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AIFMD Compliance Deadline Looms

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The deadline for compliance with the new Alternative Investment Fund Management Directive (AIFMD) that has been transposed into national law is July 22, 2014. That is only a few months away, but already many fund service providers, depositaries and industry insiders are predicting last minute bottlenecks as the implementation deadline approaches. By now, all financial firms in the EU, or marketing in the EU, that manage collective investment schemes should have self-assessed to find out whether they come under the scope of AIFMD and reported this to their home regulator or competent authority in the EU where their funds are marketed.

Now that AIFMD has become inevitable many self-managed or formerly lightly-regulated investment managers will have to make tough decisions with regards to the costs of regulatory compliance, increased reporting requirements, the demands of remuneration transparency, restrictions on distribution through national private placement regimes (NPPRs), and new rules on client classification under MiFID, as well as the prospect of smaller funds having to hire additional staff for risk management, compliance and internal audit roles required by the new law.

Foreign-based funds, including those managed in nearby Switzerland under CISA, wanting access to investors under a single EU-wide passport will also be a motivation to become AIFMD compliant before NPPR schemes are phased-out by 2018 or severely curtailed by national regulators as early as 2015 in some EU countries.

For asset managers, banks, family offices, investment firms, trust companies and private wealth managers wanting to manage a collective investment scheme or start their own fund it will be important to set it up in a cost efficient manner that is AIFMD compliant whether it is domiciled in the EU or not. Investment managers may also prefer to focus their attention on fund management, investment performance and client acquisition rather than risk management and compliance.

KMG Capital Markets (KMG) can help new or existing EU and non-EU AIFs become AIFMD compliant in one of several ways. The existing non-EU fund can migrate to an EU domicile with the help of KMG. An existing under-threshold AIF can appoint KMG as its external AIFM and opt-in under AIFMD. KMG can help open a new EU or non-EU based fund with KMG as its external AIFM. KMG can set-up an EU-based fund to mirror the performance of the non-EU AIF. A non-EU fund can act as a feeder fund for an EU-AIF with KMG as the AIFM. Or an EU or non-EU asset manager can establish their own segregated sub-fund on the KMG SICAV SIF platform in Luxembourg.

KMG can help new or existing UCITS/AIFs, as well as investment firms covered by MiFID, with their risk management, reporting and compliance functions. The UCITS/AIF can appoint KMG as its external UCITS/AIFM. A self-managed AIF can outsource their risk management to KMG. An investment firm wanting to manage collective investments can appoint KMG as its AIFM. For licensed, regulated or authorized asset managers or investment firms KMG can then delegate back the portfolio management as either the fund’s investment manager or advisor. KMG can offer family offices, trust companies and private wealth mangers discretionary portfolio management as well as investment advisory services. Registered investment advisors can also market investment products to their clients as an agent of KMG.