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FSA consultation affects how EU directive applies to UK investment managers

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As the FSA launches a two-part consultation to transpose the Alternative Investment Fund Managers directive (AIFMD) into UK law, Deloitte, the business advisory firm, says the policy positions taken will affect how the directive applies to investment trusts, hedge fund managers and private equity managers.

Brian Forrester (pictured), partner at Deloitte, says: “This is an important step towards the implementation of the Directive into UK law. The FSA appears to be warning the industry that more managers than previously thought could be caught, however, the regime for smaller firms is still in the hands of the Treasury and we will have to wait until the New Year to hear the outcome. The level 2 regulations have yet to be released and some important clarification will be included within those. The FSA’s view on depositaries for private equity funds will be well received by the PE industry.”

The AIFMD governs how investment firms manage and market alternative investment funds in Europe.

The impact of the key policy positions are:

• Boards of investment trusts may have considered becoming “self-managed” alternative investment funds. However, the FSA’s policy positions make the benefit of doing so less evident. In addition, the FSA appears to limit the ability of investment trusts to become “self-managed” to those that do not appoint external managers and employ staff.

• Many UK private equity (PE) managers will for the first time be required to appoint a depositary for their funds. The FSA has signalled that it could allow administrators to provide this service, which should reduce the cost of compliance.

• Some UK hedge fund managers for offshore funds believed they could fall outside the scope of the most expensive parts of the directive because they do not have the permission to “operate an unregulated collective investment scheme”. However, the FSA has warned that it expects some of these to be within scope even if they just have the “managing investments” permission.

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