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Based on the adopted text, the main changes are:
Loan source
AIFMD II defines a loan origination alternative investment fund (AIF) as an AIF that: (i) Its investment strategy is primarily loan origination. or (ii) the notional principal value of the loan originated by the AIF is at least 50% of the net asset value.
Under AIFMD II, loan originator funds are governed by the following rules:
- Unless the Alternative Investment Fund Manager (AIFM) certifies to the European Securities and Markets Authority (ESMA) that it is compatible with its investment strategy and redemption policy, AIFs that originate loans are closed-end (i.e., cannot be redeemed by investors). (no rights) is recommended. ) Develop draft regulatory technical standards for unrestricted AIF compliance requirements.
- The leverage limit for loan origination AIFs is calculated as the ratio of exposure to net asset value and is set at 300% for closed-end and 175% for open-end.
- The 20% concentration limit on loans to a single borrower applies if the borrower is a financial business, an AIF or a collective investment business in transferable securities (UCITS).
- AIFMs must retain 5% of loans transferred to third parties until maturity (up to 8 years for consumer loans) and at least 8 years for other loans.
- AIFMs are prohibited from managing AIFs in an “origin-to-distribute strategy” for the sole purpose of transferring loans to third parties.
- The transition rules distinguish between original loans in existing AIFs (with an AIFM opt-in period of five years) and existing loans (which benefit from exemptions from the rules).
Liquidity Risk Management Tool (LMT)
AIFMD II will require EU and non-EU AIFMs to disclose the AIF’s liquidity risk management system to investors before entering into a subscription agreement.
AIFMs overseeing open-end AIFs will be required to select at least two liquidity management tools, including redemption gates, notice periods, liquidity fees, swing/dual pricing, anti-dilution taxes, and in-kind redemptions. As an exception, money market funds can only use her one tool.
AIFMs must establish and follow detailed procedures for activating and deactivating selected LMTs. Any unusual use of these tools, such as redemption or suspension of side pockets, should be immediately reported to the competent national authorities (“N.C.A.The NCAs will then inform the host Member State’s NCAs and ESMA without delay, and if there are potential risks to financial stability and integrity, the financial system will notify the European Systemic Risk Committee. ESMA is tasked with: Develop regulatory standards for open-end structures for loan originating AIFs and guidelines for the selection and coordination of liquidity tools for AIFM risk management and financial stability mitigation.
delegation
EU AIFMs will be required to report their delegation arrangements to the NCA, including disclosure of total assets delegated under management, proportion of the portfolio and details about the parties involved.
AIFMD II authorizes the NCAs of AIF home member states to authorize institutions in other member states to act as depositary institutions, subject to an individual assessment of the absence of relevant depositary services. There is. This means that the AIFM has submitted a legitimate request, demonstrated that there is a lack of adequate depositary services in its member state, and that appointing a depositary from another member state is in line with the AIF’s investment strategy. The condition is to prove that In addition, the total assets in the domestic deposit market of the AIF’s home member country must not exceed EUR 50 billion or its equivalent. If such an appointment is approved, his relevant NCA must notify his ESMA. AIFMD II also sets out the conditions for the appointment of a depositary from a third country, including that the country is not high risk, has a signed agreement with its Member State, and is not subject to the EU for tax purposes. These include not being listed as a non-cooperating jurisdiction. If these conditions change after appointment, a new trustee must be appointed within a reasonable period not exceeding two years, having regard to the interests of investors.
independent director
Under AIFMD II, AIFMs that manage AIFs sold to retail investors are encouraged to appoint at least one non-executive or independent director to the AIFM’s board of directors. In making such appointment, the AIFM shall ensure that the director is independent in character and judgment and has sufficient expertise to enable the AIFM to assess whether he is managing the AIF or UCITS in the best interests of the investors. And you need to make sure you have experience.
costs and fees
AIFMD II also requires AIFMs to annually report all direct and indirect fees and charges incurred by the AIF. Additionally, AIFMs are required to annually disclose costs and expenses incurred by investors, whether incurred directly or indirectly.
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