Fund managers who have not yet submitted their application for approval under a new European directive that comes into force next week run the risk of facing regulatory enforcement action, a consultancy has warned.
Bovill, the specialist financial services regulatory consultancy, warned that some alternative investment fund managers have yet to put in an application to trade under the new regime, despite the fact they have only until 22 July to be fully compliant.
The Alternative Investment Fund Managers Directive regulates fund groups with vehicles that sit outside of the Undertakings in Collective Transferable Securities (Ucits) rules, including private equity and hedge funds, as well as many in the property and infrastructure sector.
Under the regulations, alternative funds will be forced to comply with similar reporting and capital requirements as peers governed by Ucits, including new rules on disclosure of fees, investment strategy, third party arrangements and leverage.
The deadline for firms to apply has already been pushed back a year by the Treasury due to pressure from the industry that not enough time was being allowed for firms to apply.
Ashley Kovas, head of funds at Bovill, said: “This is the last chance for alternative fund managers to file their application with the FCA. Some firms are leaving it until the very last minute.
“This is not just about getting the form filled in and filed with the FCA, fund managers need to be compliant with the rules from Tuesday (22 July).
“The FCA has been quite clear that it expects firms to meet their obligations under AIFMD by Tuesday and it could hold them to account through enforcement action if they fail to do so.”
The next key date for alternative fund managers to plan towards is the start of new reporting obligations, with most firms needing to submit their first reports by the end of January 2015, Bovill said.
Firms will have to provide information such as the top five instruments the fund is trading, the geographical breakdown of the fund’s investments, what their investment strategy is and the principal markets that the fund is trading in.
Mr Kovas added: “As at the end of the year, alternative investment fund managers will have to provide a huge amount of management information.
“Some managers will not collect this information already so they will have to set up processes from scratch to make sure they meet their obligations. Fund managers we have advised have been surprised at the quantity and type of information that they will need to produce.”
