By Justin Partington
Regulators are fond of recalling former Chairman of the SEC William O. Douglas’ pithy comment that, “sunlight is the best disinfectant” in the context of regulators’ view on transparency. Private Fund Managers did not cause the financial crisis nor did they heighten systemic risk. The Alternative Investment Fund Manager s Directive (AIFMD) reporting will help to substantiate that.
As deadline for the first round of AIFMD reporting approaches, the European Securities and Markets Authority (ESMA) and the Financial Conduct Authority (FCA) have clarified the process.
In our last client briefing on Alternative Investment Fund Managers (AIFM) reporting, we covered who needs to report and how often based upon the type of assets held and the total value of assets under management (AUM).
In this briefing, we address the further guidance issued by the FCA on 29 September 2014. This guidance helps AIFs and AIFMs managed or marketed in the EEA to work out what to report and by when to the FCA.
Which entities do I report for?
Article 24 of the AIFMD requires reporting on both AIFMs and AIFs if managed or marketed in the EEA.
The categories of AIFM in the UK are as follows:
Further, Full Scope UK AIFMs have to also report additional information as defined in FUND 3.4.2R, 3.4.3R, 3.4.5R and 3.4.6AR(1) and summarised as follows:
What details do AIFs need to report?
For each AIF that is EEA domiciled or marketed in the EEA, the following needs to be reported:
How do I submit the reporting?
AIFMs are to report through form AIF001 and through form AIF002 for their AIFs. While the sample forms contain nearly 600 rows of data points, the forms are straightforward and written clearly. For Private Equity many of the sections are not applicable.
How often do I need to report?
Most Private Equity Funds (AIFs) will be required to report on an annual basis. If the AIF is leveraged, holds listed securities, or cannot meet the criteria for annual reporting then the reporting reverts to AUM to define the frequency. The table below sets this out: One issue for larger Private Equity buyout firms is whether small or short-term holdings of listed securities, if retaining a partial holding of an IPO for example, trigger quarterly reporting. The AIFMD Level 2 Regulations state that an AIFM is only required to submit annual reports for the AIF if it is unleveraged and the AIF’s core investment policy is to invest in non-listed companies and issuers in order to acquire control. If the AIF’s formation documents clearly state that its core investment policy does not include investment in listed securities, then holding such securities from time-to-time will not trigger quarterly reporting and the AIF can report annually.
When does the reporting period start?
For AIFs that have commenced, the reporting period starts from the first day of the calendar quarter following authorisation or registration. For example, if an AIF was registered on 22 July 2014, the reporting period would start from 1 October 2014. Please note that AIFs that have not commenced still need to report a nil return.
What is the reporting deadline?
One month after the respective calendar quarter or year end. Funds of Funds have a further extension of 15 days. For example, if an AIF was registered on 22 July 2014, the reporting period would start from 1 October 2014 and end on 31 December 2014, and therefore the reporting deadline is 31 January 2015. For Funds of Funds it would be 15 February 2015.The FCA’s GABRIEL system will show a reporting schedule for each AIFM. We strongly urge all of our clients to access GABRIEL when the module comes online to check the accuracy of their reporting schedule. The FCA takes no responsibility for the accuracy of the schedule and all Fund Managers are responsible for checking.
What if I miss a report or file late?
An administrative fee of £250 may apply, and the FCA may issue a reminder. The FCA note that enforcement options include possible cancellation of authorisation or registration.
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