The IMS Group's Special Report: ESMA's Final Advice on AIFMD

A swift turnaround but will the Commission accept ESMA’s recommendations?

On 16 November 2011 the European Securities and Markets Authority (“ESMA”) published its final technical advice (“the ESMA Advice”) to the European Commission on the proposed rules to be contained within the Alternative Investment Fund Managers Directive (“AIFMD” or “the Directive”). ESMA sent its proposals out for consultation in July and August this year and garnered more than 150 submissions in response.

Overall, very few changes have been introduced though a few improvements are observed. The most significant changes arise in relation to depositaries, capital requirements, and regulatory reporting. However, considerable uncertainty remains in areas such as depositary liability and private placement regimes. Of particular note is the fact remuneration disclosure guidance is not updated at all from ESMA’s previous advice.

Background and context of the ESMA Advice

The AIFMD was published in the Official Journal of the European Union (“the EU”) on 1 July 2011 and came “into force” on 21 July 2011. The AIFMD is a “framework directive” ( or “Level 1”) to which the detail needs to be added when devised. In December 2010, the recently established ESMA, an independent authority established by the EU with the role of safeguarding the stability of its financial system, received a request from the European Commission to assist with the content of the “Level 2” implementing measures of the AIFMD. ESMA duly responded on 16 November 2011 and the European Commission will now work on a proposal for the final Level 2 implementing measures. It is worth noting that the European Commission is not legally bound to follow the ESMA Advice and have already indicated that it does not agree with all of ESMA’s policy positions. The final Level 2 measures should be adopted by July 2012 following further discussions by the European Commi ssion with the European Council and European Parliament.