AIFMD II – European Commission proposed directive, November 2021 – Investor protection

Investor protection is one of the main objectives of EU financial law. The Commission proposal includes the following changes and additions:

Details of the possibility and conditions for using selected LMTs should be made available to investors by the AIFM as part of the description of the AIF’s liquidity risk management.

For each EU AIF that it manages and each AIF it markets in the EU, an AIFM should also disclose to investors:

  • The originated loan portfolio.
  • On a quarterly basis, all direct and indirect fees and charges directly or indirectly charged or allocated to the AIF or any of its investments.
  • On a quarterly basis, any parent company, subsidiary or special purpose entity established in relation to the AIF’s investments by the AIFM, its staff or direct or indirect affiliates.

Reporting to regulatory authorities of the AIFM’s home member state is widened regarding markets and instruments in which it trades on behalf of the AIF it manages and the exposure of each AIF (no longer only the principal markets and instruments, and principal exposures).

For each EU AIF that it manages and each AIF it markets in the EU, an AIFM should provide the following information to the regulatory authorities of its home member state:

  • The percentage of the AIF’s assets that are subject to special arrangements arising from their illiquid nature.
  • Any new arrangements for managing the liquidity of the AIF.
  • The current risk profile of the AIF and the risk management systems employed by the AIFM to manage market risk, liquidity risk, counterparty risk and other risks including operational risk.
  • The results of stress tests under normal and exceptional liquidity conditions that enable them to assess and monitor the liquidity risk of the AIFs as well as risks associated with each investment position of the AIF and the overall effect of such risks on the AIF’s portfolio.

This information is already included in the current AIFMD, but the obligation to report information on the main categories of assets in which the AIF invests is removed in the Commission proposal.

You can access a copy of the directive proposed by the European Commission here.

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