Authorisation Requirements
EU AIFM authorisation
An EU AIFM that cannot rely on an exemption from AIFMD will need to obtain authorisation from its home regulator in order to manage AIFs, in accordance with Article 6 AIFMD. AIFMs may also apply for certain additional permissions, which are known as “MiFID Top-Up” permissions.
As part of the application procedure, the AIFM will need to provide the following information to the regulator:
- a program of activity setting out the organisational structure of the AIFM, including information on how the AIFM intends to comply with its obligations under AIFMD;
- information on the persons who conduct the business of the AIFM;
- the identity of direct or indirect shareholders who have 10% or more of the capital or voting rights in the AIFM or the ability to exercise a significant influence over management of the AIFM (“Qualifying Shareholders”) and the amounts of their holdings;
- information on the remuneration policies and practices of the AIFM; and
- information on the AIFM's delegation arrangements.
Additionally, the AIFM will need to provide its home regulator with the following information on each AIF it intends to manage:
- information about the AIF’s investment strategies, including the types of underlying funds if the AIF is a fund of fund and the AIFM’s policy as regards the use of leverage, and the risk profiles and other characteristics of the AIF, including information about the EU Member State or third country in which it is established or expected to be established;
- information on where the master AIF is established if the AIF is a feeder AIF;
- the fund rules or instruments of incorporation of the AIF;
- information on the arrangements made for the appointment of the depositary for the AIF; and
- information required by AIFMD to be disclosed to investors before they invest in the AIF (see the Disclosure to investors section under Disclosure and Reporting).
Where an AIFM is already authorised as a management company under the UCITS Directive and has provided information to its home regulator in that regard, AIFMD does not require the AIFM to provide the same information to its home regulator again, provided that such information is up to date.
the home regulator of the AIFM may only grant authorisation if:
- the regulator is satisfied that the AIFM will be able to comply with the requirements of AIFMD;
- the AIFM has sufficient initial capital;
- persons conducting the business of the AIFM are of sufficiently good repute and experience [1];
- Qualifying Shareholders are suitable, taking into account the need to ensure sound and prudent management of the AIFM; and
- the head and registered offices of the AIFM are located in the same EU Member State.
Prior to granting authorisation to an AIFM, the home regulator may be required to consult with other EU Member State regulators (for example, if the AIFM in question is associated with an entity regulated in another EU Member State, such as a management company under the UCITS Directive, an investment firm, a credit institution or an insurance undertaking).
The home regulator must refuse authorisation where the effective exercise of its supervisory functions is prevented by a number of factors, in particular, close links between the AIFM and other natural or legal persons.
The home regulator may also restrict the scope of any authorisation granted to an AIFM, including if relevant, the investment strategies the AIFM is permitted to manage.
The initial AIFM authorisation process will vary in each EU Member State, but will, however, be reflective of the general AIFMD requirements set out above. AIFMs authorised in their home Member State are able to exercise management and marketing passport rights in relation to EU AIFs. In order to exercise these rights, the competent authority of the EU AIFM’s home Member State will need to send the relevant notification forms, in accordance with the requirements of AIFMD, to the relevant national regulator.
Exemptions
For information on exemptions to authorisation, please click here.
Luxembourg AIFMs
The process for obtaining a Luxembourg AIFM licence from the CSSF to manage an AIF differs depending on whether the applicant is seeking to receive a licence as a fully authorised Luxembourg AIFM in accordance with Chapter 2 of the Luxembourg AIFM Law or as a registered Luxembourg AIFM.
Authorised AIFMs
Application
Any entity requiring to be authorised as a Luxembourg AIFM in accordance with Chapter 2 of the Luxembourg AIFM Law must complete the “Application questionnaire for the set-up of a fully licenced alternative investment fund manager”, which may be downloaded from the CSSF’s website.
The authorisation fee to be paid to the CSSF is specified by way of a Grand-Ducal Regulation (which is regularly updated).
Once the authorisation as an AIFM has been granted by the CSSF, the AIFM is obliged, prior to implementation, to notify the CSSF of any material changes to the organisation of the AIFM on which the initial authorisation was based, and specifically any material changes to the information provided as part of the application. Click here for more information on material change notification.
Where an entity was previously authorised as a so-called Chapter 15 or Chapter 16 Management Company, a slightly lighter application can be made, as certain information can be recycled.
Senior management personnel
Specific requirements apply to the members of the management body and senior management of a Luxembourg AIFM, notably in terms of required number, skills and experience, or number of mandates.
In addition to the relevant application forms relating to the AIFM itself, supporting documents (e.g. a declaration of honour (template available on the CSSF website), CVs, criminal records extracts, passport copies) must therefore be submitted to the CSSF in respect of each person who is proposed to perform a controlled function for a Luxembourg AIFM.
Timing considerations
The CSSF must determine an application for authorisation as a Luxembourg AIFM within three months of the date on which it receives the complete application, but may extend that period by an additional three months where it considers this necessary. Given that the CSSF’s assessment period only starts to run from the point at which the CSSF receives a complete application, the CSSF will not commence its assessment if it deems the application to be incomplete for any reason.
The AIFM may start managing AIFs in Luxembourg with investment strategies described in the application for authorisation as soon as the authorisation is granted but not earlier than one month after having submitted any missing information in respect of each AIF (e.g. copy of the rules or instruments of incorporation of the AIF information that will be made available to investors).
Registered AIFMs
Application
AIFMs managing AIFs below the thresholds of Article 3(2) of AIFMD do not need to be authorised under Chapter 2 of the Luxembourg AIFM Law, but must submit a request for registration as AIFM to the CSSF.
The registration request must at least include the “Declaration for a registered AIFM”, the “Registration form for an alternative investment fund manager” and the “IFM EMIR questionnaire” which are available for download on the CSSF’s website.
The information required to register the AIFM shall be kept up to date. Hence, any change to the information provided in the registration request must be communicated to the CSSF without delay. In addition, an updated registration form shall be transmitted to the CSSF at least once a year.
Timing considerations
The CSSF acknowledges receipt of the registration request within 2 working days and will communicate the name of the agent in charge of examining the request by way of an email to the email address of the contact person indicated in the registration form.
The CSSF endeavours to contact the applicant within 10 working days after reception of the initial request and reserves the right to request additional information and/or documents and other additional confirmations, and/or specifications on other aspects of the request.
The CSSF sends a letter of registration of the AIFM to the applicant as soon as the review of the request is completed and conclusive.
Notification of new funds under management - “on-boarding”
The timing of the initial authorisation/registration should be considered in tandem with any management passport, marketing passport and on-boarding notification to be made to the CSSF. In particular where such filings require the submission of offering documents in final form, this will need to be factored into the timing of the submission of notifications.
In cases where a Luxembourg AIFM is managing an EU AIF, it may also be the case that the AIF will be subject to separate regulatory filing requirements in the country in which it is established and it will therefore be necessary to ensure that the regulatory filings in each jurisdiction are adequately dovetailed.
Luxembourg Regulated AIF
In order to on-board a new Luxembourg regulated AIF (e.g. a specialised investment fund), a Luxembourg AIFM must complete a specific application questionnaire for the setting-up of such Luxembourg regulated AIF, which may be downloaded on the CSSF’s website.
Unregulated AIF and Third-Country Regulated AIF
The management of an additional AIF (i.e. any unregulated AIF and any regulated AIF established in a third country which has not been notified to the CSSF either during the review of the AIFM's authorisation or registration file or during an update of said file) must be communicated to the CSSF in accordance with CSSF Circular 15/612 using the appropriate form, which can be downloaded from the CSSF’s website.
The management of an additional AIF must be communicated to the CSSF within ten working days following the beginning of the management of this additional AIF.
Management passport
A Luxembourg AIFM that wishes to manage an AIF in another EU Member State on a passported basis must notify the CSSF of its intention to do so using the notification form regarding the free provision of services, which can be downloaded from the CSSF’s website.
This form should also be used for the purpose of notifying the CSSF of changes to the provision of existing cross-border services.
The CSSF must (subject to being satisfied that the AIFM complies with its obligations under AIFMD) transmit the notification to the relevant authorities of the EU Member State where the AIF to be managed is established within one month where the AIFM wishes to manage the AIF on a cross-border basis (or within two months where the AIFM wishes to establish a branch in the relevant EU Member State). The CSSF must notify the AIFM immediately once the notification has been transmitted to the authorities of the relevant EU Member State.
The AIFM may only manage the AIF in accordance with the passport from the date it receives this notification.
UK AIFMs
The process for obtaining AIFM authorisation from the FCA to manage an AIF differs depending on whether the applicant is an existing firm already authorised to carry on other regulated activities or not, and whether the applicant is seeking to opt in as a “full-scope UK AIFM” or whether it qualifies as a “small AIFM”.
See the Brexit page for information on how the United Kingdom’s exit from the European Union affects UK AIFMs.
Full-Scope UK AIFMs
- Existing firms which wish to become full-scope UK AIFMs, and those which would ordinarily qualify as small AIFMs but wish to opt into the full scope of AIFMD, are required to vary their permissions by obtaining added permission to manage an AIF. This involves completing the FCA’s Variation of Permission (“VoP”) form for full-scope AIFMs, along with the various AIF notification forms, available on the FCA website.
- Any entity which is not already an authorised firm and requires full-scope UK AIFM authorisation must complete the Wholesale Investment Firms Application along with a VoP and the various AIF notification forms, available on the FCA website.
The FCA must determine an application for authorisation as a full-scope UK AIFM within three months of the date on which it receives the complete application, but may extend that period by an additional three months where it considers this necessary. Given that the FCA’s assessment period only starts to run from the point at which the FCA receives a complete application, the FCA will not commence its assessment if it deems the application to be incomplete for any reason.
Small UK AIFMs
Certain UK AIFMs (i.e. AIFMs managing AIFs below a threshold in Regulation 9 of the UK Regulations) are required to be authorised or registered with the FCA as small UK AIFMs, or may opt into the full requirements of AIFMD as full-scope UK AIFMs. It is important to note that small UK AIFMs may act in a dual capacity as both a small authorised UK AIFM for one or more AIFs, and a small registered UK AIFM for one or more other AIFs.
- A “small authorised UK AIFM” carries on the regulated activity of managing an AIF and is subject to FCA rules in respect of that activity. The application of FCA requirements to a small authorised UK AIFM depends notably on whether it manages an authorised AIF or an unauthorised AIF.
- A “small registered UK AIFM” is registered by the FCA in accordance with Regulation 10 of the UK Regulations. It does not carry on a regulated activity in respect of its activities as an AIFM for an AIF for which it is entitled to be registered. It is, however, required to comply with certain requirements under AIFMD (which mainly relate to reporting).
Following initial authorisation or registration of the small UK AIFM, the AIFM may elect to manage new funds other than those which were designated in the initial authorisation or registration of the AIFM. Such AIFMs must seek approval from the FCA to manage new AIFs or sub-funds before taking up management of the new stand-alone fund or sub-fund.
Third country AIFMs
Firms based in non-EU (3rd country) jurisdictions are currently unable to obtain authorisation under AIFMD. Firms based in non-EU (3rd country) jurisdictions wishing to market AIFs in the EU are currently unable to rely on a marketing passport. Please see Marketing and Third Country Provisions for more information.
