Another Milestone For The AIFMD - Time For Non-EU Private Equity Advisers To Take Stock?

Author:Mr Andrew Henderson
Profession:Ropes & Gray LLP

The Alternative Investment Fund Managers Directive ("AIFMD") was published on June 8, 2011. It introduces a Europe-wide regime aimed at regulating the activities of those who manage and market alternative investment funds, such as private equity funds ("Funds"). The AIFMD has been in the public domain for over a year and its immediate impact has yet to be felt. However, on November 16 the European Securities and Markets Authority ("ESMA") took the first legislative step towards the implementation of the AIFMD by presenting its technical advice on the AIFMD implementing measures ("Technical Advice") to the European Commission ("Commission"). The Technical Advice addresses issues which are relevant to non-EU advisers, including "Third Countries", general provision for managers, authorization and operating conditions and transparency requirements and leverage.

Executive Summary and Next Steps for Advisers

This Technical Guidance brings the AIFMD's impact closer and represents an opportunity for U.S. and other non-European private equity advisers to consider or reconsider the AIFMD's impact:

For an adviser or manager considering any fund-raising in the EU, it will need to ensure that this fund-raising is completed by July 21, 2013 to avoid the need to comply with the AIFMD's fund-raising requirements. These include specific requirements relating to portfolio companies where those companies are private European Union ("EU") companies – advisers raising funds after July 21, 2013 will need to pay special attention to the question of whether the funds make European investments. In light of the requirement for any vehicle, including a feeder vehicle, which is established in the EU to have a manager which complies with the AIFMD (an "AIFM") from July 2014, the adviser may need to reconsider the structure of existing funds with fund vehicles established in the EU. An adviser with a subsidiary in the EU will need to consider whether that subsidiary will become subject to the AIFMD and may need to reconsider the structure of its business by July 2014. Fund Raising in Europe after July, 2013

From July 22, 2013, the AIFMD will apply to anyone who wishes to market a Fund to a professional investor in or into any country located in the European Union (a "Member State").

Reverse Solicitation

The AIFMD will not apply where any investor in a Member State approaches an adviser or manager, i.e. marketing by reverse solicitation. This means that a professional investor will be able to continue to invest in the Fund by approaching the adviser provided the adviser has not solicited the investor prior to the approach. The AIFMD does not contain much guidance on precisely when a professional investor may have made a reverse solicitation so advisers will need to approach the question of reverse solicitation with caution.

Conditions for Active Solicitation

Even where an adviser cannot rely on reverse solicitation, there will be no need for the adviser to be authorized in any Member State until at least July 2018. However, from July 22, 2013 the following conditions will need to be satisfied on a Member State by Member State basis:

"Appropriate co-operation arrangements" will need to be in place between the Fund manager's...

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