UK FSA Issues First Consultation on AIFMD Implementation

by Proskauer Rose LLP

On 14 November 2012, the UK Financial Services Authority (FSA) published Part I (CP1) of its two-part consultation paper series on implementation of the Alternative Investment Fund Managers Directive (AIFMD) in the UK. The consultation period for CPI closes on 1 February 2013.

CP1 covers the following topics:

  • the prudential regime for all types of alternative investment fund manager (AIFM);
  • matters relating to depositaries; and
  • the requirements on AIFMs contained within the AIFMD, including organisational matters, duties in relation to management of alternative investment funds (AIFs) and transparency obligations towards investors and regulators.

Part II of the consultation (CP2) will cover remaining topics relating to the AIFMD's implementation (see further below).

Context of Consultation and Implementation

The FSA's consultation is taking place in the context of significant reform of UK financial regulation due in the first part of 2013, when it is expected that the FSA will be split into, and succeeded by, the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). Under the draft reform legislation, the FCA will be both the conduct and prudential regulator for AIFMs. Transposition of the final rules implementing the AIFMD is intended to be located primarily in a new FCA rule sourcebook, "FUND".

In addition, HM Treasury will be consulting on legislative measures covering particular AIFMD matters, including options to apply differentiated regimes to certain smaller firms under the AIFMD, changes to the scope of activities which are regulated in the UK and the marketing requirements to be applied to AIFMs established outside the European Economic Area (non-EEA AIFMs) marketing AIFs into the UK by private placement.

Implementing measures also are being developed currently at the European level. Because the provisions in the European Commission's forthcoming implementing regulation (the Level 2 Regulation) will be directly applicable in each EU member state, the FSA will not be consulting on it once it is published, and will incorporate the Level 2 Regulation into the FCA's rules in large part by reference rather than strict copy out. Firms therefore will be responsible for ensuring that they are complying with the detailed provisions of both the FCA's rules and the Level 2 Regulation, and should familiarise themselves with the Level 2 Regulation detail when it is published.

Additionally, the European Securities and Markets Authority (ESMA) also is tasked with developing certain implementing measures; for firms, the two most important will be:

  • draft regulatory technical standards (RTS) and related material on key concepts and types of AIFMs, following ESMA's discussion paper of February 2012; and
  • final guidelines on remuneration policies and practices, following ESMA's consultation paper of June 2012.

Provided that the various consultations and drafts are published as expected, the FSA intends that CP2 will cover issues arising from the forthcoming Treasury and European consultations.

Scope and Types of AIFM

While matters concerning the scope and regulatory perimeter of the AIFMD are still the subject of continuing work at the European level and therefore not covered in great detail in the FSA's consultation, the FSA has set out its views on a few notable issues.

  • Asset managers structured as English limited partnerships will not be able to become AIFMs because they do not have separate legal personality under English law, as the AIFMD requires an AIFM to be a "legal person".
  • An entity may be out of scope of the definition of an AIF if its main business is a commercial activity, such as manufacturing goods or constructing buildings, or providing services to customers, although it is possible that an AIF may own such businesses without participating directly in the commercial activity being carried on. The presence of a substantial number of employees carrying on commercial activities might place an entity out of scope, whereas an AIF generally would employ relatively few people to manage its assets. This may be useful to some types of REITS, for example.
  • An example of a UK internally-managed AIF would be an investment company whose board retains control of all investment management functions, where no external manager has been appointed, and where the investment company employs staff to assist with investment management decisions.
  • The FSA expects ESMA's draft RTS to address the difference between a closed-ended AIF and an open-ended AIF, and therefore will not be proposing its own definitions.

Authorisation Issues

The FSA has indicated that the Treasury will be proposing the following new regulated activities:

  • managing an AIF;
  • managing a UCITS;
  • acting as a depositary of an AIF; and
  • acting as a depositary of a UCITS.

Establishing and operating a collective investment scheme (CIS) will remain a regulated activity but only in relation to CISs that are not AIFs or UCITS, which in practice will be very narrow in reach. This means that firms authorised to carry out the new regulated activities of managing an AIF or UCITS will not need permission to establish and operate a CIS in relation to the AIF or UCITS managed.

The FSA also has clarified its position on the transitional provisions. Firms currently not authorised by the FSA but which anticipate becoming AIFMs may wish to consider becoming authorised to operate a CIS before 22 July 2013 so as to take advantage of the transitional provisions in the AIFMD allowing up to a year to apply for authorisation as an AIFM, as these are not available to firms that will not be managing or marketing AIFs before that date. Firms that currently carry on business as an AIFM without needing to be authorised by the FSA – such as internally managed investment companies – also will be able to benefit from the transitional period.

The FSA also is considering establishing a "grandfathering" process to applications for variations of permission for firms currently holding permission to establish and operate a CIS, and will notify firms in due course of its intentions.

Finally, contrary to its previous publications, the FSA now does not expect that the FCA will be in a position to accept applications for authorisation (or variations of permission) until 23 July 2013.

Regulatory Capital Requirements

The FSA has noted the following changes in relation to the AIFMD's prudential requirements:

  • Three new prudential categories will be created: collective portfolio management firm; internally managed AIF; and collective portfolio management investment firm (i.e., an AIFM that also undertakes certain services under the Markets in Financial Instruments Directive (MiFID) as permitted by the AIFMD).
  • In the FSA's view, the AIFMD's initial capital requirements for AIFMs should be met out of own funds on an ongoing basis.
  • Internally managed AIFs will need to meet the initial capital requirements out of their own funds on an ongoing basis as well as professional indemnity insurance requirements, but will not need to meet prudential requirements relating to funds under management and expenditure.
  • Collective portfolio management investment firms will need to hold the higher of the AIFMD's own funds requirements and the capital requirements currently set out for firms undertaking the relevant MiFID-scope business.

Disclosure, Transparency and Reporting Requirements

Much of the detail regarding the disclosure, transparency and reporting requirements in the AIFMD will be supplemented by the Level 2 Regulation. In particular, disclosure requirements relating to portfolio company holdings, which will be of interest principally to private equity fund managers, will be discussed in CP2.

The following is noted in CP1:

  • Where a fund's constitution currently does not require the disclosure of information to investors at least on request, it will need to be amended.
  • AIFMs marketing non-EEA AIFs into the UK will be permitted to have the AIF's annual report audited in the country where it is established, provided the process meets international accounting standards.
  • The FSA expects the first regulatory reporting deadline to be October 2013 for certain very large AIFMs that are not operating under the transitional provisions relating to authorisation.


The FSA has proposed, in conjunction with the Treasury, a "private equity AIF depositary" model applicable to particular types of closed-ended AIFs, which will typically be private equity funds. The FSA proposes that firms other than just professional firms (such as lawyers and accountants) should be allowed to perform depositary activities. These depositaries would be authorised to act as depositary of an AIF with a limitation to private equity AIFs, and would generally not hold assets in custody but would be permitted to do so if necessary. The FSA intends for these depositaries to have lower regulatory capital requirements than depositaries acting for other AIFs, recognising their more limited role under the AIFMD and the need for such limited depositaries to provide competitive pricing to smaller fund managers. Taken together, the FSA proposals potentially open the way to new entrants into the custody/depositary market.

Next Steps and Timing

For both private equity fund managers and managers outside the EEA, most of the detail is still to come in CP2. The FSA currently expects to publish CP2 in February 2013 but the precise timing will depend on the timing of the Treasury's consultation, expected in January 2013, as well as further European progress on AIFMD measures. According to the FSA, the European process for the adoption and agreement of Level 2 had not yet begun by 14 November 2012, and so a delay to the publication of the Level 2 Regulation is anticipated, possibly into December 2012 or early 2013. ESMA's draft RTS and related material on key concepts and types of AIFMs is expected to be published in Q4 2012, with final guidelines on remuneration policies expected to follow in Q1 2013.

Provided the timing of these various publications proceeds as expected, the FSA intends to cover additional topics relating to AIFMD implementation in CP2, including the following:

  • Further clarification on scope issues and supervisory regimes for smaller AIFMs.
  • The retail regime, including the integration of current retail fund schemes and marketing to retail investors;
  • Marketing to professional investors, including non-EEA AIFs;
  • Further clarification on the Level 2 Regulation delegation requirements, including supervisory assessment of "letterbox entities"; and
  • AIFMD provisions applicable principally to private equity fund managers, including portfolio company disclosure requirements.

The FSA expects that a final policy statement covering both consultations will be published in June 2013.

In the interim, firms would be wise to consider their positions in relation to the FSA's first set of articulated views. Firms currently authorised to operate a CIS may want, for example, to examine their current funds in light of the FSA's proposed regulatory capital rules and revisit their fund documents to ensure that investor disclosure is properly addressed. Firms not currently authorised but which anticipate becoming AIFMs should consider in particular whether they want to become authorised as CIS operators before 22 July 2013 to take advantage of the AIFMD's transitional provisions.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Proskauer Rose LLP | Attorney Advertising

Written by:

Proskauer Rose LLP

Proskauer Rose LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide

JD Supra Privacy Policy

Updated: May 25, 2018:

JD Supra is a legal publishing service that connects experts and their content with broader audiences of professionals, journalists and associations.

This Privacy Policy describes how JD Supra, LLC ("JD Supra" or "we," "us," or "our") collects, uses and shares personal data collected from visitors to our website (located at (our "Website") who view only publicly-available content as well as subscribers to our services (such as our email digests or author tools)(our "Services"). By using our Website and registering for one of our Services, you are agreeing to the terms of this Privacy Policy.

Please note that if you subscribe to one of our Services, you can make choices about how we collect, use and share your information through our Privacy Center under the "My Account" dashboard (available if you are logged into your JD Supra account).

Collection of Information

Registration Information. When you register with JD Supra for our Website and Services, either as an author or as a subscriber, you will be asked to provide identifying information to create your JD Supra account ("Registration Data"), such as your:

  • Email
  • First Name
  • Last Name
  • Company Name
  • Company Industry
  • Title
  • Country

Other Information: We also collect other information you may voluntarily provide. This may include content you provide for publication. We may also receive your communications with others through our Website and Services (such as contacting an author through our Website) or communications directly with us (such as through email, feedback or other forms or social media). If you are a subscribed user, we will also collect your user preferences, such as the types of articles you would like to read.

Information from third parties (such as, from your employer or LinkedIn): We may also receive information about you from third party sources. For example, your employer may provide your information to us, such as in connection with an article submitted by your employer for publication. If you choose to use LinkedIn to subscribe to our Website and Services, we also collect information related to your LinkedIn account and profile.

Your interactions with our Website and Services: As is true of most websites, we gather certain information automatically. This information includes IP addresses, browser type, Internet service provider (ISP), referring/exit pages, operating system, date/time stamp and clickstream data. We use this information to analyze trends, to administer the Website and our Services, to improve the content and performance of our Website and Services, and to track users' movements around the site. We may also link this automatically-collected data to personal information, for example, to inform authors about who has read their articles. Some of this data is collected through information sent by your web browser. We also use cookies and other tracking technologies to collect this information. To learn more about cookies and other tracking technologies that JD Supra may use on our Website and Services please see our "Cookies Guide" page.

How do we use this information?

We use the information and data we collect principally in order to provide our Website and Services. More specifically, we may use your personal information to:

  • Operate our Website and Services and publish content;
  • Distribute content to you in accordance with your preferences as well as to provide other notifications to you (for example, updates about our policies and terms);
  • Measure readership and usage of the Website and Services;
  • Communicate with you regarding your questions and requests;
  • Authenticate users and to provide for the safety and security of our Website and Services;
  • Conduct research and similar activities to improve our Website and Services; and
  • Comply with our legal and regulatory responsibilities and to enforce our rights.

How is your information shared?

  • Content and other public information (such as an author profile) is shared on our Website and Services, including via email digests and social media feeds, and is accessible to the general public.
  • If you choose to use our Website and Services to communicate directly with a company or individual, such communication may be shared accordingly.
  • Readership information is provided to publishing law firms and authors of content to give them insight into their readership and to help them to improve their content.
  • Our Website may offer you the opportunity to share information through our Website, such as through Facebook's "Like" or Twitter's "Tweet" button. We offer this functionality to help generate interest in our Website and content and to permit you to recommend content to your contacts. You should be aware that sharing through such functionality may result in information being collected by the applicable social media network and possibly being made publicly available (for example, through a search engine). Any such information collection would be subject to such third party social media network's privacy policy.
  • Your information may also be shared to parties who support our business, such as professional advisors as well as web-hosting providers, analytics providers and other information technology providers.
  • Any court, governmental authority, law enforcement agency or other third party where we believe disclosure is necessary to comply with a legal or regulatory obligation, or otherwise to protect our rights, the rights of any third party or individuals' personal safety, or to detect, prevent, or otherwise address fraud, security or safety issues.
  • To our affiliated entities and in connection with the sale, assignment or other transfer of our company or our business.

How We Protect Your Information

JD Supra takes reasonable and appropriate precautions to insure that user information is protected from loss, misuse and unauthorized access, disclosure, alteration and destruction. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. You should keep in mind that no Internet transmission is ever 100% secure or error-free. Where you use log-in credentials (usernames, passwords) on our Website, please remember that it is your responsibility to safeguard them. If you believe that your log-in credentials have been compromised, please contact us at

Children's Information

Our Website and Services are not directed at children under the age of 16 and we do not knowingly collect personal information from children under the age of 16 through our Website and/or Services. If you have reason to believe that a child under the age of 16 has provided personal information to us, please contact us, and we will endeavor to delete that information from our databases.

Links to Other Websites

Our Website and Services may contain links to other websites. The operators of such other websites may collect information about you, including through cookies or other technologies. If you are using our Website or Services and click a link to another site, you will leave our Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We are not responsible for the data collection and use practices of such other sites. This Policy applies solely to the information collected in connection with your use of our Website and Services and does not apply to any practices conducted offline or in connection with any other websites.

Information for EU and Swiss Residents

JD Supra's principal place of business is in the United States. By subscribing to our website, you expressly consent to your information being processed in the United States.

  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at:

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit
  • New Relic - For more information on New Relic cookies, please visit
  • Google Analytics - For more information on Google Analytics cookies, visit To opt-out of being tracked by Google Analytics across all websites visit This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at:

- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.