) directive – scheduled to take effect 22 July – the industry rejoiced. The extension was roundly applauded, but it also created a compliance situation that wasn’t exactly black and white.
One area that remained particularly gray was marketing, especially for firms outside of the EU. GPs in fundraising mode – or about to be – were left scratching their heads over what steps need taking should they want to target UK-based investors. But recently both the UK’s HM Treasury and the pan-European securities regulator, the European Securities and Markets Authority (ESMA), have provided some much needed clarity on how to market during this transitional period.
In HM treasury’s updated regulations, non-EU fund managers wishing to take advantage of this extra marketing year now have a relatively clear path. Funds already being marketed can carry on without any more notifications or filings, essentially using the UK’s existing private placement regime. (And the fund needn’t have been marketing specifically in the UK previously).
Non-EU managers that want to begin marketing in the UK after the transition period will also have the private placement route available. But that wasn’t the case until last week as cooperation agreements between the regulators were needed for this to be permitted. Fortunately firms have not been left sweating over this any longer as ESMA revealed it had signed cooperation agreements with the industry’s major non-EU jurisdictions on behalf of EU member states (including the UK).
The good news for these managers is that rather than undergoing an approval and registration process with the Financial Conduct Authority, as was previously anticipated, the fund manager only needs to submit a written notification to the recently rebranded UK regulator. The notification must confirm that the manager is responsible for complying (and that the manager complies) with the relevant provisions of the AIFM that the UK’s private placement regime requires. The exact details of the documents that must accompany the notification are not yet known, but legal sources expect them to be published in due course. But it will likely involve submitting fund documents and other memoranda. Once a notification has been submitted the manager can start marketing and it will not be necessary to await approval from the FCA.
All of this is good news. But non-EU managers should not don their party hats just yet. Not all countries will follow the UK’s lead and it is expected that several countries will limit access to their national private placement regimes. This means putting paramount importance on knowing the ins and outs of marketing jurisdictions in order to raise capital in Europe after 22 July. But for the EU market responsible for the lion's share of private equity fundraising, the welcome mat for non-EU fund managers is firmly in place.
The July issue of PE Manager will provide an in-depth look at how other major European jurisdictions are implementing the AIFM directive.