Third Country Treatment under AIFMD

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1 Third Country Treatment under AIFMD

2 Contents Background AIFMD Status Third countries What is at stake? The Way Forward Annex I: Overview of the PE/VC Industry s Key Concerns and Messages 2

3 Background On 30 April 2009, the European Commission proposed a draft Directive on Alternative Investment Fund Managers (AIFM). As co-legislators, the European Parliament and Council also adopted their versions of the AIFM Directive: On 17 May 2010, the European Parliament s Economic and Monetary Affairs Committee approved proposed amendments to the European Commission s original draft AIFM Directive. On 18 May 2010, the Council approved its version of the AIFM Directive. The Parliament and Council versions of the AIFM Directive differ in a number of respects, notably in their treatment of non-eu AIFs and AIFMs. The three European Institutions are now trying to come to an agreement (trialogue negotiations). The following overview is based on the latest Presidency compromise text. Important to note that the AIFM Directive remains a moving target and is still under discussion. It remains unclear what the ultimate legislation will look like. 3

4 Third Countries - Timeline : 2018: Entry into force of Directive - national regimes continue subject to minimum harmonised conditions End of transposition period A harmonised EU passport for non-eu AIFM regime becomes applicable after the entry into force of a delegated act by the Commission. This harmonised passport regime co-exists with the national regimes during a transitional period of 3 years. It is the intention that the national regimes shall be terminated, after the entry into force of a delegated act by the Commission. 4

5 Third country regime: EU AIFM Non-EU AIF Non-EU AIF Manage but not market in the EU Manage and market to professional investors in the EU WITH PASSPORT Manage and market to professional investors in EU Member State WITHOUT PASSPORT EU AIFM AIFM to comply with all requirements, EXCEPT Depositary and Annual Report Appropriate cooperation arrangements to be in place AIFM to comply with all requirements, EXCEPT Chapter VI (EU AIFM/EU AIF) Appropriate cooperation arrangements, multilateral tax agreements and anti-money laundering AIFM to submit a notification to its competent authorities. AIFM to comply with all requirements, EXCEPT Depositary (BUT AIFM to ensure that one or more entities are appointed to carry out the depositary functions) Appropriate cooperation arrangements and antimoney laundering Member States may impose stricter rules on the AIFM in respect of the marketing of non-eu AIF to investors on their territory. 5

6 Third country regime: Non-EU AIFM EU AIF EU AIF Marketing to professional investors in the EU WITH a passport Managing AIF established in Member State other than Member State of reference Marketing in EU MS WITHOUT passport of AIF managed by non-eu AIFM Non-EU AIFM The authorised non-eu AIFM shall also submit a notification to the competent authorities of its Member State of reference. Authorised non-eu AIFM may manage EU AIF in a Member State other than its Member State of reference either directly or via the establishment of a branch. Non-EU AIFM shall communicate additional information to the competent authorities of its Member State of reference. Compliance with Transparency requirements (Articles 22 to 24) and with Section 2 of Chapter V (Private equity) Appropriate cooperation arrangements and antimoney laundering Member States may impose stricter rules on the AIFM in respect of marketing of AIF to investors on their territory. 6

7 Third country regime: Non-EU AIFM Non-EU AIF Non-EU AIF Non-EU AIFM Marketing to professional investors in the EU WITH a passport Authorised non-eu AIFM to comply with ALL the requirements Appropriate cooperation arrangements, multilateral tax agreements and anti-money laundering The authorised non-eu AIFM shall also submit a notification to the competent authorities of its Member State of reference Marketing in EU MS WITHOUT passport of AIF managed by non-eu AIFM Compliance with Transparency requirements (Articles 22 to 24) and with Section 2 of Chapter V (Private equity) Appropriate cooperation arrangements and anti-money laundering Member States may impose stricter rules on the AIFM in respect of marketing of AIF to investors on their territory 7

8 Third Countries What is at stake? OTHER VERSIONS PROPOSED PREVIOUSLY: No national private placement regimes from the start. Guillotine effect. European passport not granted to 3rd country managers Passive Marketing forbidden As a result: Severe constraints on fund marketing, capital raising, capital flow and investor s choice. 8

9 Third Countries What is at stake? Capital Flows, by Investor Location, from and to the EU ( ) AIFM Directive Non-EU Investors invested 65bn in European funds investing in the European economy EU Investors invested 68bn in Non-EU Funds for investments outside the EU 9

10 Third Countries What is at stake? Capital Flows, by Fund Location, to the EU ( ) AIFM Directive 47%* of the total funds raised from European PE/VC houses is raised through managers based outside the EU *This represents 73bn raised by European PE/VC houses through legal structures based outside the EU, for investment in the EU economy 10

11 Third Countries What is at stake? Capital Flows, by Investments in the Real Economy, from and to the EU ( ) Funds located outside the EU invested 57bn in the EU economy AIFM Directive Funds located in Europe invested 4bn in Non-EU economies 11

12 The Way Forward

13 What Happens next? The AIFMD legislative process is in the trialogue stage. It seems that we are very close to a deal. HOWEVER: Continuous threats for particularly: Restrictions on passive marketing (No) passport for third country AIFM/AIF If no agreement can be reached, process could move into second reading. We expect this could add up to 1 year to the timetable. 13

14 Annex I: Overview of the PE/VC Industry s Key Concerns and Messages

15 Third countries Key points from the PE/VC Industry s point of view Private equity is about raising money worldwide to invest locally. Around 60% of European venture capital funds and 40% of buyout funds come from outside the EU. These sources of finance should not be put at risk by having our trading partners feel they are being treated unfairly. There also continues to be a major risk for European institutional investor returns, if undue restrictions are imposed regarding their ability to invest in funds outside the EU. Access of and to non-eu funds is important for the continuous supply of European companies with capital from outside Europe and for European investors and their asset allocation strategy. The European economy cannot afford depriving its funds and companies of resources coming from cooperative third countries, nor preventing its investors from diversifying their risks by taking stakes in other regions of the world. To provide legal certainty to investors, it is critical that the national private placement regimes remain in place at least as long as it takes to make the EU passport system operational. 15

16 Third countries Key points from the PE/VC Industry s point of view Professional investors should be free to place their funds as they so choose as long as they are in compliance with their own regulation and any such investment guidelines which their Board may have decided upon. Protection of investors at EU level would be more efficient by applying rules to the marketing of funds rather than to the investment in a fund. This is the approach taken worldwide to investor protection not penalising the investors themselves. Institutional investors (pension funds, insurance companies, banks) are protected and regulated through specific and harmonized EU legislative instruments. From a legal and public policy point of view, any restriction to the right to invest of investors should not be addressed through an EU directive which regulates the behaviour of other market actors, in casu the fund managers, but through a review of the harmonized EU legislation applicable to these investors or for other, country specific, professional investors, for which there exists no harmonized EU legislation, through a review of applicable national legislation. 16

17 Third countries Key points from the PE/VC Industry s point of view EU innovative companies need capital to grow and long-term shareholders which can commit themselves to their daily management with the determination to develop an effective corporate strategy. Therefore: It is key that the third country regime does not alienate Europe s major trading partners to take a defensive and protectionist stance on bilateral investment with Europe, at a time when such investments are badly needed in the wake of the financial crisis, as this would lead to inward investment into Europe s economies and SMEs being inhibited or slowed down. It is important that the third country rules do not damage the returns of Europe s pension funds and institutional investors, and do not restrict the freedom of European investors to invest in AIFs outside the EU, as that would threaten the competitiveness of the European private equity and venture capital industry vis-à-vis its North- American and Asian equivalents. 17

AMF Position Guide to UCITS and AIF marketing regimes in France DOC

AMF Position Guide to UCITS and AIF marketing regimes in France DOC 2014-04 Reference text: Articles L. 214-2-2 and L. 214-24-1 of the Monetary and Financial Code. The AMF is keen to provide support for