23 June 2023

Simmons and Simmons: AIFMD II update: latest trilogue postponed (perhaps to September)

We have learned today that the Swedish Presidency of the Council of the EU has concluded that an agreement cannot be reached on amendments to the Level 1 text of AIFMD before the end of the presidency’s six month term on 30 June.

As a result, it has cancelled the political trilogue meeting that was due to have been held early next week.

Instead, on 1 July, the rotating Presidency will pass to the Spanish – indications are that the next trilogue may be delayed until after the summer, possibly being held in September.

What are the sticking points?

At the outset of the negotiations in March, many anticipated that an agreement would be reached fairly quickly – ‘by the end of April’ was a popular choice.

However, disagreements in approach between the Commission, the Council and of the European Parliament (EP) have turned out to be harder to reconcile than many had expected – although progress has been made in some areas, we understand that parties remain apart on (among other things):

A. Delegation
The EP

• is trying to avoid requiring the AIFM to report on both the AuM and the percentage of the AIF’s assets subject to delegation arrangements and
• wants to see the list of information which an AIFM seeking authorisation must submit to its home NCA under a revised Article 7 to be closed, rather than non-exhaustive

B. Loan originating funds
There is still disagreement on the definition of a loan originating fund

• the EP’s proposal to capture only those funds whose main/principal strategy is loan origination, is proving unacceptable to the Council
• so, too, is the EP’s proposal to change the method of calculation for leverage from commitments to borrowing
• it appears, though, that there may be movement towards agreeing a cap for closed-ended funds

C. The depositary passport
There remains disagreement regarding whether there should be reference to a depositary passport (the Council is in favour of deleting the proposed reference)

D. Undue costs

• the EP appears to be working on revised language to align its proposal with the recently published work under the Commission’s Retail Investment Strategy (see our summary here), including amendments to the existing reporting provisions and giving power to ESMA to establish criteria to assess when costs are not due....

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