AIFMD II: European Commission kicks off the review process with a consultation

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AIFMD II: European Commission kicks off the review process with a consultation

26 October 2020

Regulatory News Alert

Context and objectives

On 22 October 2020, the European Commission (EC) launched a consultation on the review of Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers (AIFMD).

This consultation follows the EC’s June 2020 report on the AIFMD’s scope and application that was submitted to the European Parliament and the Council. On 19 August 2020, the European Securities and Markets Authority (ESMA) published its letter to the EC highlighting 19 areas to consider during this review.

Given the EC’s ongoing efforts to develop the capital markets union (CMU), this consultation seeks stakeholders’ views on how to achieve a more effective and efficient European Union (EU) AIF market as part of the overall financial system.

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Strengthen the rules and complete the AIF internal market

This public consultation aims to gather views from all interested parties—especially collective investment fund managers and investment firms, AIF distributors, industry representatives, investors and investor protection associations—on the following key objectives:

  • Utility of the AIFM passport and the overall competitiveness of the AIF industry in the EU:
    • Scope of the AIFM license to be potentially extended to smaller AIFMs.
    • Level-playing field concerns regarding the regulation of other financial intermediaries: firms regulated by the Markets in Financial Instruments Directive (MiFID), credit institutions, or undertakings for the collective investment in transferable securities (UCITS) managers that provide similar services.
  • Investor access to account for the differences between retail and professional investors:
    • Possibility of opening the AIF environment to a larger pool of investors, while considering their varying degrees of financial literacy and risk awareness.
    • Greater clarity on the AIFMD rules on depositaries and potential legal solutions, which could address the issue of the short supply and concentration of depository services in smaller markets.
  • AIFMD third country passport regime and delegation rules:
    • How best to achieve the equitable treatment of non-EU AIFs and securing a wider choice of AIFs for investors while at the same time ensuring that EU AIFMs are not exposed to unfair competition or are otherwise disadvantaged,
    • The focus of the review is on the appropriateness of the AIFMD third country passport regime and delegation rules,
  • Whether the intervention powers and a tool-kit available to the relevant supervisors are sufficient for financial stability:
    • How to ensure National Competent Authorities (NCAs) and AIFMs have the tools necessary to effectively mitigate and deal with systemic risks,
    • Improvements to the supervisory reporting template provided in the AIFMD, with particular focus on the increased activities of AIFs in the credit market, in order to assess risks associated with leveraged loans and CLOs,
  • Potential enhancement of AIFMD rules regulating investment in private companies:
    • Adequacy and effectiveness of the obligations for AIFMs managing AIFs that acquire control of nonlisted companies and issuers in enhancing transparency regarding the employees of the portfolio company and the AIF investors.
    • Improvements of the AIFMD provisions against asset-stripping when an AIFM acquires control over a nonlisted company or issuer.
  • Appropriateness of the AIFMD rules in assessing sustainability risks:
    • Whether AIFMs should only quantify sustainability risks as defined in the Disclosure Regulation 2019/2088.
    • Whether the investment decision processes of any AIFM should integrate the assessment of nonfinancial materiality, i.e., any potential principal adverse sustainability impacts.
    • How these adverse impacts on sustainability factors should be integrated into the quantification of sustainability risks (AIFM or financial product level, etc.).
    • How AIFMs should account for the long-term sustainability and social impact of their investment decisions.
  • A more coherent approach in the treatment of UCITS:
    • A single EU rulebook for UCITS and AIFM regulatory frameworks.
    • A single license for AIF and UCITS managers.
    • Harmonized metrics for leverage calculation and reporting on the use of liquidity management tools.

 

Next steps

All interested parties should submit their feedback by 29 January 2021.

Based on the consultation’s results, the EC plans to publish a proposal for a directive and adopt it by the third quarter of 2021.

At this stage, unless your firm wishes to reply to the consultation, this information should help you prepare your target model for AIFMD II. Stay tuned for more regulatory developments.

 

How can Deloitte help you?

The Deloitte Regulatory Watch Kaleidoscope service helps you stay ahead of the regulatory curve by identifying changes to your environment and allows you to better anticipate, manage and plan upcoming regulations on the way to AIFMD II.

Deloitte’s advisory specialists and dedicated services will help you design and implement your business strategy in light of the future evolution of the regulatory framework and market trends.

Additionally, through its Reporting Factory service, Deloitte offers a range of solutions for forthcoming investment fund reporting requirements tailored to your business needs.

Deloitte’s Regulatory Watch Kaleidoscope service actively monitors AIFMD and UCITS developments and publications on an ongoing basis. We carefully analyze all relevant published documents to identify any changes and provide the most updated view to our clients.

Deloitte teams can assist you at any stage of your operation lifecycle through our wide range of services:

  • Service provider selection and due diligence
  • Key performance indicators (KPIs) definition and dashboard implementation
  • Marketing and commercial strategy
  • Commission de Surveillance du Secteur Financier (CSSF) license application
  • IT strategy
  • AIFM operating model definition
  • Market research and analysis

Contacts

Subject matter specialists

Xavier Zaegel
Partner – Consulting - IM & PERE Leader
Tel: +352 45145 2748
xzaegel@deloitte.lu

Nick Tabone
Partner – Private Equity Leader
Tel: +352 45145 2264
ntabone@deloitte.lu

Basil Sommerfeld
Partner – PERE Stategy, Business Design and Operations Transformation
Tel: +352 45145 2646
bsommerfeld@deloitte.lu

Lize Griffiths 
Partner – Real Estate Industry Leader
Tel: +352 45145 2693 
lizgriffiths@deloitte.lu

Arnaud Bon
Partner – PERE Stategy, Business Design and Operations
Tel: +352 45145 4165
abon@deloitte.lu

Lou Kiesch
Partner – Regulatory Consulting Leader
Tel: +352 45145 2456
lkiesch@deloitte.lu

Vincent Gouverneur
Partner – EMEA Investment Management Leader
Tel: +352 45145 2451
vgouverneur@deloitte.lu

 


Regulatory Watch Kaleidoscope service

Simon Ramos
Partner – IM Advisory & Consulting Leader
Tel: +352 45145 2702
siramos@deloitte.lu

Jean-Philippe Peters
Partner – Risk Advisory
Tel : +352 45145 2276
jppeters@deloitte.lu

Benoit Sauvage
Director – Risk Advisory 
Tel : +352 45145 4220
bsauvage@deloitte.lu

Marijana Vuksic
Senior Manager – Risk Advisory
Tel : +352 45145 2311
mvuksic@deloitte.lu

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