Published on March 4, 2014
AIFMD Surgery Webinars - VOP and Business Plan The webinar will begin shortly… You can join either by VoIP or dial in by telephone Follow call in details if you select to use Telephone audio 12/11/2013 2
AIFMD Surgery Webinars - VOP and Business Plan © Copyright 12/11/2013 3
Introductions and Format Host o Jonathan Wilson, Project Director Panel o Derek McGibney, Managing Consultant o Bobby Johal, Managing Consultant o James Lawson, RTT Team Leader o Hector Thompson, Consultant Please submit any questions throughout the duration of the webinar in the question panel within the GoToWebinar application © Copyright 12/11/2013 4
Questions You can submit your questions using the Questions area in the GoToWebinar console © Copyright 12/11/2013 5
Agenda o Applications – The basics Timing of applications Permissions Objectives of the VOP o Project Delivery - Being prepared for submission o Project Delivery - Being prepared for post submission o Content of a VOP o Business Plans, Content and Practical issues in demonstrating compliance with AIFMD o Follow up Webinars © Copyright 12/11/2013 6
Applications – The Basics Time Frame o FCA Review Time: o 3 months for complete applications o 6 months for ‘incomplete’ applications o Time Frame Options o Identify preferred authorisation date o ‘deferral of determination’ Request deferral from now to submission but no later than 21st July 2014) o Identify which documents will not be available for submission and when they will likely be available. Again, at least 1 month prior o Ensure that you will have all arrangements in place by that (deferral) date (including required submissions at least 1 month before authorisation date) © Copyright 12/11/2013 7
Applications – The Basics Time Frame For complete applications the FCA will need to the following for all AIFs: o A copy of the instrument of incorporation of the AIF(s) o Confirmation that depository contractual arrangements are in place for each AIF listed (and for which you intend to market in the EU) o All information which will be made available to investors (under FUND 3.2) © Copyright 12/11/2013 8
Applications – The Basics Permission Profile July 16, 2013 9
Applications – The Basics Content of a VOP submission pack o o o o o Cover letter explaining main timing issues (recommended) Variation of Permission Application Form Regulatory Business Plan Financial Projections Main documents o Fund Instruments of Incorporation o Fund Documentation o Investor Disclosures o AIF Schedules o Marketing Applications (UK registration, EU passports etc) © Copyright 12/11/2013 10
Applications – The Basics Objectives of a VOP o Demonstrate that: o the applicant can satisfy the AIFMD o That the applicant will be ready and able to undertake the regulated activities applied for o That the applicant continues to satisfy the Threshold Conditions o Demonstrate that the organisation structure will satisfy AIFMD at authorisation and that the business plan is suitable for an AIFM Make it easy to conclude these points by keeping responses succinct, cross referring to specific questions and supporting documentation. © Copyright 12/11/2013 11
Project Delivery Work stream Project delivery assessment 1 2 Month 3 (Nov) Dec Jan 7 Variation of Permission Portfolio Risk management Depositary Capital and Operational risk Delegation Client disclosures Operational procedures Systemic reporting Private equity disclosures Compliance infrastructure Training © Copyright 12/11/2013 12
Project Delivery – Post Submission Work stream Project delivery assessment Jan Feb Month Mar Apr May Jun July Variation of Permission Portfolio Risk management Depositary Capital and Operational risk Delegation Client disclosures Operational procedures Systemic reporting Private equity disclosures Compliance infrastructure Training © Copyright 12/11/2013 13
Applications – The Basics Content of VoP – Regulatory Business Plan A) Background to the business B) Proposed business (and operating model) F) Governance and culture 1) General 2) Conflicts of interest G) Systems and controls •Fund Structure •Current (Potential) Customers •Regulated Activities •Capital Model C) Organisation structure of the AIFM D) Long term business and expansion plans 1) Disclosure to investors and competent authorities 2) Liquidity management 3) Risk management 4) Leverage 5) Prime brokerage 6) Valuation 7) Depositary Arrangements 8) Marketing Arrangements E) Appropriateness and scalability of non-financial resources © Copyright 12/11/2013 14
Practical Issues on Content of the VOP A) Background to the business B) Proposed business (and operating model) F) Governance and culture 1) General 2) Conflicts of interest G) Systems and controls •Fund Structure •Current (Potential) Customers •Regulated Activities •Capital Model C) Organisation structure of the AIFM D) Long term business and expansion plans 1) Disclosure to investors and competent authorities 2) Liquidity management 3) Risk management 4) Leverage 5) Prime brokerage 6) Valuation 7) Depositary Arrangements 8) Marketing Arrangements E) Appropriateness and scalability of non-financial resources © Copyright 12/11/2013 15
C. Organisational Structure of the AIFM © Copyright Not for distribution outside Cordium 21/10/2013 12/11/2013 16
F. Governance and Culture 1. General o Governance Structures in place (Section 4 content) o Built up from section C (Organisation) o Overight in place and Management Information o Honesty, fairness, professionalism, independence, and acting in client and investor interest? (Question 4.2) o Can you demonstrate? o Refer to status of registered individuals o Refer to current processes 2. Conflicts of Interest (Question 4.3) o Confirm that policy is in place and operational o Provide limited description of operation of policy © Copyright 12/11/2013 17
G. Systems and Control 1) Disclosure to investors and competent authorities o Adequate and effective AIFM systems and controls to ensure appropriate disclosures are made… o set out in FUND 3.2.2R (prior disclosures); o 3.2.3R (depositary liability discharge disclosures); o 3.2.5R (liquidity profile & arrangement, risk management systems); o 3.2.6R (leverage disclosures); o 3.3 (annual report); o 3.4 (reporting obligations). © Copyright 12/11/2013 18
G. Systems and Control 3) Risk management o Can you demonstrate that the risk management function is functionally and hierarchically separated from the operating units, including the portfolio management function? o Have you made provision for specific safeguards against conflicts of interest that facilitate independent performance of risk management activities? o Can you satisfy FUND 3.7 requirements and demonstrate consistent effectiveness? © Copyright 12/11/2013 19
G. Systems and Control 5) Prime brokerage (if applicable) o Have you ensured the Appointment / Intended Appointment of a prime brokerage firm? o Have established adequate and effective systems and controls that will ensure the exercise of due skill, care and diligence in the selection and appointment of a prime brokerage firm? o Has there been the formalisation of terms in a contract? o Does the contract allow for transfer and reuse of the AIF’s assets compliant with the AIF’s fund document? o Does it provide for the depositary to be informed of these arrangements? © Copyright 12/11/2013 20
G. Systems and Control 7) Depositary Arrangements o Full scope UK AIFM of UK and EEA AIFs must ensure that a single depository is appointed for each AIF o Full scope UK AIFM of non-EEA AIFs being marketed in the UK must ensure that one or more entities are appointed to carry out the functions of; o Oversight o Custody o Cash Management o Firms need to determine who is going to do each of these activities and negotiate with services providers. o No depositary required for sub-threshold but their may be custody requirements and firms will be subject to local requirements if they wish to market under NPPR. © Copyright 12/11/2013 21
G. Systems and Control 7) Depositary Arrangements © Copyright 12/11/2013 22
G. Systems and Control 7) Depositary Arrangements o o o o FCA expects that the AIFM has performed due diligence This is a high level requirement that has not been detailed in the directive The Applicant has to make sure the depositary is appropriate The FCA also requires: o Identity of the depositary; o the type of service; o full scope; o PE depositary (FUND 3.11.12R); o Non-EEA AIFS depositary marketed in the UK (established in UK or offshore). o consent to contact the depositary © Copyright 12/11/2013 23
G. Systems and Control 8) Marketing o Full UK/EEA AIFM wishing to market UK/EEA AIF 2 different forms : o Notification of intention to market in the UK (for professional and retail investors) o Passporting for EU AIFs (professional investors) Information requested: Annex III and IV of the directive o o o o o A notification letter with a programme of operations identifying the AIFs The AIF rules or instruments of incorporation Identity of the depositary Controls implemented to prevent the AIF from being marketed to retail investors Additional information if marketing to retail: authorised fund or recognised scheme? Prospectus or marketing under COBS 4.12? o Note: New procedures for dealing with NMPI © Copyright 12/11/2013 24
G. Systems and Control 8) Marketing Full Scope UK AIFM wishing to market a non EEA AIF, (or feeder AIFs that are UK AIFs or EEA AIFs where the master AIF is a managed by a non-EEA AIFM or is a non-EEA AIF) To professional or retail investors - Notify the FCA using the National Private Placement Regime (NPPR) – Article 36 form Full scope Third country AIFM wishing to market whether UK, EEA or non-EEA AIF - Notify the FCA using the NPPR Regime – Article 42 form Notification in respect of major holdings and control acquired after the date of marketing notification Sub-threshold UK AIFM wishing to market AIFs to investors in other EEA do not have right to passport - Firm needs to consult the national law of each EEA state Sub-threshold non EEA AIFM wishing to market UK, EEA, non-EEA AIF - Notify the FCA using the NPPR - Small Third Country form © Copyright 12/11/2013 25
G. Systems and Control 8) Marketing NPPR notifications require information on: o Core details of the AIF(s) o Any delegation o Independent valuation agent / Independent transfer agent o Prime broker o Independent auditors o Other entities marketing the AIF in the UK o Custody (Art. 42 and Small Third Country forms) o Category of assets (Small Third Country form) o Use of leverage or borrowing (Small Third Country form) © Copyright 12/11/2013 26
Questions You can submit your questions using the Questions area in the GoToWebinar console © Copyright 12/11/2013 27
AIFMD Surgery Webinars Next… Risk management – 26th November 2013 – 2pm GMT Registration details coming soon! Coming soon… Depositaries Annex IV Remuneration Marketing © Copyright 12/11/2013 28
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