AIFMD II – European Parliament Final Report – Activities and services performed by AIFMs
The list of ancillary services member states may authorise AIFMs to provide is not extended to “any other ancillary service that is not regulated as an investment service under Directive 2014/65/EU (MiFID II), which represents a continuation of services already undertaken by the AIFM or use of internal capabilities, and which does not create conflicts of interest that cannot be managed by additional rules”.
Regarding the information to be provided by the AIFM seeking authorisation from a national regulator, the applicant AIFM shall disclose how it complies with its obligation under SFDR. Also, the list added in the European Parliament draft report of information to be shared by the applicant AIFM is developed with an explanation of the added value of the delegation to the investor and, for each of the following, a description of the human and technical resources:
- employed by or committed to the AIFM for performing day-to-day portfolio or risk management tasks within the AIFM;
- employed by or committed to the delegate for performing those services on a delegated basis; and
- employed by or committed to the AIFM for monitoring and controlling the delegate.
An authorised AIFM shall report to the competent authority any material changes that may affect the scope of the authorisation by that authority and in particular any modification on the arrangements of the delegation and sub-delegation to third parties provided at the time of authorisation. Also, the competent authorities shall, every quarter, inform ESMA of any changes in the scope of authorisations by those authorities, and in particular of material changes to the information provided by applicant AIFMs.
The RTS detailing information to be provided by applicant AIFMs to competent authorities shall specify situations where the name of the AIF(s) an applicant AIFM intends to manage could be materially deceptive or misleading to the investor.
Where an AIFM manages an AIF marketed to retail investors, the AIFM shall ensure that at least one member of its governing body is a non-executive director. The AIFM, in appointing a non-executive director of its governing body, shall determine whether such a member is independent in character and judgement and whether there are relationships or circumstances, which are likely to affect that member’s judgement. The AIFM shall take reasonable steps to ensure that any non-executive directors appointed to its governing body have sufficient expertise and experience to be able to make judgements on whether the AIFM is managing AIFs in the best interest of investors. Non-executive directors shall contribute to ensuring that the AIFM complies with the requirements regarding conflicts of interests and acting in the best interests of the AIFs and their investors, as specified in the AIFMD.
Where an AIFM intends to manage an AIF on behalf of a third party, including, but not limited to, under a mandate given on a discretionary basis for the management of portfolio of investments or under a delegation in accordance with Article 20, and where the third party has significant control over the AIF’s design, distribution and management, the AIFM shall employ heightened scrutiny of the potential for conflicts of interest. AIFMs engaging in such a relationship shall submit detailed explanations and evidence on their compliance in this regard to the competent authorities of their home Member State. In particular, they shall specify how they prevent systematic conflicts of interest or any other material conflicts of interest arising from the relationship, how any existing or potential conflicts are effectively managed in the best interest of investors and how this is clearly and comprehensively disclosed to investors. Therefore, attention should be drawn to the review of the AIFM agreement with such third party and the control over the AIF’s design, distribution and arrangement kept by the third party. As the relevant conflicts of interest shall be disclosed to the investors, the AIFM shall continuously review the actions performed by such third party. ESMA shall develop RTS specifying:
- the types of relationship between the AIFM and a third party when the AIFM manages an AIF on behalf of the third party and of conflicts of interest as referred to in this paragraph;
- the criteria to be used by the relevant competent authorities to assess whether AIFMs comply with the obligations mentioned in this paragraph.
Regarding the obligation for an AIFM to have at least natural two persons conducting the business of the AIFM, the EU Parliament final report adds the option for these two natural persons to be committed on a full-time equivalent basis.
Access the European Parliament Final Report of 2 February 2023 here.