AIFM update!

On 22 July 2011 the Alternative Investment Fund Management Directive (AIFM Directive) was adopted in the European Union. The AIFM Directive, which will become effective in the middle of 2013, is not only aimed at ‘alternative’ investment companies such as hedge funds and private equity funds, but also has a much broader reach.

It so happens the Dutch legislator implementing the AIFM in the Dutch financial supervision act (Wft: Wet op het financieel toezicht) has chosen to apply the AIFM regulations to many other, already regulated investment institutes. To this end the Wft and underlying regulations, such as the supervision of conduct of financial institutions resolution (Bgfo: Besluit gedragstoezicht financiële ondernemingen), will be significantly modified. For (most) parties, which at this moment have a licence to offer participation rights in investment institutions to retail investors, this means that they will have to deal with highly modified and expanded regulations from the middle of 2013.

Although the parties still have over a year before they have to meet the requirements of the AIFM, in view of the scope and reach of these requirements it is wise to start in good time. In this and the following newsletters Charco & Dique will give you further explanations regarding this matter.

Current situation
As indicated before, the AIFM Directive was adopted on 22 July 2012. The member states of the European Union now have two years time to embed this directive into their national legislations. It is not surprising that the Dutch legislator has chosen to incorporate the rules resulting from the AIFM in the Wft. However, what maybe is surprising, is that the legislator has chosen to apply the AIFM not only to (alternative) investment institutes that are still unregulated and that are (solely) aimed at professional investors, but also to the retail investment institutes that are already being supervised. A separate regime will however remain applicable to (management companies of) so-called ICBE investment institutes, or UCITs. 

The AIFM actually concerns all types of investment institutes (more information in the decision tree), also the parties that until now have been free from any kind of supervision, such as investment study groups and distributors of participation rights of at least 100,000 euro. It is true that the latter don’t have to apply for a licence under the AIFM, but they do have to be registered with the AFM.

Furthermore, it is good to realise that within the regulations adopted by the EU and the motion of the implementation of these within the Wft, only the so-called level 1 is the highest level of regulations.

Currently the European Commission is working out the so-called level 2 regulation. This is the more specific regulation in which the general level 1 rules are elaborated in more detail. Expectations are that the European Commission will give notice of this level 2 regulation in July 2013. However, it remains unclear what form this will take. If this is done in the form of a (second) directive, then national legislators will again have to incorporate this into their national regulations. For the Netherlands this would above all lead to modifications and additional rules in the Bgfo and the prudential regulation provisions. However, it is also possible that the European Commission establishes the level 2 regulation in the form of a statutory regulation. A regulation takes direct effect throughout the entire EU and does therefore not have to be incorporated in the national legislation of each member state.

What to do with the important elements of the AIFM?
Although there are already many publications concerning the AIFM, we will summarise the most important elements of the AIFM below. Due to the volume and quantity of rules in the AIFM it is not possible to give each individual stipulation in this newsletter. In addition, many level 2 regulations will be elaborated in more detail. The survey below can therefore be considered as an indication of the subjects supervised by the AIFM.

Management company and Custodian:
  • Each investment institute has a management company at its disposal or runs its own administration
  • The management company has the licence and is responsible for the observance of AIFM
  • The management company should at least perform the portfolio management and risk management themselves
  • Each investment institute appoints a bank, investment company or another supervised entity as custodian
  • The custodian keeps assets, watches over the purchase and distribution of participation rights, guarantees proper (intrinsic) valuation and settlement of transactions. Therefore the role of the custodian is different than within the actual/current regulation where the custodian is appointed as the legal owner of the assets.
Capital requirements
  • A management company should be sufficiently solvent. To guarantee his solvency he should have a required equity of at least 125,000 or 300,000. Additional regulations concerning professional liability risks are still being elaborated.
Operational management
  • Good administrative, accounting and internal control procedures
  • Act in the interest of the investor
  • Manage possible conflicts of interests
  • Sound remuneration practices
  • Suitable risk management systems to recognise, measure, control and monitor relevant risks.
  • Establish liquidity control system to guarantee that all obligations can be met
  • Outsourcing of activities is permitted as long as the management company can be regarded as the actual management company
  • Further (detailed) regulations for all matters concerning operational management are still being further elaborated at a European level.
  • Provide a prospectus when offering participation rights
  • Annual statement financial investment within six months after end of fiscal year
  • Make other general information available to investors
Valuation and trading
  • Assets of each investment institute should be valued at least once a year.
  • Intrinsic value calculation of all open-end investment with each issuance or purchase of participation rights
  • Valuation must be done in a proper, consistent and independent manner
  • If the evaluation is done by an external assessor the AFM must be informed of this
  • If there are intentions to start trading participation rights the AFM must be informed of this, also in case of the trading in other EU countries


Although the investment institutes and their management companies and custodians don’t have to meet the AIFM requirements as from the middle of 2013, it is advisable to start the implementation of the AIFM in good time. A logical first step is conducting an impact assessment.

Several staff members of Charco & Dique have ample experience in the field of financial regulations in general and regulations for investment institutes in particular. With our practical approach we can help you implementing the AIFM in many ways.

What we can do for you:

  • Make an AIFM impact analysis and implementation plan
  • Help with licence or notification procedure
  • Draw up and implement procedures and measures
  • Executing (parts of) the Risk Management and Compliance function
  • Conducting a (quick) scan to estimate whether you meet the AIFM requirements
  • Take care of contact with the AFM and DNB

We go into more detail in the requirements resulting from the AIFM on our website . In the following newsletters we will also further examine the specific topics in the AIFM.

For more information please contact Charco & Dique at 020-4165403 or send an e-mail to