FSA may face £5m hit from implementation of alternative directive

‘AIFMs [will be required] to demonstrate to the [upcoming regulatory body] FCA that the leverage limits of each AIF are reasonable and that they comply with those limits at all times,’ the regulator said.

‘An AIFM making changes to the maximum level of leverage must in future disclose this to investors,’ it added, saying it considered giving fund managers some leeway in the level of over-leverage that they could accrue before informing investors, but ultimately decided that any push beyond fund leverage limits ought to be disclosed.

Remuneration

Remuneration is also under the spotlight as the AIFMD includes specific requirements around the implementation of remuneration policies. As a result, the consultation paper is proposing disclosure of the total amount of remuneration paid by an alternative manager to its staff and policies, which include factors such as performance-related pay, guaranteed variable remuneration, and remuneration linked to units and shares in funds that are managed.

The FSA said it would move to produce further guidance on the EU’s Remuneration Code to help alleviate the burden on some Aifms who would be caught up by several sets of rules.

In its consultation paper, the FSA said it had ascertained there is at least £179.5 billion in assets held in alternative investment funds (Aifs).However, since preliminary research scouting out potential Aifms saw a response from just 36 groups, 22 of which are expected to have Aifms within their UK structures, the figure could well be higher.

The Association of Investment Companies (AIC) recently called for the July 2013 implementation date to be pushed back to 2014, arguing it is ‘possibly impossible’ for firms to comply with the rules in time.