AIFM Consultation Paper December 2015

Summary

This is a Bermuda Monetary Authority consultation paper, issued in December 2015, seeking industry feedback on a proposed Bermuda Alternative Investment Fund Manager (AIFM) regime. It explains the legislative basis created by the Investment Business Amendment Act 2015 and attaches draft Alternative Investment Fund Managers Rules 2015, intended to align Bermuda's regime with the EU AIFMD to support ESMA's assessment of extending the AIFM marketing passport to Bermuda.

• Licensing scope: Existing or new Investment Business Act licensees may elect to be licensed as an AIFM investment provider, managing assets of Alternative Investment Funds (AIFs) limited to institutional or sophisticated investors.
• Core capability requirement: Draft Rules would require AIFM applicants to demonstrate they can perform both portfolio management and risk management functions.
• Application information: Applicants would need to provide additional qualitative and quantitative information on the AIFM and each AIF managed, including depositary arrangements, valuation function, delegation arrangements, and leverage/risk limits.
• Capital and liquidity: Proposed minimum capital equivalent to EUR 300,000 (internal AIFM) or EUR 125,000 (external AIFM), additional capital where managed AIF portfolios exceed EUR 250 million, and liquidity equivalent to at least three months' expenditure.
• Organisational, operating and reporting requirements: Draft Rules would impose organisational safeguards, remuneration, conflicts of interest, risk and liquidity management rules, supervisory reporting (including leverage reporting), and disclosure obligations when an AIF acquires control of listed or non-listed companies.
• Notification of material change: Under new section 19G of the Investment Business Act, AIFMs would be required to notify the BMA of any material change to licence conditions.

As a consultation paper, the document itself imposes no binding obligations; it invites stakeholder comment on the draft Rules and the Amendment Act framework before any AIFM regime is finalised and brought into force.

Key obligations

• Submit comments on the consultation paper and draft Rules to policy@bma.bm no later than 22 January 2016
• If the regime is adopted, AIFM applicants would need to demonstrate ability to perform both portfolio management and risk management as a licensing prerequisite
• If adopted, AIFMs would need to notify the BMA of material changes to licence conditions under new section 19G of the Investment Business Act
• If adopted, AIFMs would need to maintain minimum capital equivalent to EUR 300,000 (internal AIFM) or EUR 125,000 (external AIFM), plus additional capital where managed AIF portfolios exceed EUR 250 million
• If adopted, AIFMs would need to maintain liquidity equivalent to at least three months' expenditure
• If adopted, AIFMs managing AIFs that acquire control of listed or non-listed companies would need to make specified disclosures to the company's board, employees and other stakeholders

Applies to

Alternative Investment Fund Managers (AIFMs), investment providers licensed under the Investment Business Act, Alternative Investment Funds (AIFs), Bermuda fund managers

Deadlines

• 22nd January 2016: Deadline for stakeholders to submit comments on the consultation paper and draft AIFM Rules to policy@bma.bm
• prior to end of March 2016: ESMA intends to publish its advice on extending the AIFM passport to Bermuda