AIFMD: Implications For Non-EU Managers Of Cayman Funds

Author:Ms Derbhil O'Riordan and Matt Mulry
Profession:Dillon Eustace
 
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Directive 2011/61/EU on Alternative Investment Fund Managers (the AIFMD) comes into force on 22 July 2013, and aims to provide common requirements across all EU States for the management or sale of Alternative Investment Funds (AIFs) by Alternative Investment Fund Managers (AIFMs) within the EU. The majority of the AIFMD's provisions will affect EU AIFMs; those who have their registered office in a member state and manage or sell AIFs in the EU. However, Non-EU AIFMs which have their registered office in a third country selling non-EU Funds, including Cayman Funds, within the EU will also be required to comply with certain provisions of the AIFMD.

WHAT IS THE EFFECT OF AIFMD?

From July, a single marketplace within the EU will be created for the marketing of AIFs. This "passport", previously available in Europe only to Ucits funds, will also become available to non-Ucits funds managed by EU AIFMs. Non-EU AIFMs will not benefit from the passport but will be permitted, until at least 2018 and subject to the rules of each individual EU member state, to continue to market their funds within the EU on a private placement basis, providing that certain conditions are met.

Non-EU AIFMs of Cayman funds will need to be aware of these conditions, and ensure that they are in a position to implement them by July to guarantee that they are able to continue the private placement of their funds within the EU after that time.

THE PRE-REQUISITES TO CONTINUING PRIVATE PLACEMENT

Until at least October 2018, EU member states can continue to allow the private placement of Cayman funds to professional investors, although they are not obliged to do so, subject to their own national rules. Therefore, to the extent that the EU is currently made up of a patchwork of regulatory regimes in respect of private placement, the status quo will remain. However, in order for a Cayman fund to be marketed in the EU to professional investors from July 2013, the following conditions must also be met in addition to the existing national rules:

A co-operation arrangement must be in place for the purpose of systemic risk oversight between: The regulators of the EU member states in which the Cayman fund is marketed Those member states and the home jurisdiction of the non-EU AIFM Those member states and the Cayman Islands As is already the case, the Cayman Islands must not be listed as a non-co-operative country and territory by the OECD's Financial Action Task Force on anti-money...

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