31 July 2012

Report of AIFMD Stakeholders' Committee on transposition of AIFMD and development of French innovative asset management

Nearly half of French investment funds could qualify as Alternative Investment Funds (AIFs) within the meaning of the Directive, and nearly two-thirds of France's management companies currently manage AIFs. Other investment vehicles that are not yet regulated may also be covered by the Directive.

The Directive on Alternative Investment Fund Managers (AIFM Directive) was adopted by the European Parliament in November 2010 and entered into force on 21 July 2011. It prompts sweeping changes to the regulations governing the European alternative investment fund management industry. The purpose of the Directive is to provide a common set of rules for all alternative investment funds marketed in Europe to ensure a more secure framework for their development and to enhance investor protection. In the past, some industry participants were either unregulated or only loosely regulated. Now, all managers exceeding the thresholds set forth in the Directive will have to undergo an authorisation procedure and meet periodic reporting requirements. Transposing the AIFM Directive into domestic law presents a major challenge for many Member States, since it could bring about structural changes in the industry, depending on how the countries interpret it.

The Autorité des Marchés Financiers or AMF wanted the broadest possible range of stakeholders to be represented on the Committee. Therefore, the Committee included industry associations, along with asset managers of all investment strategies covered by the AIFM Directive (mainstream asset management companies, "alternative" asset management companies, private equity firms and real-estate specialists). Representatives of institutional investors and retail investors, as well as the relevant national authorities, including the Directorate-General of the French Treasury, the Directorate of French tax legislation, the French prudential regulator, the Autorité de Contrôle Prudentiel (ACP) and the Authority in charge of accounting standards (Autorité des Normes Comptables), were also involved in the Committee's work. Depositaries, legal counsels and consultants also made major contributions to the discussions. Chaired by two members of the AMF Board, Monique Cohen and Jean-Luc Enguéhard, the Committee started work in November 2011.

The AIFM Directive has a dual objective: regulating alternative investment fund managers and monitoring and containing systemic risks. For this purpose, it introduces the requirement that all alternative investment fund managers be authorised and comply with a set of harmonised rules regarding risk management, conflicts of interest, delegation, valuation, depositaries and disclosure to investors. It also imposes reporting requirements with regard to regulators, including information about the main exposures and leverage of the managed funds. Even though French regulations already include many provisions applying to investment fund managers, including managers other than UCITS management companies, transposing the AIFM Directive means that some provisions of French laws and regulations will have to be revised, as well the AMF General Regulation.

In addition to imposing new requirements and providing a secure framework in which the managers concerned will do business, the AIFM Directive could provide many new development opportunities for French alternative investment fund management. First, simplification of the product range will raise the profile of the funds designated as alternative investment funds and facilitate investors’ access to the wealth of various "alternative" strategies implemented by French managers. It will also give France's industry and infrastructure, which enjoy a reputation for high quality regulation, an opportunity to carve out a new position in the European and international financial markets, building on their head start in terms of compliance with the requirements imposed by the AIFM Directive.

The AIFMD Stakeholders’ Committee sought to assess the challenges that the AIFM Directive raises for the French industry and to prepare for its transposition into French law within a framework that gives the industry opportunities to simplify and modernise the product range covered by the Directive, step up the international promotion of the Paris financial centre, put French depositaries on an equal footing with their European competitors, and give fresh impetus to the growth of French management companies, while maintaining a high level of investor protection.

Full document

© AMF - Autorité des Marchés Financiers