AIFM's next steps

Assuming no surprises from the Council, the directive’s text will then become a legally binding act sometime early next year, writes Jenna Gottlieb.

The EU Parliament’s stamp of approval this week sends the AIFM directive back to EU finance ministers who are expected to formally approve the compromise text on behalf of the Council.

They will meet either next week or in early December.

The private equity industry breathed a sigh of relief when the controversial “passport” rules were agreed on, which allow non-EU funds to market to EU member states.

However, there’s a lot more to the new rules. Are you prepared?

The relatively esoteric private equity industry will have to comply with new rules on fund transparency which will include new reporting requirements both before investors commit and thereafter. Funds will have to submit to regulators and investors, among other things, the total amount of any leverage used by a fund, investment strategy, and any preferential treatment of fund investors.

Jenna
Gottlieb

Under the directive, general partners will face new rules on pay and bonuses, similar to those imposed on bankers under the Capital Requirements Directive. Remuneration policies will have to ultimately be put in place for any staff whose work will have a material impact on the risk profile of a fund.

GPs will also be subject to new restrictions on the amount of capital they can distribute following the takeover of a non-listed or public company. In the first two years following an acquisition, fund managers must use their “best efforts” in preventing “distribution, capital reduction, share redemption and/or acquisition of own shares by the company”.

The passport has been granted, and that’s great for non-EU funds. But, is your firm prepared for the host of other rules?