Investor Transparency Post AIFMD: What Have We Gained?

September 22, 2014

The Alternative Investment Fund Managers Directive (2011/61/EU) (the “Directive” or “AIFMD”) states in Recital 94 that its objective is:

...to ensure a high level of investor protection by laying down a common framework for the authorisation and supervision of AIFMs [alternative investment fund managers]...

and opines that the deficiencies in the Member States’ existing regimes demonstrate that such protection would be better provided at the European Union level.

The importance of investor disclosure (which is equated with investor protection) is emphasised throughout the Commission Delegated Regulation (EU) No 231/2013 (the “Delegated Regulation” also known as “Level 2”) adopted pursuant to the Directive. It notes, for example, at recital 124 that:

It is essential for investors to obtain the minimum information necessary with respect to particular AIFMs and AIFs [alternative investment funds] and their structure in order to be able to take the right investment decisions tailored to their needs and risk appetite. That information should be clear, reliable, readily understandable and clearly presented...

These are great ideals.

Member States were required to implement the Directive by 22 July 2013 and, following a one year grandfathering period in most Member States, all AIFMs (to the extent provided in the Directive) must now be compliant with AIFMD. For AIFMs of AIFs established in the European Economic Area (“EEA”)1 or AIFMs marketing into the EEA AIFs established outside of the EEA, this includes ensuring compliance with Articles 22 and 23 of AIFMD. These articles set out the Directive’s core requirements relating to investor transparency and are supplemented by Articles 103 through 109 of the Delegated Regulation.2

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Footnotes
1) It is expected that the Directive, as a text with EEA relevance, will be formally adopted into the European Economic Area Agreement and thereby be extended beyond the European Union to the additional Member States of the EEA: Iceland, Norway and Liechtenstein. This adoption process is not yet complete.

2) This article is concerned with investor protection through investor transparency. The Directive also includes significant requirements relating to regulatory reporting and disclosure, which are directed both at investor protection and systemic stability.