ESMA updates its AIFMD Q&As

ESMA's most recent update includes two new questions and answers on the cross-border marketing of alternative investment funds (AIFs), intended to clarify issues around material changes of existing notifications, along with two new questions and answers on the delegation of functions by an Alternative Investment Fund Manager (AIFM) to AIFs or third parties.

Notification of AIFs

ESMA confirms that, where an AIF is marketed in a host Member State under the Article 32 AIFMD marketing passport, the creation of a new share class which is to be marketed cross-border within an already notified fund or sub-fund would not constitute a material change of the notification.

ESMA also notes that, where an AIFM wishes to notify a material change to a notification made to its home regulator to manage or market an AIF on a cross-border basis under Article 32(7) or 33(6) of AIFMD, it must include the full set of documentation required by Articles 32 or 33 together with its revised notification letter. AIFMs are asked to highlight any amendment to the original notification letter and accompanying documentation.

Delegation

Where a third party, rather than the AIFM itself, performs any of the functions set out in points 1 or 2 of Annex I of AIFMD, ESMA’s view is that this does not release the AIFM from its responsibility to ensure compliance of the relevant function(s) with the AIFMD. Where the third party performs such a function, this should be considered as having been delegated by the AIFM to the third party, leaving the AIFM still responsible for ensuring compliance with the delegation requirements under Article 20 of the AIFMD and the principle in Article 5(1) (ie, the single AIFM appointed for an AIF is responsible for ensuring compliance with the AIFMD).

Finally, ESMA states that an externally-managed AIF cannot itself perform the investment management functions in point 1 of Annex I or functions set out in point 2 of Annex I of AIFMD (together, ‘the Annex 1 functions’) as it is not regulated as an AIFM. Where the AIF appoints an external AIFM pursuant to Article 5(1)(a), the external AIFM is responsible for providing the Annex 1 functions. It may delegate the task of carrying out functions on its behalf to a third party under Article 20 of AIFMD. The AIF is, however, not a ‘third party’ in accordance with Article 20(1) of AIFMD.