AIFMD checklist. Things to consider

Transcription

1 AIFMD checklist Things to consider

2 Header 2 Contents Page Introduction 3 The financial statements 4 Annual - on the activities of the financial year 5 s to be provided outside (or inside) the annual 8 Annual remuneration disclosures 11 Contact us 1

3 AIFMD checklist 3 Introduction The Alternative Investment Fund Managers Directive ( AIFMD ) includes transparency requirements which are applicable to Alternative Investment Fund Managers ( AIFMs ) marketing and or/managing Alternative Investment Funds ( AIFs ) in the European Union. These transparency requirements relate to the annual, investor disclosures and regulatory ing. This briefing sets out to provide AIFMs with a high level checklist to assist them in identifying the key disclosure issues to be considered and where potentially these disclosures may be presented in the AIFs annual.

4 AIFMD checklist 4 The financial statements 1 The financial statements must contain: a a balance sheet or a statement of assets and liabilities; and b an income and expenditure account for the financial year. 2 The balance sheet should include a line item for cash and cash equivalents, including, but not limited to, cash-in-hand, demand deposits and qualifying shortterm liquid investments. "Cash equivalents" are highly liquid investments held in the base currency of the AIF, that are readily convertible to a known amount of cash, are subject to an insignificant risk of change in value and provide a return no greater than the rate of a three-month high quality government bond. 3 Separate line items for: a realised and unrealised gains under income, and c realised and unrealised losses under expenses. Where included in financial statements Statement of financial position and statement of comprehensive Income Statement of financial position Statement of comprehensive income Response:

5 AIFMD checklist 5 Annual - on the activities of the financial year Where included in financial statements Response: 1 A on the activities of the financial year. Investment manager s 2 Investment activities during the period: a an overview b a fair and balanced review of the activities of the AIF c to the extent necessary for an understanding of the AIF s investment activities, the analysis shall include both financial and non-financial key performance indicators relevant to that AIF. 3 AIF performance over the period: a an overview b a fair and balanced review of the performance of the AIF c to the extent necessary for an understanding of the AIF s performance, the analysis shall include both financial and non-financial key performance indicators relevant to that AIF. Investment manager s Investment manager s 4 An overview of the AIF s portfolio at period end. Investment manager s 5 A description of the principal risks and investment or economic uncertainties that the AIF might face. Investment manager s 6 of any material changes in the pre-sale information required to be made available to investors. (see checklist below) The disclosure should include a description of any potential or anticipated impact on the AIF and/or investors in the AIF. Director of the manager s

6 AIFMD checklist 6 Pre-sale information required to be made available to investors A description of the investment strategy and objectives of the AIF. If the AIF is a feeder AIF, information on where the master AIF is established. If the AIF is a fund of funds, information on where the underlying funds are established. A description of the types of assets in which the AIF may invest. The investment techniques that the AIF, or the AIFM on behalf of the AIF, may employ and all associated risks. Any applicable investment restrictions. The circumstances in which the AIF may use leverage. The types and sources of leverage permitted and the associated risks. Any restrictions on the use of leverage and any collateral and asset reuse arrangements. The maximum level of leverage which the AIFM is entitled to employ on behalf of the AIF. A description of the procedures by which the AIF may change its investment strategy or investment policy, or both. A description of the main legal implications of the contractual relationship entered into for the purpose of investment, including information on jurisdiction, the applicable law and the existence or absence of any legal instruments providing for the recognition and enforcement of judgments in the territory where the AIF is established. The identity of the AIFM, the AIF's depositary, the auditor and any other service providers and a description of their duties and the investors' rights. A description of how the AIFM complies with the requirements for professional negligence relating to professional liability risk. A description of any AIFM management function delegated by the AIFM. A description of any safe-keeping function delegated by the depositary. A description of the identity of each delegate appointed (Delegation). A description of any conflicts of interest that may arise from such delegations. A description of the AIF's valuation procedure and of the pricing methodology for valuing assets, including the methods used in valuing any hard-to-value assets, (Valuation). A description of the AIF's liquidity risk management, including the redemption rights of investors in normal and exceptional circumstances, and the existing redemption arrangements with investors. A description of all fees, charges and expenses, and the maximum amounts directly or indirectly borne by investors. A description of how the AIFM ensures a fair treatment of investors. Whenever an investor obtains preferential treatment or the right to obtain preferential treatment, a description of that preferential treatment. Whenever an investor obtains preferential treatment or the right to obtain preferential treatment, a description of the type of investors who obtain such preferential treatment. Whenever an investor obtains preferential treatment or the right to obtain preferential treatment, a description of where relevant, their legal or economic links with the AIF or AIFM. Changed during year Y/N Change disclosed in financial statements Y/N

7 AIFMD checklist 7 Pre-sale information required to be made available to investors The procedure and conditions for the issue and sale of units or shares. The latest net asset value of the AIF or the latest market price of the unit or share of the AIF, (Valuation). The latest annual, (Annual of an AIF). Where available, the historical performance of the AIF. The identity of the prime brokerage firm. A description of any material arrangements of the AIF with its prime brokerage firm and the way any conflicts of interest are managed. The provision in the contract with the depositary on the possibility of transfer and reuse of AIF assets. Information about any transfer of liability to the prime brokerage firm that may exist. Changed during year Y/N Change disclosed in financial statements Y/N

8 AIFMD checklist 8 s to be provided outside (or inside) the annual Some of the disclosures required by articles 108 and 109 of the AIFMD level 2 regulation are to be disclosed as part of the AIF s periodic/regular ing to investors, as required by the AIF s instrument of incorporation or trust deed (as appropriate), or at the same time as the prospectus and (as a minimum) at the same time as the annual is made available. Consideration should be given to presenting these disclosures on a website so that they are accessible immediately to investors. As an alternative the AIFM may present the below on its website. The below disclosures have been prepared on the assumption that the AIFM presents this information within the annual. 1 The information below to be presented in a clear and understandable way. 2 The percentage of the AIF s assets (i.e. net assets) that are subject to special arrangements arising from their illiquid nature. 3 The current risk profile of the AIF, which risk profile should outline: a measures to assess the sensitivity of the AIF s portfolio to the most relevant risks to which the AIF is or could be exposed; and b if risk limits set by the AIFM have been or are likely to be exceeded and where these risk limits have been exceeded a description of the circumstances and, the remedial measures taken. Where included in financial statements (liquidity risk) (market risk and any implications on credit / liquidity/ counterparty / operation risks) Response

9 AIFMD checklist 9 4 The risk management systems employed by the AIFM to manage the risks disclosed in its current risk profile, outlining: a the main features of the risk management systems employed by the AIFM to manage the risks to which the AIF it manages is, or may be, exposed; b in the case of a change, include the information relating to the change and its anticipated impact on the AIF and its investors; c the main features of the risk management systems employed by the AIFM to manage the risks to which the AIF it manages is, or may be, exposed; and d in the case of a change, include the information relating to the change and its anticipated impact on the AIF and its investors. 5 Where the AIF employs leverage, the total amount of leverage, calculated in accordance with both the gross and commitment methods, employed by the AIF. 6 (If the AIF is not an unleveraged closedended AIF), whenever the AIFM makes changes to the liquidity management systems and procedures which are material. 7 Where the AIFM activates gates, side pockets or similar special arrangements or where the AIFM decides to suspend redemptions. An overview of the changes to arrangements concerning liquidity, whether or not these are special arrangements, including: a where relevant, the terms under which redemption is permitted and circumstances determining when management discretion applies; b any voting or other restrictions exercisable, the length of any lock-up or any provision concerning first in line or pro-rating on gates and suspensions; c where relevant, the terms under which redemption is permitted and circumstances determining when management discretion applies; or d any voting or other restrictions exercisable, the length of any lock-up or any provision concerning first in line or pro-rating on gates and suspensions. Where included in financial statements (market risk) Credit / liquidity risk) Credit / liquidity risk) (Liquidity risk) Response

10 AIFMD checklist 10 8 Information on changes to the maximum level of leverage calculated in accordance with both the gross and commitment methods and any right of reuse of collateral or any guarantee under the leveraging arrangements, including: a the original and revised maximum level of leverage, whereby the level of leverage shall be calculated as the relevant exposure divided by the net asset value of the AIF b the nature of the rights granted for the reuse of collateral c the nature of guarantees granted d details of changes in any service providers which relate to one of the items above. Where included in financial statements (Market risk / liquidity risk) Response

11 AIFMD checklist 11 Annual remuneration disclosures Once a firm becomes authorised under the AIFMD, it becomes subject to the AIFMD remuneration rules and the Remuneration Guidelines and the relevant rules should start to apply as of the date of authorisation. However, as for the rules on variable remuneration AIFMs should apply them for the calculation of payments relating to new awards of variable remuneration to their identified staff for performance periods following that in which they become authorised. So the AIFMD regime on variable remuneration should apply only to full performance periods and should first apply to the first full performance period after the AIFM becomes authorised. For example: an existing AIFM whose accounting period ends on 31 December and which obtained an authorisation between 22 July 2013 and 31 December 2013: the AIFMD rules on variable remuneration should apply to the calculation of payments relating to the 2014 accounting period; and an existing AIFM whose accounting period ends on 31 December obtains an authorisation between 1 January 2014 and 22 July 2014: the AIFMD rules on variable remuneration should apply to the calculation of payments relating to the 2015 accounting period. However, for an existing AIFM whose accounting period ends on 31 December which submits an application for authorisation by 22 July 2014 and obtains an authorisation after that date (including when the authorisation is obtained after 31 December 2014), the AIFMD rules on variable remuneration should apply to the calculation of payments relating to the 2015 accounting period. 1 The total amount of remuneration paid by the AIFM to its staff for the financial year: a split into fixed and variable remuneration, including, where relevant, any carried interest paid by the AIF b the number of beneficiaries of the above remuneration c whether or not the above disclosures relate to any of the following: i the total remuneration of the entire staff of the AIFM, indicating the number of beneficiaries; ii the total remuneration of those staff of the AIFM who are fully or partly involved in the activities of the AIF, indicating the number of beneficiaries; or iii the proportion of the total remuneration of the staff of the AIFM attributable to the AIF, indicating the number of beneficiaries. Where included in financial statements Investment managers or remuneration Response:

12 AIFMD checklist 12 2 Where the above information is disclosed at the level of the AIFM: a an allocation or breakdown of the amounts in relation to each AIF, in so far as this information exists or is readily available; and b a description of how the allocation or breakdown has been provided. 3 General information (to be provided by the AIFM): a relating to the financial and non-financial criteria of the remuneration policies and practices for relevant categories of staff to enable investors to assess the incentives created; and b at least the information necessary to provide an understanding of the risk profile of the AIF and the measures it adopts to avoid or manage conflicts of interest. 4 The aggregate amount of remuneration, broken down by senior management and members of staff of the AIFM whose actions have a material impact on the risk profile of the AIF. Where included in financial statements Investment managers or remuneration Investment managers or remuneration Investment managers or remuneration Response:

13 Contact us Contacts Niamh Meenan Partner, Global Head of Asset Management D (0) E niamh.meenan@ie.gt.com John Glennon Partner D (0) E john.glennon@ie.gt.com David Lynch Director D (0) E david.lynch@ie.gt.com City Quay, Dublin Offices in Dublin, Belfast, Cork, Galway, Kildare and Limerick This publication has been prepared only as a guide. No responsibility can be accepted by us for loss occasioned to any person acting or refraining from acting as a result of any material in this publication. Grant Thornton refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Ireland is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate, one another and are not liable for one another s acts or omissions. Member of Grant Thornton International Limited (GTIL) Authorised by Chartered Accountants Ireland ( CAI ) to carry on investment business.