InvestmentsJun 28 2013

Clearing up the rules on promoting AIFs: FCA

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The Financial Conduct Authority has published rules governing the way the UK implements the European Union’s alternative investment fund managers’ directive and introduced two legal forms of tax-transparent funds.

In its latest 196-page policy statement, PS13/5 Implementation of the Alternative Investment Fund Managers Directive, and its new rules for fund managers, the FCA said it was upholding the EU’s directive to support its objectives of protecting and enhancing the integrity of the UK financial system and securing an appropriate degree of protection for consumers.

The rules also give AIFMs an EU-wide passport to manage alternative funds and market them to professional investors, creating opportunities to market to European investors.

The FCA said: “The publication of the Policy Statement now gives UK asset management firms more certainty about how they will be regulated and how they can take advantage of the opportunities AIFMD creates.”

However, in the policy statement, the FCA was keen to stress the subtle difference between marketing and financial promotion, one problem area the regulator said the rules are designed to clear up.

The PS said: “There is likely to be a considerable overlap between marketing and financial promotion, and in the case of marketing to retail clients, this can only be done if a financial promotion can be made to that investor, but the two concepts are not the same.

“In particular, it is possible for a person to make a financial promotion without marketing an AIF. For example, an AIFM that makes a communication in relation to an AIF would be making a financial promotion if that communication was a significant step in the chain of events leading to an agreement to engage in investment activity, but would not be marketing an AIF if this communication was in relation to draft documenation.”

Also within the new rules is the introduction of two legal forms of collective investment scheme (CIS), known as authorised contractual schemes or ‘tax transparent funds’.

According to the FCA, these new rules will support the Treasury’s initiative to encourage investment in UK funds by offering investors, including those who may be tax-exempt such as charities and pension funds, a more tax-efficient vehicle.”

The report said: “Tax-transparent funds are currently available in other parts of the EU and their introduction in the UK aligns our regulatory framework with that of other fund domiciles, improving the UK’s competitive position.

Treasury is responsible for implementing many aspects of AIFMD in the UK. The Treasury has laid its draft statutory instrument before Parliament, containing its AIFMD regulations and consequential changes to primary and secondary legislation.

The statutory instrument is proceeding through Parliament and the Treasury expects it to be made law by 22 July.

Chris Woolard, the FCA’s director of policy, risk and research, said: “The implementation of these changes is a crucial development for the asset management industry and consumers. Ensuring certainty about these new measures has been a priority for the FCA.

“By publishing our rules now and implementing the Directive on time, we are delivering that certainty and increasing cross-border opportunities for UK firms”.

Timeline

March 2013: FCA consults on AIFMD implementation

22 July 2013: Rules come into force

22 July 2014: Date when transitional reliefs for firms finish.