Bovill briefing: Making AIFMD business as usual - Annex IV reporting - October 2014

Making AIFMD business as usual

Ashley Kovas, Head of Funds

Donal Martin, Consultant

9 October 2014

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What we’re looking at today

• The AIFMD deadline has passed

• What the FCA want

• What does compliance involve?

• Some detailed areas to consider

• Annex IV reporting

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The AIFMD deadline has passed

• New applicants:

AIFM must comply from the date of authorisation

• Transitionals:

AIFMs who applied for VoPs should have complied from the date of

approval or 22 July – whichever was first.

… and the FCA are likely to be checking up on implementation

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What the FCA want

Business model and strategy

• How you make your money

Culture

• Leadership, strategy, decision-making and challenge, controls, performance

management and reward

Front-line business processes

• From product development to complaints handling

Systems and controls

• Reinforce the right culture and business practices

Governance

• The role of the people responsible for running the firm

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What does compliance involve?

For all AIFMs

• Authorisation and registration

• Reporting

• To regulator

• To customers

• Annual report

For full scope AIFMs

In addition, you need to have policies

and procedures for:

• Risk management

• Valuation

• Conflict of interest

• Liquidity management

• Delegation

• Investor disclosure

• Due diligence

• Remuneration

• Leverage

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Risk management

Full scope AIFMs need:

• A permanent risk management function

• Risk management policies and procedures

• Published risk profile

• Regular review of risk management systems

• Reports to the Board

For each AIF it manages the AIFM must:

• Identify all relevant risks

• Establish risk limits for the AIF taking account of all relevant risks

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Valuation

Full scope AIFMs need the following procedures:

• Proper and independent valuation

• Net asset value

• Disclosure of valuation

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External valuers

• Who are they?

• Appointment process

• Written guarantees obtained from the external valuer

• Exchange of information

• Ongoing due diligence

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Assets under management

For each AIF the AIFM needs to:

• Identify portfolio of assets

• Value each asset

• Include all assets acquired through leverage

• Convert derivative positions

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Assets under management – examples

Interest rate swaps

• Notional contract value of the swap

Contracts for differences

• Price difference the owner of the CFD has to pay

So again, AUM is likely to be larger

Convertible bonds (embedded derivatives)

• number reference shares x market value of reference shares x the delta

number of contracts x

market value of

the reference

instrument

Annex IV reporting

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Who is caught?

• Full-scope UK AIFM

• Small authorised UK AIFM

• Small registered UK AIFM

• Third country AIFMs

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What does Annex IV reporting involve?

Transparency…

• reporting about you

• reporting about your funds

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Why do you need to do this?

It’s part of the FCA’s strategy

• Regulatory reporting is part of the FCA’s supervision strategy and transparency

information is a key element of this.

It helps the financial system

• Information is used to protect and enhance the integrity of the financial system

and secure consumer protection.

You have to!

• Managers are required under the Directive to report information (transparency

information) to the FCA or other NCA(s).

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What does the FCA need?

Two reports submitted electronically via GABRIEL :

AIF001 – Manager Report

• AIFM specific information

• FRN is used to identify each AIFM

AIF002 – Fund Transparency Report

• AIF specific information

• PRN used to identify each AIF

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Reporting obligations – quarterly

AIFM Reporting period

end

Submission date

Full Scope AIFM

• AUM exceeds €1 billion

Or

• AUM of one or more AIFs

exceeds €500m

SUP 16.18.4(3)(b)

SUP 16.18.4(3)(c)

As at:

• 31 March

• 30 June

• 30 September

• 31 December

SUP 16.18.5R(3)

30 April

31 July

31 October

31 January

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Reporting obligations – half-yearly

AIFM Reporting period

end

Submission date

Full Scope UK AIFM

• AUM exceed either €100 million

OR

• AUM exceeds €500 million

(unleveraged and no redemption

rights for 5 years)

BUT

• AUM is less than €1 billion.

SUP 16.18.4(3)(a)

As at:

• 30 June

• 31 December

SUP 16.8.5R(2)

31 July

31 January

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Reporting obligations – annually

AIFM Reporting period

end

Submission date

Full Scope UK AIFM:

• unleveraged AIF which invests

in non-listed companies and

issuers in order to acquire

control

SUP 16.18.4(3)(d)

As at:

• 31 December

SUP 16.18.6R

SUP 16.18.7D

31 January

Sub-threshold AIFMs

• small authorised AIFMs

• small registered AIFMs

SUP 16.18.6R

SUP 16.18.7D

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Helping you with Annex IV reporting

For less complex structures or lower assets under management

• You can input to direct to GABRIEL

• We can advise and help with data input

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Helping you with Annex IV reporting

For more complex structures or higher assets under management

• We can handle reporting on your behalf

• We can advise and help at each step

Simplified reporting template

Validation, error check and audit

trail to minimize errors

Generates and submits xml filing

straight to NCA

Capable of multi-jurisdictional

and multi currency filings

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How it works

• Bovill templates issued to you

• We advise on technical queries and help complete templates

• We validate your completed template through the system

• We work through queries and return form for your approval

• We submit direct to the necessary NCAs

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Making AIFMD business as usual

• AIFMD should be part of every day business

• Take time to do the correct calculations

• Understand what you need to report, how and when

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If you’re stuck

• Speak to your Bovill contact

• Have a drink with us after the briefing

• Give us a call +44 20 7620 8440

www.bovill.com

www.bovill.com