EU Council of Ministers Reaches Agreement on AIFM Directive

Author:Mr Edward Black and Martin Cornish
Profession:Katten Muchin Rosenman LLP

Summary On October 19, the European Union Council of Ministers announced that agreement had been reached at its ECOFIN meeting on a compromise text of the proposed Alternative Investment Fund Managers Directive (AIFMD). The Council text must be approved by the European Parliament before it becomes effective and will then go to the individual member states for implementation and to the European Securities and Markets Authority (ESMA) for detailed rules to be prepared on several key aspects of the AIFMD. The Council stated that there is a large degree of agreement between it and the Parliament and accordingly that it hopes to be able to conclude negotiations with the Parliament in time for a final text of the AIFMD to be before the Parliament for approval on November 10. If that happens, the AIFMD text will come into force in early 2011 and will be required to be implemented by EU member states by early 2013. Michel Barnier, the European Commissioner for Internal Markets and Services, issued a separate statement on October 19 in which he confirmed that the agreement reached at the ECOFIN meeting included a passport for funds managed by non-EU managers. Belgian Compromise Proposal – October 15, 2010 The ECOFIN agreement appears to have been based on the compromise proposal released on October 15 by the Belgian presidency of the EU Council (the Proposal). In an attempt to reach agreement over the most contentious issue of the passport for non-EU funds and managers, the Proposal set out a dual system allowing non-EU managers to apply for a passport from 2015, while EU managers will be able to obtain a passport from the initial implementation date of the AIFMD in 2013. The existing private placement regime will remain in place throughout this transition period, but may be withdrawn in 2018 if the passport for non-EU managers is successful—see below. In order to obtain a passport, non-EU managers will need to meet a number of requirements, including appointing an EU legal representative to be a point of contact within the EU for regulators and others. There will also need to be co-operation agreements in place between the competent regulatory authorities of the manager's home jurisdiction and the 'host' member state(s) in which the manager is carrying out marketing activity. The manager's home state must not be on the list of Non-Cooperative Countries and Territories (NCCTs) maintained by the Financial Action Task Force (FATF) in connection...

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