Material Change Notifications
Notification of changes to authorisation/registration arrangements
Full-scope EU AIFMs are required to notify the competent authorities of their home Member State of material changes to the conditions for their initial authorisation, in particular material changes to the information provided when applying for authorisation.
The competent authority of the home Member State of an AIFM must be notified of a planned material change before its implementation. If the competent authority decides to object to or impose restrictions on the proposed changes, it must inform the AIFM within one month of receiving the notification, but may prolong that period by one further month upon prior notification to the AIFM. The AIFM may implement the changes if the competent authority does not notify it of a decision to object to, or impose restrictions on, the proposed changes within the relevant period.
Luxembourg implementation
The CSSF must be notified in advance of any substantial change affecting the AIFM, notably the information provided to the CSSF as part of the authorisation application and on the basis of which the CSSF authorised the relevant AIFM.
The CSSF provides in Appendix 2 of its Circular 18/698 on the authorisation and organisation of investment fund managers incorporated under Luxembourg law, a summary table of the “arrangements for the communication to the CSSF according to the nature of the change”. This appendix establishes a detailed, yet non-exhaustive, list of changes which require either a notification to the CSSF only (e.g. delegation by the AIFM of the performance of the accounting function or IT function; resignation of members of the AIFM’s management body/governing body, the conducting officers and, where appropriate, of the members of the supervisory board), or a prior notification with a view to authorisation by the CSSF (e.g. acquisition of holdings/creation of a subsidiary by the AIFM; approval of the members of the AIFM’s management body/governing body, the conducting officers and, where appropriate, of the members of the supervisory board).
The applicant must provide the CSSF with any relevant information for the examination of the request in the form of a detailed letter (the format of which is not prescribed). Because of the variety of possible amendments and, therefore, the variety of information that could change, no questionnaire is currently available on the CSSF website for the collection of the relevant information.
UK implementation
Following the UK’s withdrawal as a Member State of the European Union and the end of the Transition Period, the UK has implemented a domestic regime for UK AIFMs. At present, the UK regime is broadly the same as that which remains in place in the EU, including requirements to notify the FCA of matters relating to the authorisation of AIFMs and the marketing of AIFs, and changes thereto. Please see here for more information in relation to the UK’s withdrawal from the European Union.
With respect to material changes to the conditions for a UK AIFM’s initial authorisation, the FCA must be notified of a planned material change at least one month before the change takes effect, or immediately after an unplanned change has occurred.
The forms that must be completed in order to notify the FCA of a material change are referenced below. They contain some helpful guidance as to the kinds of changes that should be notified, the key features of which at the time of writing are summarised below. Please note that the FCA forms are subject to change so the latest versions should be used, and any updated guidance included in those forms should be taken into account.
Material changes are notified using the FCA’s Material Change Notification Form. The FCA has provided guidance in this form that a change must be deemed material if there is a substantial likelihood that a reasonable investor, becoming aware of such information, would reconsider its investment in the AIF, including because such information could impact an investor’s ability to exercise its rights in relation to its investment, or otherwise prejudice the interests of one or more investors in the AIF.
The form also provides illustrative examples of changes which should be notified – these include significant changes to the rules or instruments of incorporation of an AIF, or changes to the predominant investment strategy of an AIF. There is no exhaustive list of notifiable material changes and AIFMs must therefore exercise their own judgement in determining whether a given change should be deemed material and therefore notified to the FCA. There is no formal requirement for this material change notification form to be accompanied by supplementary documentation, although in certain cases, it may be helpful for the form to be submitted together with an updated version of the AIFM’s Schedule of AIFs or an updated AIF prospectus.
Small registered UK AIFMs must notify the FCA when they cease to satisfy the conditions of registration using a Small Registered AIFM Change Form. Small AIFMs must notify the FCA when they exceed the AuM threshold using the Notice of Sub-threshold AIFM Exceeding AUM limit Form.
Notification of changes to cross-border management arrangements
Full-scope EU AIFMs that manage EU AIFs established in another Member State for the first time either directly or by establishing a branch must communicate certain information to the competent authorities of their home Member State, which is set out in Article 33 of AIFMD. This information includes: (i) the Member State in which they intend to manage AIFs directly or establish a branch; (ii) a programme of operations stating the services they intend to perform and identifying the AIFs they intend to manage; and (iii) any additional information pertaining to the organisation and management of the branch, if applicable.
In the event of a change to any of the information provided with a cross-border management application, EU AIFMs must give written notice of that change to the competent authorities of their home Member State at least one month before that change takes effect, or immediately after an unplanned change has occurred.
If, pursuant to a planned change, the management of an AIF would no longer comply with AIFMD or the AIFM would no longer comply with AIFMD, the relevant competent authorities of its home Member State are required to inform the AIFM without undue delay that it must not implement the change. This timeframe changes under the CBDF Directive to within 15 working days.
If a planned change is implemented, (i) notwithstanding the prior notification obligation or the request not to implement from the relevant competent authorities, or (ii) if an unplanned change has taken place, pursuant to which the AIFM’s management of the AIF would no longer comply with AIFMD; or the AIFM otherwise would no longer comply with AIFMD, the competent authorities of the home Member State of the AIFM are entitled to take a number of measures as set out in Article 46 of AIFMD. These include, amongst other measures, on-site inspections, requesting temporary prohibition of professional activity and withdrawal of the authorisation granted to the AIFM. The CBDF Directive adds a new requirement for the home competent authorities to notify the competent authorities of the host Member State of the AIFM without undue delay.
Please see here for more information in relation to the management passport generally.
Luxembourg implementation:
Luxembourg AIFMs that exercise the passport right to provide cross-border services in another EU Member State to manage an EU AIF must notify the CSSF of any change to the information provided in connection with the passporting application one month in advance or immediately after such change in case of an unplanned change to the information contained in the application. This notification should be made using this relevant form for any notification regarding the free provision of services and amendments to the information included in such a notification available on this page.
UK implementation:
Following the UK’s withdrawal from the European Union and the end of the Transition Period during which EU rules continued to apply in the UK, UK AIFMs may no longer manage EU AIFs on the basis of the AIFMD management passport. Equally, EU AIFMs do not have the right to manage UK AIFs under the management passport. Please see here for more details.
Notification of changes to marketing arrangements
Marketing in the AIFM’s home Member State; or in other Member States with a passport
Full-scope EU AIFMs that wish to market funds to professional investors in their home Member State or another Member State must submit a notification to the competent authorities of their home Member State in respect of each EU AIF that they intend to market. This notification must comprise the documentation and information set out in Annex III to AIFMD (in the case of marketing in the AIFM’s home Member State) or Annex IV to AIFMD (in the case of marketing in other Member States with a passport).
In the event of a material change to any of the particulars communicated in the relevant notification, the AIFM is required to give written notice of that change to the competent authorities of its home Member State at least one month before implementing a planned change, or immediately after an unplanned change has occurred.
Similar to the cross-border management arrangements, the authorities of the home Member State of the AIFM may object to the change and, if implemented despite such objection or without prior notification, or in the event an unplanned change would cause a contravention of AIFMD, the competent authorities of the home Member State of the AIFM are also entitled to take a number of measures as set out in Article 46 of AIFMD which may include, if necessary, the express prohibition of marketing of the AIF.
EU AIFMs may also market funds in another Member State to retail investors where such marketing is allowed pursuant to the laws of the relevant Member State. Depending on local laws and regulations, changes to the information communicated to the competent authorities of these Member States may have to be notified to authorities in accordance with the rules set out under these local laws and regulations.
Please see the Marketing page for more information in relation to marketing AIFs in the AIFM’s home Member State, and into other Member States using the AIFMD marketing passport.
Luxembourg implementation:
The CSSF must be notified of a planned material change at least one month before the change takes effect, or immediately after an unplanned change has occurred. By contrast with the FCA, the CSSF has not provided guidance in respect of what would constitute a material change. The assessment of the materiality of a change to a marketing notification is therefore mostly a matter of regulatory practice.
The CSSF has not published any particular forms in respect of marketing notifications and changes thereto, and the forms used for these purposes have been designed through practice and dealings with the CSSF by the industry.
The CSSF instructions available on its website are that in the event of a material change in the information contained in its original notification file, a Luxembourg-based AIFM must provide written notice of this change to the CSSF by resubmitting a marked-up version of the original notification file indicating the proposed changes.
UK implementation:
Marketing in the UK for UK AIFMs
Full-scope UK AIFMs that market funds in the UK (and Gibraltar AIFMs that market funds in the UK to retail customers) in accordance with Regulation 54 of the UK Regulations must notify the FCA of material changes to the information provided with their marketing application.
It is understood that there is no exhaustive list of notifiable material changes and that AIFMs must therefore exercise their own judgement in determining whether a given change should be deemed material and therefore notified to the FCA. There is, however, various commentary as to what constitutes a notifiable material change in the UK context. As noted above, the FCA has provided guidance on what constitutes a material change and this is also set out in the AIFMD Marketing Notification Form.
In our view, as a matter of practice, in most cases where firms are making material change notifications in a management or authorisation context, they are also making material change notifications with respect to their marketing passport.
This notification should be made using the AIFMD Marketing Notification Form and the relevant annexes indicating in the form that the submission is a notification of a material change. The annexes to be appended (as applicable) can be accessed here.
AIFMD marketing passport/Temporary Permissions Regime – material changes
Following the UK’s withdrawal from the EU and the end of the Transition Period, UK AIFMs may no longer market UK AIFs or EU AIFs into EU Member States on the basis of the AIFMD marketing passport. Accordingly there is no longer a process for notifying the FCA of material changes in this respect. If a UK AIFM is relying on local transitional provisions to continuing marketing AIFs into an EU Member State, it will need to comply with any relevant local rules in relation to notification of changes made to any information provided to the local regulator.
Similarly, EU AIFMs may no longer rely on the AIFMD marketing passport to market AIFs into the UK, other than pursuant to the FCA’s Temporary Permissions Regime. For AIFs marketed in the UK under the Temporary Permissions Regime, the FCA has indicated that it should be notified of material changes to the AIFM’s marketing notification directly, in addition to the notification to the EU AIFM’s home state regulator – there is no longer any process for the home state regulator to pass the updated information to the FCA.
Marketing without a passport
Member States may allow an authorised EU AIFM to market to professional investors, in their territory only, units or shares of non-EU AIFs it manages and of certain EU feeder AIFs that may not be marketed under the AIFMD marketing passport, provided that a number of conditions set out under Article 36 of AIFMD are complied with.
Similarly, Member States may also allow non-EU AIFMs to market to professional investors, in their territory only, units or shares of AIFs they manage subject to a number of conditions set out under Article 42 of AIFMD.
Member States may determine their own rules in relation to the basis on which such marketing is allowed in their territory. The requirements applicable to changes to the information communicated to the competent authorities of the Member State where such marketing takes place must therefore be assessed under the local legal framework of this Member State.
Please see the Marketing page for more information in relation to marketing AIFs without a passport.
Luxembourg implementation:
Every authorised EU AIFM which intends to market non-EU AIFs to professional investors in Luxembourg must send an Information Form to the CSSF by email. The CSSF must be notified of a planned material change at least one month before the change takes effect, or immediately after an unplanned change has occurred.
In particular, if an AIFM intends to cease the marketing of its AIF/sub-fund in Luxembourg and deregister the AIF/sub-fund, it must inform the CSSF whether Luxembourg investors are still invested in the fund/sub-fund. Such deregistration should be made through email correspondence with the CSSF.
The same is applicable to non-EU AIFMs applying for such authorisation under Article 42 of AIFMD, with a similar Information Form being used.
UK implementation:
The UK retains a National Private Placement Regime (“NPPR”) following its departure from the EU and the end of the Transition Period. Non-UK AIFMs wishing to market AIFs in the UK must notify the FCA under Article 59 of the UK Regulations (or Article 58 in the case of small AIFMs). UK AIFMs wishing to market in the UK non-UK AIFs (including EU AIFs) and certain UK feeder AIFs, must notify the FCA under Article 57 of the UK Regulations. Please see the Marketing page and our Brexit microsite for more information in relation to the UK’s National Private Placement Regime.
Firms are required to notify the FCA of any material changes to the information previously submitted to the FCA in respect of the marketing of AIFs under the UK National Private Placement Regime.
The FCA’s online Connect system is used for material change notifications in relation to AIFs marketed under the UK National Private Placement Regime, in most circumstances. The process for submitting these notifications changes from time to time; the latest position can be checked on the NPPR page of the FCA website.
The FCA must be notified of a planned material change at least one month before the change takes effect, or immediately after an unplanned change has occurred. The nature of the information items required in the material change forms suggest that any changes to the information previously submitted to the FCA as part of the initial National Private Placement Regime notification will need to be notified to the FCA and not just changes which would be deemed material in the exercise of a firm’s judgement.
