ESMA and CSSF Updates on AIFMD

1 Update of the ESMA Q&As relating to AIFMD application

On 3 June 2016, the European Securities and Markets Authority (“ESMA”) published an updated version of its Questions and Answers (the “Q&As”) (Ref. ESMA/2016/909) with regard to the application of the Alternative Investment Fund Managers Directive (the “AIFMD”). The new questions and answers concern (i) the marketing of EU alternative investment funds (“AIFs”), as well as (ii) the influence that committed capital can have on the calculation of the total value of assets under management and additional own funds:

  • In Section II of the Q&As, ESMA clarifies that in the context of marketing under Article 31 of the AIFMD, no distinction is made whether an EU AIF is domiciled in the same Member State as the AIFM or not. Furthermore, an EU AIFM may only, in its home Member State, market an EU feeder AIF with an EU master AIF (managed by an authorised EU AIFM) under Article 31 of the AIFMD. Marketing of an EU feeder AIF with a non-EU master AIF is subject to Article 36(1) of the AIFMD.
  • In Sections IX and X of the Q&As, ESMA further explains that as a general rule, committed capital shall not be taken into account when calculating the total value of assets under management. Indeed, committed capital does not, in principle, contribute to the actual assets of the AIF for which it was pledged, as long as it has not been drawn down by the AIFM.

2 Update of the CSSF FAQs concerning the AIFM Law

On 9 June 2016, the Commission de Surveillance du Secteur Financier (the “CSSF”) published an updated version of its Frequently Asked Questions (the “FAQs”) on the Law of 12 July 2013 on alternative investment fund managers, as amended (the “AIFM Law”).

Following an opinion of ESMA published on 11 April 2016 (ref. ESMA/2016/596) relating to loan origination by funds, questions have been added in the FAQs concerning Luxembourg-based AIFs engaging in loan origination, participation and/or acquisition.

The CSSF underlines that loan origination is not prohibited under the AIFM Law or other relevant laws regulating Luxembourg investment funds, and may thus be authorised under certain conditions. However, the CSSF will review such conditions on a case-by-case basis. Similarly, loan participation and/or acquisition may be permitted under certain conditions. The AIFM Law and other relevant (product) laws shall nevertheless always be complied with.

For each AIF engaging in loan origination, participation and/or acquisition, the following key principles should be adhered to:

  • all aspects and risks of such activity(ies) are addressed;
  • proper organisational and governance-structures are applied;
  • the necessary expertise/experience is available (and supported by the relevant technical and human resources);
  • the relevant policies and disclosures are put in place.

The CSSF concludes that it is the responsibility of the AIFM, or where applicable, the AIF itself, to ensure the implementation of a robust and appropriate approach for loan origination, participation and/or acquisition. The CSSF will evaluate in the context of its approval and on-going supervisory process, if applicable, on a case-by-case basis the approaches put in place by the relevant AIFM or, where applicable, by the AIF.