FCA to extend master fund level reporting for non-EEA and UK AIFMs

Introduction

In its Handbook Notice No. 40, published on 25 January 2017, the FCA confirmed that it will go ahead with the proposals to extend master fund level reporting requirements under AIFMD Annex IV, which it set out in its July 2016 Quarterly Consultation Paper No. 13 (CP 16/17).

When will the changes come into effect?

The FCA has allowed a six month transitional period - the new rules come into force on 29 June 2017. This means that affected AIFMs (see below) will have to report the additional information required under them for the first time in respect of Q2 2017 ie, by 15 August 2017 for fund of funds and by 31 July 2017 for all other funds.

Will the change affect you?

The rule changes will apply in respect of:

• Above-threshold non-EEA AIFMs which:
  • manage non-EEA master AIFs, and
  • market a feeder AIF of that master AIF in the UK under Article 42 of AIFMD.
• Full-scope UK AIFMs which:
  • manage a non-EEA master AIF which is not marketed in the EEA, where the feeder AIF is:
    • an EEA AIF, or
    • a non-EEA AIF which is marketed in the EEA.

However, the FCA has clarified that the changes will only affect non-EEA or UK AIFMs which report on a quarterly basis under Article 110 of the AIFMD Delegated Regulation - the rules in respect of AIFMs which report on a half-yearly or annual basis will remain as before.

(Article 110 of the AIFMD Delegated Regulation requires quarterly reporting by AIFMs which manage (a) portfolios of AIFs whose aggregate assets under management (AuM), calculated in accordance with Article 2 of the AIFMD Delegated Regulation, exceeds €1bn or (b) an individual AIF whose AuM (including any assets acquired through the use of leverage) exceeds €500m.)

What changes is the FCA making?

For AIFMs which meet the criteria above, the FCA is making changes to its FUND sourcebook to require the reporting, on a quarterly basis, of information under Article 24 of AIFMD regarding the master AIF as well as the feeder AIF. This brings the FCA into line with ESMA’s Opinion of 01 October 2013 and with the stance already taken by regulators in a number of other EU countries.

In light of feedback to its original proposal, the FCA has, at least, decided not to go beyond the ESMA Opinion by requiring a non-EEA AIFM to report in respect of a master AIF which is managed by an AIFM in the same legal group. Instead, the requirement is now limited to a master AIF which is managed by the same non-EEA AIFM as the feeder AIF.

The rule changes (to FUND 3.4.6A R(2) in respect of UK AIFMs and to FUND10.5.11B G for non-EEA AIFMs) are set out in an FCA Handbook Instrument, published at the same time as Handbook Notice No. 40.