The Treasury’s recent ‘Q&A’ on the transposition of the AIFMD has been reinforced this week by its Responses to the two Consultations that it published earlier this year. Some will have noted that the Q&A in the main Response omits several of the items covered in the freestanding Q&A of last month. This is not a change of heart from HMT, just a narrower focus in the Response.

What is rather striking about the Q&A is that it focuses rather more on what the Treasury plans to do than it does on any sort of interpretation of their consultations. Basically, HMT is accepting that its drafting needs some ‘tidying up’! But it also shows that the UK regulators (HMT and FCA) are determined not to over-egg the regulations that transpose this dreaded directive. It is all consistent with their dislike of AIFMD, their view that it imposes a lot of requirements on fund managers where investors have no need of additional protection and their determination that the UK industry will be no more hobbled by AIFMD than is strictly required by the letter of the EU legislation.

Key points to emerge are:

 Existing AIFMs will be able to launch new funds during the transitional period without losing their temporary exemption. Quite a few firms have been concerned about the risk of a significant hindrance to the launch of new funds during the transitional year; we now know that this is not a problem.

 It will be possible to promote all AIFs in the UK during the transition, whether they are UK based, EEA based or third country funds. HMT recognises that it drafted the regulations too narrowly and will amend. There is no sign that they meant to make life difficult, but their confirmation of putting the drafting right is a welcome token of their determination to avoid any unnecessary burden or disruption.

 It won’t be necessary to wait for cooperation agreements to be in place between regulators before continuing to promote third country funds in the UK during the transition. In other words, marketing is not halted on 22 July. However……

o Watch carefully for relevant coop agreements to be put in place. If you convert before they are there, your marketing of those funds will be halted. Look before you leap.

o If the coop agreements are still not in place by July next year, there will be a problem. That stops the show – there is no further transitional relief.

o Remember that ESMA has taken it upon itself to arrange these coop agreements for all the national regulators. That may or may not be helpful – it is conceivable that some third countries may be happy to coop with the UK, but be more reluctant to sign up with Bulgaria!

 The depositary obligations are not triggered until the AIFM has converted (i.e. AIFM has got its AIFMD permission). This was always the logical position, but it is useful to have confirmation of this, especially in the light of ‘no transitionals for depositaries’.

 The marketing restrictions will apply only to marketing at the initiative of, or on behalf of, the AIFM. That is a significant move because the draft regulations applied them to all firms, which would have affected discretionary investment managers and IFAs, restricting their ‘whole of market’ purview. The alternative would have been almost unthinkable in its inappropriateness.

We have decidedly reached the point where affected firms – and that is practically every fund manager – need to be looking at how they are going to implement the directive. You may or may not want to convert early, but prompt preparation will provide space for strategic planning and avoid the higher professional fees that are bound to bite when the timeframe gets tight.