The Act of 19 April 2014 (the AIFM Act) implementing the alternative investment funds management directive 2011/61/EU (AIFMD) in Belgian law entered into force on 27 June 2014. The AIFM Act provides for an extensive new regulatory regime for managers of alternative investment funds.
Background
In the wake of the financial crisis, the European legislator implemented AIFMD, aiming to develop a comprehensive framework for alternative investment funds (AIFs). In this way, the European legislator intends to provide for an internal market for alternative investment fund managers (AIFMs or Managers) and a harmonised and stringent regulatory and supervisory framework for the activities of AIFMs within the EU. Initially, national legislators had two years to transpose AIFMD into national law, a deadline that was subsequently extended by one year until 22 July 2014 at the latest. On 17 June 2014, the AIFM Act was published in Belgium, making Belgium one of the last EU jurisdictions to transpose the AIFMD's provisions. Technically, the AIFM Act entered into force on 27 June 2014 (i.e. ten days after its publication in the Official Gazette).
Scope
The AIFM Act implements an extensive regulatory regime for AIFMs managing one or more AIFs. Many of these Managers were previously unregulated and could now become subject to an extensive regulatory regime under the AIFMD Act.
An AIF is any collective investment undertaking which raises capital from a number of investors with a view to investing it in accordance with a defined investment policy for the benefit of those investors and which is not a (traditional) UCITS, i.e. an undertaking for collective investment under the UCITS directive (Directive 2009/65/EC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities).
Due to its broad scope of application, the AIFM Act potentially applies to a wide variety of Managers, including managers of hedge funds, private equity, real estate, commodities and infrastructure funds. As a result, for example, existing Belgian close-ended real estate investment funds ("sicafis"/"vastgoedbevaks") technically fall within the scope of the AIFM Act. The Belgian legislator, however, decided that undertakings that have invested in real estate, but which position themselves commercially and operationally as genuine commercial-operational companies putting real estate at the disposal of users (a concept well known in the global real estate market under the "REIT" label, which stands for "real estate investment trust") can apply for the status of "regulated real estate company" ("société immobilière réglementée" ("SIR") – "gereglementeerde vastgoedvennootschap" ("GVV")). SIRs do not fall under the scope of the AIFM Act.
Exemptions and limitations
The AIFM Act excludes certain types of funds from its scope, such as holdings, institutions for occupational retirement provision, supranational institutions, central banks, government funds managing social security and pension systems, employee participation schemes, and securitisation SPVs. There are also specific exemptions for "family offices" and joint ventures.
Furthermore, the AIFM Act provides for a "light" regime for two smaller types of Managers:
- Managers with a leveraged portfolio under management that does not exceed EUR 100 million; and
- Managers with an unleveraged portfolio under management that does not exceed EUR 500 million.
These "sub-threshold" Managers are not subject to the more stringent provisions of the AIFM Act (unless they decide to opt in, in which case the AIFM Act will be applicable in its entirety) and are only required to submit a (light) notification to the competent supervisory authority.
Belgian (sub-threshold) Managers have already been subject to the provisions of the AIFM Act since 22 July 2014. However, other EU Managers under the "light" regime benefit from a transitional period and are allowed to carry on their activities under pre-AIFMD private placement regimes until 27 December 2014 (i.e. for a period of six months after the entry into force of the AIFM Act). Non-EU Managers were immediately subject to the AIFM Act and will need to comply with its provisions if they want to continue their activities on Belgian territory.
Requirements imposed on Managers
The AIFM Act provides a comprehensive set of rules for Managers relating to, amongst other things, authorisation, operating conditions (such as remuneration, conflicts of interest, risk management, liquidity management and depositary requirements) and transparency.
Furthermore, the AIFM Act provides for a marketing passport, which allows Managers to market EU AIFs to professional investors (as defined under MiFID). This passport will be valid throughout the EU, allowing EU Managers to market their funds in the EU as soon as they receive authorisation from their home state supervisory authority.
For EU Managers managing non-EU AIFs and non-EU Managers managing (EU or non-EU) AIFs, this marketing passport will only be introduced by 2015 at the earliest, following a delegated act of the European Commission. In the meantime, however, these non-passported Managers are entitled to market funds in Belgium under the safe harbour provisions provided for in the AIFM Act until 2018, at which point the national safe harbour provisions will no longer remain in force. The solicitation of information through "covert public offers" or "reverse solicitation" is also prohibited unless it falls under a private placement safe harbour. While these safe harbours allow Managers to market AIFs in Belgium without being considered to be making a "public" offer, the Managers still have to go through the applicable notification procedure with the FSMA before they can commence their marketing activities.
As a result of the new and transitional regulatory regime under the AIFM Act, all Managers will need to notify or register with the FSMA before they can start or continue their activities in Belgium. The extent of this notification or registration varies and will depend on the applicable regulatory regime.