EU Council Adopts New Regulations for Investment Fund Managers: A Step Forward for Capital Markets Union

1. Alternative Investment Fund Managers (AIFMs):

• Strengthening the regulation and supervision of AIFMs.
• Setting out conditions to prevent AIFMs from becoming "letter-box entities" by:
  • Imposing required maintenance of the necessary expertise and resources at the level of the AIFM to effectively supervise delegated tasks and manage associated risks.
  • Mandating that the AIFM must have the necessary ability to make key decisions, which fall under senior management responsibility, and to implement general investment policy and strategies.
  • Requiring compulsory retention by the AIFM of contractual rights to inquire, inspect, access, or give instructions to delegates.
  • Limiting the ability to delegate investment management functions to a level that is not substantially exceeding those performed by the AIFM itself.
• Setting out qualitative assessment requirements of the extent of any delegation of the AIFs that are managed, taking into consideration factors such as asset types, the risk profile, the investment strategies, etc..

2. "Plain-Vanilla" EU Investment Funds (UCITS Funds):

• Promoting of the creation of plain-vanilla investment funds within the EU under the form of UCITS.
• Simplifying the rules applicable to those UCITS Funds with an aim to stimulate investment in Europe.

The directive will now be published in the European official Journal and will enter into force 20 days later. Member states will have 24 months after the entry into force to enact the rules into national legislation.