Implications of the AIFMD: The Alternative Investment Fund Managers Directive

The Alternative Investment Fund Managers Directive (the "Directive") will be implemented on July 22, 2013 and will impact the reporting requirements of alternative investment fund managers ("AIFMs") covered by the Directive, including AIFMs based in the European Union (the "EU") as well as non-EU managers, including managers based in the United States. The consequences of the Directive for U.S. based investment advisers acting as a manager to an alternative investment fund ("AIF") based in the EU or that manages a non-EU fund (e.g., Delaware, Cayman) and markets the non-EU fund to investors in the EU. Investment advisers must comply with the first phase of the Directive by July 22, 2013 or carefully understand the nuances of the relevant exemptions in order to remain outside of the scope of the Directive. There are several different options for those who have determined that the Directive applies and want to continue managing EU-based AIFs and marketing in the EU. Whichever option you select will most likely involve the amendment of AIF offering documentation, restructuring of the management and delegation structure, application of authorization as an AIFM and the establishment of a parallel AIF structure.

Next steps for Non-EU based Investment Advisers

Advisers who plan to market funds to any EU member state after July 21, 2013 will need to: • Determine whether marketing undertaken after July 21, 2013 is at the initiative of the relevant EU based investors. • Check and monitor the status of co-operation arrangements. • Check and monitor whether the Directive is to be implemented in any EU member state. • Review contents of any private placement memorandum or other marketing materials. • Establish systems and controls for preparation of an annual report to investors. • Establish systems and controls for completion of reports to EU member state regulators. • Establish place systems and controls for preparation of the periodic and regular disclosure to investors. • Review and monitor implementation of provisions of the Directive governing the obligations of AIFMs.

Advisers with offices in an EU member state may need to: • Make an application for that office to be authorized by the applicable EU member state regulator by July 21, 2014 and prepare for full compliance with the Directive. • Consider which functions can be delegated to an entity outside the EU, not subject directly to the Directive. Advisers who have any fund established/registered in an EU member state managed by the adviser will need to consider whether the Directive would require the adviser or some other entity to be registered as an AIFM and to comply with the Directive. The Directive does not yet provide a mechanism for a non-EU entity to be the AIFM for an EU based fund; however, it is likely to do so late in 2015.

Fund Raising in Europe

As of July 22, 2013, the Directive will apply to anyone who wishes to market a fund to a professional investor in or into any country located in the EU, including, but not limited to broker-dealers registered with FINRA. AIFMs that fail to achieve compliance with the July deadline will be prevented from raising new funds in the EU, which comprises 27 member states of the EU plus Iceland, Liechtenstein and Norway.

Conclusion: It would be prudent for advisers based in the US (and/or non-EU AIFMs) to consider their options and start planning for the new requirements under the Directive.

Cheryl Spratt