Explanatory Note
(This note is not part of the Order)
This Order makes amendments to the United Kingdom's implementation of Directive 2011/61/EU of the European Parliament and of the Council on Alternative Investment Fund Managers (“the Directive”) (OJ L 174, 1.7.2011, p.1). The Directive was implemented in the UK by the Alternative Investment Fund Managers Regulations 2013 (S.I. 2013/1773) and the Alternative Investment Fund Managers (Amendment) Regulations 2013 (S.I. 2013/1797).
Article 2 amends section 418 of the Financial Services and Markets Act 2000 (c. 8) so that if a firm registered in the United Kingdom manages an alternative investment fund (“AIF”) from outside the EEA and that fund is registered in, or marketed in, an EEA State (including the United Kingdom), the management activity is to be regulated as if it were in the United Kingdom.
Article 3 amends the Financial Services and Markets Act 2000 (Gibraltar) Order 2001 (S.I. 2001/3084) to provide entitlements to carry on cross-border activities between the United Kingdom and Gibraltar relating to the management and marketing of AIFs, equivalent to the entitlements to carry on cross-border activities between EEA States provided by the Directive.
Article 4 makes a number of amendments to the Alternative Investment Fund Managers Regulations 2013 (“the principal regulations”)—
— Paragraph (2) provides that, where the principal regulations make provision about AIFs or their managers based in an EEA States other than the United Kingdom, the provision applies in the same way in relation to AIFs or their managers based in Gibraltar. This complements the provision made by article 3.
— Paragraph (3) provides that a manager of an AIF which is registered under the principal regulations (instead of having full authorisation under the Financial Services and Markets Act 2000) has a right of appeal to the Upper Tribunal if the Financial Conduct Authority (“FCA”) directs it to take specified steps to comply with regulatory requirements.
— Paragraphs (4) and (7)(e) give the FCA powers to monitor and enforce compliance with the limited regulatory regime that applies to a closed-ended AIF for which the subscription period expired before 22nd July 2011 and which is constituted for a period that expires before 22nd July 2016.
— Paragraph (5) provides that, where a manager of an AIF has applied for, but has not been granted, registration or authorisation as such a manager before the end of the existing transitional period on 22nd July 2014, the prohibition in the Financial Services and Markets Act 2000 on carrying on an activity regulated under that Act without permission will not apply until the firm's application has been determined.
— Paragraphs (6) and (7)(a) to (d) amend the transitional provisions for managers of closed-ended AIFs that make no additional investments after 22nd July 2013, or for which the subscription period expired before 22nd July 2011 and which are constituted for a period that expires before 22nd July 2016 (“grandfathered AIFs”). The principal regulations provide that such a manager is not required to apply for permission to carry on the new regulated activity of managing an AIF in respect of grandfathered AIFs, which was inserted into the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 by the principal regulations. The amendments provide that if such a manager is given permission to carry on the new regulated activity of managing an AIF, the manager will still need permission to carry on other regulated activities it carries on in connection with or for the purposes of managing grandfathered AIFs. However, even if the manager does not retain its existing permission to carry on such other regulated activities when varying its permission, it will be treated as if it had done so.
Article 5 makes amendments to the Alternative Investment Fund Managers (Amendment) Regulations 2013 in consequence of the amendment made by article 2.
Article 6 amends article 4 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/544) so that where a firm is carrying on insurance mediation activities within the scope of Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation (OJ L 9, 15.1.2003, p.3), the exemption in article 72AA will not apply to those activities. Article 72AA provides that where a firm has permission to carry on the regulated activity of managing an AIF or managing a UCITS fund, the firm is exempted from requiring permission for any other regulated activity that the firm may carry on in connection with or for the purpose of such management.
Article 7 provides a process whereby fund managers which have applied for permission to carry on the new regulated activities of managing an AIF or managing a UCITS before this Order comes into force, and which will require permission to carry on insurance mediation activities after article 6 of this Order comes into force, may notify the FCA of this fact and obtain such permission without the need to make a new application for a variation of permission.
An impact assessment has not been produced for this instrument as no impact on the costs of business or the voluntary sector is foreseen. An impact assessment of the effect of the principal regulations on the costs of business and the voluntary sector was produced and is available from Her Majesty's Treasury, 1 Horse Guards Road, London, SW1A 2HQ or on the HM Treasury website (www.gov.uk/government/organisations/hm-treasury), and is published with the Explanatory Memorandum alongside those Regulations on www.legislation.gov.uk.