Recent changes in the regulatory environment in Germany and the EU as a whole, have created additional complexities for AIFMs, resulting in a reduced number of eligible funds.
EU Directive on Alternative Investment Funds Managers (AIFMD)
In July 2011, the EU Directive on Alternative Investment Funds Managers (AIFMD) came into force, harmonising national regulation across the EU.
The Directive aims at increasing transparency, protecting investors, and reducing systematic risk by introducing reporting, risk management, depositary, compensation/remuneration, prudential capital, and other requirements.
- The AIFMD applies to EU and non-EU Alternative Investment Fund Managers (AIFMs), managing or marketing Alternative Investment Funds (AIFs) within the EU.
German Capital Investment Act (“Kapitalanlagegesetzbuch” or KAGB)
- In Germany, the AIFMD was transposed into national law through the German Capital Investment Act (“Kapitalanlagegesetzbuch” or KAGB), which came into effect in July 2013.
- Prior to the KAGB, AIFMs were relatively free to market AIFs incorporated in offshore jurisdictions to institutional/professional investors in Germany as long as these private placements did not qualify as public offers and did not trigger prospectus publication duties.
- However, this largely unregulated private placement regime has come to an end since the KAGB requires AIFMs marketing AIFs in Germany either to register or to hold a European passport.
- In terms of the regulatory requirements, substantial differences are made between retail and professional investors as according to Annex II to the Directive 2004/39/EC (MIFID).
While the introduction of AIFMD/KAGB will not lead to an end of non-EU AIFMs marketing AIFs within the EU, it has certainly increased the administrative burden and the need for in-depth and tailored local knowledge and advice.
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