By Ras Sipko, Chief Operating Officer of Koger – Regardless of the differences in their intent and emphasis, both the Alternative Investment Fund Managers Directive (AIFMD) and the Foreign Account Tax Compliance Act (FATCA) impose considerable demands on fund managers with regard to data management and documentation.
According to a recent and widely cited global survey of hedge fund managers by KPMG International, the Alternative Investment Management Association, and the Managed Funds Association, the hedge fund industry has already spent more than $3 billion to comply with new regulatory requirements, and considers FATCA and the AIFMD to be the most demanding in terms of cost, time, and need for external support.
The Alternative Investment Fund Managers Directive (AIFMD), initially published in the Official Journal of the European Union on July 1, 2011 seeks to provide a regulatory framework for monitoring and supervising risks posed by alternative investment fund managers (AIFMs) and the alternative investment funds (AIFs) they manage and market.
The first step in AIFMD compliance involves AIFMs registering with national regulators to become “authorised,” a process that requires AIFMs to provide a wealth of data to their home state about themselves and the funds they manage. This includes but is not limited to:
Once authorised, AIFMs are expected to comply with the provisions and mandates of the AIFMD, some of which include:
The deadline for the AIFMD to be implemented by European Economic Area (EEA) Member States was July 22, 2013. The one year transitional period/extension that certain EU AIFMs and non-EU AIFMs qualified for will end on July 22, 2014.
FATCA legislation, slated to take effect on July 1, 2014, was established by US lawmakers to combat tax evasion by US taxpayers with foreign accounts by imposing mandates on individual investors, US and foreign financial institutions (FFIs), and foreign governments.
Becoming a participating FFI is a process within itself that involves entering a binding agreement with the Internal Revenue Service (IRS) to:
The regulatory scrutiny that hedge funds are now subject to necessitates that fund managers and administrators have access to technologies that address both financially-oriented and compliance-oriented workflows. Koger is a world leader in the financial services software industry. Ten out of the twenty top fund administrators worldwide utilise Koger products to manage their AIFs. With thousands and thousands of funds under the management of our clients, we are forced to stay ahead of the curve in providing comprehensive solutions to meet emergent regulatory challenges.
If you would like to learn more, please visit us at www.kogerusa.com