Draft Alternative Investment Fund Managers Rules 2015

Summary

This is a draft consultation paper published by the Bermuda Monetary Authority setting out proposed Alternative Investment Fund Managers (AIFM) Rules 2015. It would be made under section 19H of the Investment Business Act 2003 and sets out a comprehensive regulatory regime for AIFMs licensed or applying to be licensed in Bermuda, modelled closely on the EU AIFMD framework. As a draft, it is not yet in force; the commencement date in the text is left blank pending finalisation.

• Licensing and disclosure: Applicants for an AIFM licence must supply detailed information including shareholder controller details, programme of activities, remuneration policies, investment strategies, leverage policy, depositary appointment and AIFM reporting templates for each AIF managed.
• Capital and liquidity: Proposes minimum capital of EUR 300,000 for internal AIFMs and EUR 125,000 for external AIFMs, additional capital where AIF portfolios exceed EUR 250 million, and a minimum liquidity buffer equal to three months' annual expenditure.
• Organisational and conduct requirements: Sets out general organisational requirements, conduct of business principles, remuneration policy standards, and conflicts of interest identification, management and disclosure obligations.
• Risk, valuation and depositary rules: Covers risk management, liquidity management, valuation procedures and valuer qualifications/duties, and detailed depositary appointment, safekeeping, cash monitoring, delegation and liability provisions.
• Delegation and leverage: Addresses delegation and sub-delegation of AIFM functions, liability following delegation, and limits on leverage for AIFMs managing leveraged AIFs.
• Reporting and disclosure: Requires annual reports, prescribed investor disclosures, and periodic reporting to the Authority and other competent authorities using AIFM reporting templates (Schedule II).
• Control of non-listed companies: Imposes notification, disclosure and annual reporting obligations where an AIF acquires control of a non-listed company, plus restrictions on asset stripping.

Because this is a discussion draft open for consultation, none of these requirements are yet legally binding; they represent BMA's proposed rules and are subject to change before being finalised and brought into force.

Key obligations

• Proposed: an internal AIFM must maintain minimum capital equivalent to EUR 300,000; an external AIFM must maintain minimum capital equivalent to EUR 125,000
• Proposed: AIFMs with managed AIF portfolios exceeding EUR 250 million must hold additional capital equal to 0.02% of the excess, capped at EUR 10 million total
• Proposed: an AIFM must maintain minimum liquidity at all times equivalent to three months of its annual expenditure
• Proposed: an AIFM must notify the Authority in writing within 14 days if it anticipates breaching minimum capital or liquidity requirements, describing remedial steps
• Proposed: the Authority may require an AIFM to submit further information demonstrating compliance within 28 days of a breach notification
• Proposed: an AIFM must hold additional capital or obtain professional indemnity insurance to cover professional liability risks
• Proposed: an AIFM permitted to perform discretionary portfolio management must obtain client approval and give the Authority at least 14 business days' notice before investing client assets in an AIF it manages
• Proposed: an AIFM must establish and maintain remuneration policies per Schedule I for staff whose activities materially affect the AIFM's risk profile
• Proposed: an AIFM must establish and maintain conflicts of interest identification, management, disclosure and segregation-of-duties policies
• Proposed: an AIFM must appoint a depositary for each AIF it manages and ensure compliance with depositary safekeeping and cash-monitoring duties
• Proposed: an AIFM must submit completed AIFM Reporting templates and other prescribed information to the Authority for each AIF managed
• Proposed: an AIFM acquiring control of a non-listed company must make notifications and disclosures and produce an annual report on that control, subject to asset-stripping restrictions

Applies to

Alternative Investment Fund Managers (AIFMs), internal AIFMs, external AIFMs, Alternative Investment Funds (AIFs), depositaries, external valuers

Deadlines

• within 14 days: An AIFM must notify the Authority in writing if it anticipates breaching minimum capital or liquidity requirements
• within 28 days of the notification: The Authority may direct the AIFM to submit information demonstrating compliance with minimum capital and liquidity requirements
• at least 14 business days' notice: An AIFM must notify the Authority before investing a discretionary portfolio management client's assets in an AIF it manages
• xx day of xxx 20xx (date left blank in draft): Proposed commencement date of the Rules, to be finalised