Distribution Focus

Author: Clerkin Lynch

Date Published 24/03/2022

AIFMD II and Distribution

The Alternative Investment Fund Managers Directive (“AIFMD”) is currently under review and proposals are now at an advanced stage. The proposed amendments do not introduce wholesale changes to the framework to the framework of the directive, however there are some important amendments to key areas including in relation to distribution.

Current Status of Proposals and Timeline

The Council working party (“CWP”) on the AIFMD review last met on the 9th of March to prepare advanced proposals. Further meetings of this body are scheduled for 30 March and 28 April. Meanwhile the European Parliament has appointed its ECON Committee negotiating team for this legislation, comprising the following Members of the European Parliament (MEPs). The deadline for submission of text for the amending directive by the Rapporteur is 10 May and consideration of the draft report 2 June. The deadline for amendments is 27 June with consideration of amendments around 29 August. There will then be a vote by the ECON Committee in late September, with a plenary announcement to be made in October.

Once the Council and the European Parliament have agreed on a respective position, both institutions enter in “trilogues” to adopt a final text. Those discussions could start in Q3 2022. It is possible a definitive revised text could be published in Q1 2023, which would lead to an application date of the new rules to early 2025 if the overall political negotiations are completed by the end of this year.

Distribution Amendments

The current proposals for the revision of the AIFMD envisage new requirements pertaining to the National Private Placement regimes and for EU AIFMs marketing non EU funds.
In relation to the national private placement regimes it is proposed that Article 42 AIFMD will be amended to include new requirements for non-EU AIFMs to market EU or non-EU AIFs through this approach including: (i) the third country where the non-EU AIFM or the non-EU AIF is established must not be listed on the EU list of non-cooperative jurisdictions for tax purposes, (ii) the third country must have signed a qualifying agreement on the exchange of information in tax matters with the Member State where the marketing takes place, and (iii) the third country must not have been identified as a high-risk country according to the latest European laws against money laundering.

In relation to EU AIFMs marketing non-EU AIFs without a passport, it is proposed that Article 36 AIFMD will be amended to include new requirements such that: (i) the third country where the non-EU AIF is established must not be listed on the EU list of non-cooperative jurisdictions for tax purposes, (ii) the third country must have signed a qualifying agreement on the exchange of information in tax matters with the home Member State of the EU AIFM and with the Member States where the marketing takes place, and (iii) the third country must not have been identified as a high-risk country according to the latest European laws against money laundering.

These changes combined with the new cross border fund distribution framework regime and ESMA’s statements regarding the use of “reverse solicitation” (see our related updated on both of these topics) really make the direction of travel of applicable regulation clear and are increasingly leading to a practical reality that to access EU capital an EU fund is required.