FSA demands managers reveal why they reject investments

In a 102-page discussion paper on the introduction of the European Commission’s Alternative Investment Fund Managers Directive in the UK, the regulator has revealed fund managers will be required to keep records of any “significant opportunities” considered by investors.

As revealed in FTAdviser’s Regulation Tracker key points summary of the latest FSA paper, AIFMs will need to have in place due diligence policies and procedures that take account of the nature, scale and complexity of the assets invested.

The AIFMD will bring in “significant changes” from July 2013 for alternative fund managers, including managers of hedge funds, private equity, property, listed funds, funds of funds and commodity funds, as well as depositaries, valuers and administrators.

Under the directive, funds covered by the new regulations will be able to access an EU-wide professional investor base by “taking commercial advantage” of the new AIF management and/or marketing ‘passport’.

The FSA’s discussion paper states fund managers will have an ongoing responsibility for updating their business plans to take account of any material changes in investment strategy or market conditions, and for regularly reviewing and updating their due diligence policies and procedures.

Although managers will not be required to keep records of every investment opportunity considered by an investor, they will be required to keep records of ‘significant’ opportunities, as well as detailing the risks identified with any such investments.

The FSA paper states: “These record-keeping requirements include a responsibility to retain minutes of meetings, preparatory documentation, as well as economic and financial analysis conducted in assessing the feasibility of a project or contractual commitment.”

To read more about how the FSA plans to implement the European Commission’s Alternative Investment Fund Managers directive see our summary of the discussion paper here.