AIFMD update: Subtle shifts in scope

comment - 12 November 2013

AIFMD update: Subtle shifts in scope

The policy decision by the UK authorities to gold-plate the scope of the AIFMD in the UK was originally buried in DP12/1 and only became prominent with the publication of CP13/09. It was then encapsulated in PS13/5. The UK’s approach, however, was always incorrect legally and we are beginning to see evidence of this elsewhere. It seems that scope issues, and the unresolved policy differences behind them, will continue to expose the shortcomings of the AIFMD. 

In the absence of detailed guidance, the FCA’s PS13/5 has been relied upon by industry around Europe in construing scope. Unfortunately, PS13/5 is very broad in its approach with the result that many private equity ‘funds’ are simply assumed to be AIF without detailed analysis. A more expert approach may be emerging in Luxembourg where we are seeing greater reliance being placed on ESMA guidelines that stress the fact that (as a matter of law) an AIF must be ‘capital raising’ (as a matter of fact, even if very broadly construed). Where this is simply not the case because partners agree to form a business association in advance of establishing the AIFM or AIF (i.e. a true partnership is a simple business arrangement after all), then we are aware of practitioners taking the view that these arrangements cannot be AIF (in line with Q&A ID1160); the AIFMD regulating private equity partnerships ‘that seek capital’ (i.e. AIF) and not the private equity industry per se. This subtle dichotomy was never properly identified and developed by PS13/5. 

Meanwhile we continue waiting to see if ESMA’s opinion on the definition of open and closed ended AIF will be accepted by the Commission. The differences between ESMA and the Commission on this straightforward subject are quite remarkable.

The AIFMD remains a law without a natural perimeter, but we all know this. 

Click Investment Europe to read more.
 

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