These are my live notes from PEI’s Private Fund Compliance Forum.
They are likely to be incoherent and full of typos.
AIFMD is a difficult topic.
Transitional regime. It’s just about over; it expires at the end of July 2014. They don’t work in France. They work well in the UK. Germany is in the middle. For an upcoming fund, it may be better to start marketing now to take advantage of the transitional rules.
The rules are different for non-EU funds and managers than for EU-based ones.
How does co-investment work in the “marketing” definition for AIFMD. It’s possible to set up a co-investment policy and procedure that shoehorns it into reverse solicitation.
One panelists view on the criteria to make reverse solicitation work:
- Talking to institutional investors
- Talking to investors that you have some previous relationship with
- Keep to a minimum number of investors. (A handful of investors)
- Don’t do it in France
After the transition period, you may still have a runway to close. Don’t let it go beyond the end of the summer. Get contact and some communication during the transition period.
Soft marketing. You don’t want to register if you won’t have any investors in that country. Pitchbooks may not be marketing. It’s better if you have not completed the PPM or have not yet had a first closing. You need a fund to be in existence before you can register.
Depositories in Germany and Denmark is more than a custodian. It is intrusive and will check the investments. The marketplace for depositories is still developing.
Registration is expensive; Who will pay for it? Management company? All investors? Just EU investors? Country by country allocation?
There is no single solution for all EU countries. It is a patchwork.
AIFMD enforcement is coming from a country’s regulatory authority. Failure to register is a criminal offense. If you need a legal opinion on compliance, a fund’s legal counsel may force registration or stricter compliance.
Not AIFMD:
- Joint venture
- Managed account – single investor fund
- Co-investments- The UK has specifically stated as such (other countries may take a different view)
The panel moved on to corruption and compared the FCPA to the UK’s Bribery Act. The UK’s version is stricter so it’s better to set any anti-corruption policies to the stricter UK requirements.
For private equity firms, it is possible that the bribery actions in a portfolio company could be passed through, putting liability on the fund manager. The UK enforcers are prepared to bring an action even where the nexus to the UK is tenuous.
