Unintended consequences: application of the AIFMD to SPVs

A perennial gripe of many Anglo-Saxon lawyers about European legislation is that it is often opaque and poorly drafted and has unintended consequences. The Alternative Investment Fund Managers Directive (AIFMD), which comes into effect on 22 July 2013, is a particular offender in this regard. While investment managers are generally clear that they are foursquare within the sights of the new regime, banks appear to be less attuned to its application — particularly to SPVs.

The AIFMD primarily captures EU managers of alternative investment funds (AIFs). The consequences of being a manager of an AIF are onerous: managers are subject to detailed requirements as to, inter alia, authorisation, capital, organisation, systems and controls, risk management, delegation, valuation, reporting, appointment of a depositary and marketing. (AIF status also results in financial counterparty status under EMIR and has negative capital consequences for EU firms that are counterparties to derivatives with the SPV, as the exemption from the CVA, capital charge under CRD IV, does not apply to AIFs.) Where an AIF is self-managed (i.e. has no external manager), the AIF itself will be subject to the requirements. The marketing of AIFs in member states will also be subject to a notification requirement and also potentially restricted under national private placement regimes. This raises two key questions — is an SPV an AIF? And if so, can it comply with, or work around, the requirements? …

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