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Today (22nd July 2013) the UK law implementing the Alternative Investment Fund Managers Directive (AIFMD) came in to force. The AIFMD was published by the European Union on 1st July 2011 and required member states to transpose it into domestic law by 22nd July 2013. An AIF is a ‘collective investment undertaking’ that is not subject to the UCITS ('Undertakings for Collective Investments in Transferable Securities) regime and includes hedge funds, private equity funds, retail investment funds, investment companies and real estate funds. The AIFMD is the response of the EU to provide for regulation of Alternative Investment Fund Managers after the Lehman Brothers collapse and means that some hedge fund managers will be regulated for the first time. A Survey conducted by Deloittes suggested that 72% of managers viewed AIFMD as a business threat and most believed that it would lead to a more protective and less competitive EU market. However it was also recognised that this could be counterbalanced by greater investor confidence, passporting protection throughout the EU and the creation of a level playing field.

Today is also the day when the transitional provisions for depositaries of an AIF commence. These are aimed at imposing obligations on depositaries to ensure proper monitoring of cash flows, performing the safekeeping of financial instruments and other assets belonging to the AIF and carrying out various monitoring and oversight roles with a view to providing greater investor protection, ensuring investors receive regular and full information on the AIF they invest in and restricting the ability of a depositary to delegating custody of a security to others. They will also have to assist the competent regulatory authority by making available to it information which is necessary for  the authority to fulfil its supervisory function. Transitional arrangements will be available for 12 months from today for all UK regulated depositary firms that are authorised persons, have a registered office or have established a branch in the UK and who are able to act as depositaries under Article 21(3) of AIFMD. Firms wishing to apply for permission during the transitional period must have permission to carry on the new regulated activity of acting as a trustee or depositary of an authorised/unauthorised AIF by 22nd July 2014 and should submit the FCA’s VoP application sufficiently in advance of this deadline to give the FCA time to consider and approve the application.

Guidance for those wishing to submit the form is available on the FCA’s site as follows:-