AIFMD II – The Council position – Delegation

Before the review by the European Commission of the functioning of the rules laid down in the AIFMD and experience acquired in applying them, ESMA shall provide a report analysing market practice regarding delegation and compliance with articles 7 (AIFM authorisation) and 20 (delegation of AIFM functions), based, inter alia, on data reported to regulatory authorities in accordance with point (d) of article 24(2) and on the exercise of its supervisory convergence powers. The difference between the Council position and the Commission proposal as well as the European Parliament draft report on this point is the absence of a time period stipulated for ESMA to provide such a report in the Council position.

Article 20 relating to delegation is also amended by the Council position, including the same amendments as those in the Commission proposal. However, the following addition in the Council position does not appear in the Commission proposal:

Where the marketing function is performed by one or multiple distributors that are acting on their own behalf and that market the AIF under Directive 2014/65/EU (MiFID II) or through insurance-based investment products in accordance with Directive 2016/97/EU (Insurance Distribution Directive), this should not be considered delegation subject to the requirements laid down in the above paragraphs irrespective of any distribution agreement between the AIFM and the distributor. This addition is broader than that included in the European Parliament draft report, since the performance of the marketing function would not be considered delegation irrespective of the existence of a distribution agreement between the distributors and the AIFM.

The Council position does not refer to a peer review of the application of the delegation regime, focusing on measures to prevent AIFMs that delegate portfolio management or risk management functions to independent entities in third countries from becoming letter-box entities. There is no new article 38a referred to in the Commission proposal.

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