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Erhvervsudvalget 2010-11 (1. samling)
KOM (2009) 0207
Offentligt

COUNCIL OF

THE EUROPEAN UNION

Brussels, 20 October 2010

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Interinstitutional File:

2009/0064 (COD)

EF 140

ECOFIN 634

CODEC 1069

COVER NOTE

from:

to:

Subject:

General Secretariat

Delegations

Proposal for a Directive of the European Parliament and of the Council on

Alternative Investment Fund Managers and amending directives 2003/41/EC

and 2009/65/EC

- Council's position agreed by ECOFIN

Delegations will find attached the Council's position with regard to the above-mentioned Directive

as agreed by the Council (ECOFIN) by unanimity on 19 October 2010.

________________________

Encl.

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THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 53

(1) thereof,

Having regard to the proposal from the European Commission,

Having regard to the opinion of the European Central Bank,

After consulting the European Economic and Social Committee,

Acting in accordance with the ordinary legislative procedure,

Whereas :

(1)

Managers of alternative investment funds (AIFM) are responsible for the management of a

significant amount of invested assets in Europe, account for significant amounts of trading

in markets for financial instruments, and can exercise an important influence on markets

and companies in which they invest.

(2)

The impact of AIFM on the markets in which they operate is largely beneficial, but recent

financial difficulties have underlined how the activities of AIFM may also serve to spread

or amplify risks through the financial system. Uncoordinated national responses make the

efficient management of these risks difficult. This Directive therefore aims at establishing

common requirements governing the authorisation and supervision of AIFM in order to

provide a coherent approach to the related risks and their impact on investors and markets

in the European Union.

(3)

Recent difficulties in financial markets have underlined that many AIFM strategies are

vulnerable to some or several important risks in relation to investors, other market

participants and markets. In order to provide comprehensive and common arrangements for

supervision, it is necessary to establish a framework capable of addressing those risks

taking into account the diverse range of investment strategies and techniques employed by

AIFM. Consequently, this Directive should apply to AIFM managing all types of funds

that are not covered by Directive 2009/65/EC on the coordination of laws, regulations and

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administrative provisions relating to the undertakings for collective investment in

transferable securities (UCITS) (recast), irrespective of the legal or contractual manner in

which the AIFM is entrusted with this responsibility. AIFM should not be entitled to

manage UCITS within the meaning of Directive 2009/65/EC on the basis of authorisation

under this Directive.

(4)

This Directive aims to provide a European internal market for AIFM, and a harmonised

and stringent regulatory and supervisory framework for the activities of all AIFM, EU or

non-EU, within the European Union. As the practical consequences and possible

difficulties resulting from a harmonised regulatory framework and a European internal

market for (a) non-EU AIFM performing management and/or marketing activities within

the European Union and (b) for EU AIFM managing non-EU AIF, are uncertain and

difficult to predict due to the lack of previous experience in this regard, a review

mechanism has been set forth. It is intended that after a transitional period of two years a

harmonised European passport regime shall become applicable in the situations described

under (a) and (b) after the entry into force of a delegated act by the Commission in this

regard and that this harmonised regime shall during a further transitional period of three

years co-exist with the national regimes of the Member States subject to certain minimum

harmonised conditions. After such a limited period of co-existence, it is the intention that

the national regimes shall be terminated, after the entry into force of a delegated act by the

Commission in this regard.

Further, four years after the ultimate transposition date of the Directive, the Commission

shall review the application and the scope of the Directive taking into account the

objectives of this Directive and shall assess whether or not the European harmonised

approach has caused any ongoing major market disruption and whether or not it functions

effectively in light of the principles of the internal market and of a level playing field.

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(5)

The scope of this Directive is confined to entities managing AIF as a regular business

(AIFM), regardless of whether the AIF is of the open-ended or the closed-ended type, of

the legal form of the AIF, or of whether or not the AIF listed, which raise capital from a

number of investors with a view to investing it in accordance with a defined investment

policy for the benefit of those investors.

Investment undertakings, such as family office vehicles, which invest the private wealth of

investors without raising external capital, should not be considered to be AIF in accordance

with this Directive.

(6)

As certain entities are not considered to be AIFM pursuant to this Directive, they are out of

the scope of this Directive. As a consequence this Directive shall not apply to holding

companies as defined in the Directive, in the understanding that the purpose of this

definition is not to exclude managers of private equity funds, nor managers of alternative

investment funds whose shares are admitted to trading on a regulated market from the

scope of the Directive. This Directive shall also not apply to the management of pension

funds, employee participation or savings schemes, to supranational institutions, national

central banks or national, regional and local governments and bodies or institutions which

manage funds supporting social security and pension systems, nor to securitisation special

purpose vehicles. It shall also not apply to insurance contracts and joint ventures.

(7)

Investment firms authorised under Directive 2004/39/EC of the European Parliament and

of the Council of 21 April 2004 on markets in financial instruments amending Council

Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European

Parliament and of the Council and repealing Council Directive 93/22/EEC and credit

institutions authorised under Directive 2006/48/EC of the European Parliament and of the

Council of 14 June 2006 relating to the taking up and pursuit of the business of credit

institutions (recast) should not be required to obtain an authorisation under this Directive in

order to provide investment services such as individual portfolio management in respect of

AIF. However, investment firms can only directly or indirectly offer or place units or

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shares of an AIF to or with investors in the European Union in respect of AIF, if and to the

extent the units or shares thereof can be marketed in accordance with this Directive. When

transposing the provisions of this Directive into national law, the Member States should

take into account the regulatory purpose of this provision and ensure that investment firms

established in a third country that pursuant to the relevant national law can provide

investment services in respect of AIF, should also be covered by this provision. The

provision of investment services by these entities in respect of AIF should never amount to

a de facto circumvention of this Directive by means of turning the AIFM into a letter-box

entity, irrespective of whether the AIFM is established inside or outside the Union.

(8)

This Directive does not regulate AIF. AIF may therefore continue to be regulated and

supervised at the national level. It would be disproportionate to regulate the structure or

composition of the portfolios of the AIF managed by AIFM and it would be difficult to

provide for such extensive harmonisation due to the very diverse types of AIF managed by

AIFM. The Directive therefore does not prevent Member States from adopting or from

continuing to apply national requirements in respect of AIF established on their territory.

The fact that a Member State may impose additional requirements on AIF established on

its territory compared to requirements applicable in other Member States should not

prevent the exercise of rights of AIFM authorised in other Member States in accordance

with this Directive to market to professional investors in the European Union certain AIF

established outside the Member State imposing additional requirements and which are

therefore not subject to and do not need to comply with those additional requirements.

(9)

Several provisions of this Directive oblige the AIFM to ensure compliance with

requirements for which, in some fund structures, the AIFM is not responsible. An example

is fund structures where the responsibility for appointing the depositary rests with the AIF

or another entity acting on behalf of the AIF. In such cases, the AIFM has no ultimate

control over whether a depositary is actually appointed, unless the AIF is internally

managed. Since this Directive does not regulate the AIF, there could be no obligation in

the Directive on the AIF to appoint a depositary. In cases of failure of an AIFM to ensure

compliance with the applicable requirements for which the AIF or another entity on its

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behalf is responsible, the competent authorities shall require the AIFM to take the

necessary steps to remedy the situation. If, despite such steps, the non-compliance persists,

and insofar as it concerns an EU AIFM or an authorised non-EU AIFM managing an EU

AIF the AIFM should resign as manager of that AIF, and if the AIFM does not resign, the

competent authorities of its home Member State of the AIFM should require that it resigns.

In that case the AIF may no longer be marketed in the European Union. If it concerns an

authorised non-EU AIFM marketing a non-EU AIF the AIF may no longer be marketed in

the European Union.

(10)

Where this Directive refers to the interest of the investors of the AIF, and unless

specifically set forth otherwise, the intention is to refer to the interest of the investors in

their specific capacity of investor of the AIF and not to the individual interests of the

investors.

(11)

Subject to the exceptions and restrictions set forth herein, the Directive is applicable (i) to

all EU AIFM managing EU AIF or non-EU AIF, irrespective of whether they are marketed

in the European Union or not and (ii) to non-EU AIFM managing EU AIF, irrespective of

whether they are marketed in the European Union or not and (iii) to non-EU AIFM

marketing EU AIF or non-EU AIF within the European Union.

The Directive lays down requirements regarding the manner in which AIFM should

manage alternative investment funds (AIF) under their responsibility. For non-EU AIFM

this is limited to the management of EU AIF and other AIF the units or shares of which are

also marketed to professional investors in the European Union.

The authorisation of an EU AIFM in accordance with this Directive covers the

management of EU AIF established in the home Member State of the AIFM. Subject to

further notification requirements, this also includes the marketing to professional investors

within the European Union of EU AIF managed by the EU AIFM and the management of

EU AIF established in Member States other than the home Member State of the AIFM.

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This Directive also sets forth the conditions under which authorised EU AIFM are entitled

to market non-EU AIF to professional investors in the European Union and the conditions

under which a non-EU AIFM may obtain an authorisation to (i) manage EU AIF and/or (ii)

to market AIF to professional investors in the European Union with a passport. During a

period that is intended to be transitional, Member States may also allow EU AIFM to

market non-EU AIF on their territory only and/or allow non-EU AIFM to perform the

activities referred to in i) and/or (ii) above on their territory only, subject to national law

insofar certain minimum conditions pursuant to this Directive are complied with.

(12)

This Directive shall not apply to managers insofar as they manage AIF whose only

investors are the managers themselves or their parent undertakings, their subsidiaries or

other subsidiaries of their parent undertaking and where these investors are not themselves

AIF.

(13)

This Directive further provides for a lighter regime for AIFM where the cumulative AIF

under management fall below a threshold of EUR 100 million and for AIFM that manage

only unleveraged AIF that do not grant investors redemption rights during a period of five

years where the cumulative AIF under management fall below a threshold of EUR 500

million. Although the activities of the AIFM concerned are unlikely to have individually

significant consequences for financial stability, it could be possible that in aggregation

their activities give rise to systemic risks. Consequently, those AIFM should not be subject

to full authorisation but to a registration in their home Member States and should, among

other requirements, provide their competent authorities with relevant information regarding

the main instruments in which they are trading and on the principal exposures and most

important concentrations of the AIF they manage. However, in order to be able to benefit

from the rights granted under this Directive those smaller AIFM should be allowed to be

treated as AIFM subject to the opt-in procedure foreseen by this Directive. This exemption

does not limit the possibilities of Member States to impose stricter requirements on those

AIFM who have not opted-in.

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(14)

The Commission shall, by means of delegated acts, adopt measures specifying the methods

of leverage as defined in this Directive, including any financial and/or legal structures

involving third parties controlled by the relevant AIF, where the structures referred to are

structures specifically set up to directly or indirectly create leverage at the level of the AIF.

In particular for private equity and venture capital funds this means that leverage that exists

at the level of a portfolio company is not intended to be included when referring to such

financial or legal structures.

(15)

No EU AIFM may manage and/or market one or more EU AIF to professional investors in

the European Union unless it has been authorised in accordance with this Directive. An

AIFM authorised in accordance with this Directive must comply with the conditions for

authorisation established in this Directive at all times.

As soon as this is permitted under the Directive, a non-EU AIFM intending to manage EU

AIF and/or market AIF in the European Union with a passport or an EU AIFM intending to

market non-EU AIF in the European Union with a passport, must also be authorised in

accordance with this Directive.

At least during the transitional period, a non-EU AIFM may also be allowed by a Member

State to market AIF on the territory of that Member State and an EU AIFM may also be

authorised to market non-EU AIF on the territory of that Member State if at least the

minimum conditions as set forth in this Directive are complied with.

(16)

Depending on their legal form, AIF could be either externally or internally managed. AIF

should be deemed internally managed when the management functions are performed by

the governing body or any other internal resource of the AIF. Where the legal form of the

AIF permits an internal management and where the AIF’s governing body chooses not to

appoint an external AIFM, the AIF is also AIFM and should therefore comply with all

requirements for AIFM under this Directive and be authorised as such. An AIFM which is

an internally managed AIF may however not be authorised as the external manager of one

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or more other AIF. An AIF should be deemed externally managed when an external legal

person has been appointed as manager by the AIF or on behalf of the AIF (the appointed

AIFM), which through this appointment is responsible for managing the AIF. Where an

external AIFM has been appointed to manage a particular AIF, it should not be deemed to

be providing the investment service of portfolio management, as defined by Article 4(1)(9)

of Directive 2004/39/EC on Markets in Financial Instruments amending Council Directives

85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of

the Council and repealing Council Directive 93/22/EEC10, but instead providing the

function of collective portfolio management in accordance with this Directive.

(17)

Management of AIF should mean providing at least investment management services. The

single AIFM to be appointed pursuant to this Directive can never be authorised to provide

the services referred to in point 1(a) of Annex I without providing the services referred to

in point 1(b) of Annex I and vice versa. Subject to the conditions set forth in this Directive,

an authorised AIFM should however not be prevented from also engaging in the activities

of administration and marketing of AIF, or from engaging in activities related to the assets

of the AIF. An externally appointed AIFM should not be prevented from also providing the

service of management of portfolios of investments with mandates given by investors on a

discretionary, client-by-client basis, including portfolios owned by pension funds and

institutions for occupational retirement provision which are covered by Directive

2003/41/EC of the European Parliament and the Council of 3 June 2003 on the activities

and supervision of institutions for occupational retirement provision, or from providing the

non-core services of investment advice; safe-keeping and administration in relation to units

of collective investment undertakings and reception and transmission of orders. Pursuant to

authorisation under Directive 2009/65/EC, an externally appointed AIFM should be

allowed to manage UCITS.

(18)

It is necessary to ensure that AIFM operate subject to robust governance controls. AIFM

should be managed and organised so as to minimise conflicts of interest. The

organisational requirements established under this Directive are without prejudice to

systems and controls established by national law for the registration of individuals working

within or for the AIFM.

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(19)

It is necessary to provide for the application of minimum capital requirements to ensure the

continuity and the regularity of the management of AIF provided by the AIFM and to

cover the potential exposure of AIFM to professional liability in respect of all their

activities, including the management of AIF under a delegated mandate. AIFM should be

free to choose whether to cover potential risks of professional liability by additional own

funds or by an appropriate professional indemnity insurance.

(20)

In order to address the potentially detrimental effect of poorly designed remuneration

structures on the sound management of risk and control of risk-taking behaviour by

individuals, there should be an express obligation for AIFM to establish and maintain, for

those categories of staff whose professional activities have a material impact on the risk

profiles of AIF they manage, remuneration policies and practices that are consistent with

sound and effective risk management. These categories of staff should at least include

senior management, risk takers, control functions, and any employee receiving total

remuneration that takes them into the same remuneration bracket as senior management

and risk takers.

The principles governing remuneration policies should recognise that AIFM may apply the

provisions in different ways according to their size and the size of the AIF they manage,

their internal organisation and the nature, the scope and the complexity of their activities.

The principles regarding sound remuneration policies set out in the Commission

Recommendation of 30 April 2009 on remuneration policies in the financial services sector

are consistent with and complement the principles of this Directive.

In order to promote supervisory convergences in the assessment of remuneration policies

and practices, ESMA should ensure the existence of guidelines on sound remuneration

policies in the AIFM sector. The Committee of European Banking Supervisors should

assist it in the elaboration of such guidelines

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The provisions on remuneration are without prejudice to the full exercise of fundamental

rights guaranteed by the Treaties, in particular to the provisions of Article 153(5) of the

Treaty on the Functioning of the European Union, general principles of national contract

and labour law, applicable legislation regarding shareholders’ rights and involvement and

the general responsibilities of the administrative and supervisory bodies of the institution

concerned, as well as the rights, where applicable, of social partners to conclude and

enforce collective agreements, in accordance with national laws and traditions.

(21)

Reliable and objective asset valuation is crucial for the protection of investor interests.

AIFM employ different methodologies and systems for valuing assets, depending on the

assets and markets in which they predominantly invest. It is appropriate to recognise these

differences but to, nevertheless, require in all cases the AIFM to implement valuation

procedures resulting in the proper valuation of assets of the AIF. The process for valuation

of assets and calculation of the net asset value (NAV) should be functionally independent

from the portfolio management of the AIFM and the remuneration policy of the AIFM and

other measures should ensure that conflicts of interest are prevented and that undue

influence on the employees is prevented. Subject to certain conditions, the AIFM may

appoint an external valuer to perform the valuation function.

(22)

Subject to strict limitations and requirements, including the existence of an objective

reason, an AIFM may delegate responsibility for the performance of some of its functions

in accordance with this Directive so as to increase the efficiency of the conduct of its

business. Subject to the same conditions, also sub-delegation is allowed. AIFM should

however at all times remain responsible for the proper performance of their functions and

compliance with the rules set out in this Directive.

The strict limitations and requirements set forth on the delegation of tasks by the AIFM

apply to the delegation of the management functions as set forth in Annex I. Delegation of

other supporting tasks, such as administrative or technical functions performed by the

AIFM as a function of its management tasks are not subject to the specific limitations and

requirements set forth in the Directive.

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(23)

Recent developments underline the crucial need to separate asset safe-keeping and

management functions, and segregate investor assets from those of the manager. Although

AIFM manage AIF with different business models and arrangements for inter alia asset

safe-keeping, it is essential that a depositary separate from the AIFM is appointed to

provide depositary functions with respect to AIF.

The provisions relating to the appointment and the tasks of a depositary apply to all AIF

managed by an AIFM subject to this Directive and therefore for all AIF business models.

They are however adapted to the specificities of different business models. For some

business models certain depositary tasks are more relevant than for others, depending on

the type of assets the AIF are investing in and the tasks related to these assets.

(24)

For certain AIF (i) which have no redemption rights exercisable during the period of five

years from the date of the initial investments and (ii) which, in accordance with their core

investment policy, generally do not invest in assets that must be held in custody in

accordance with point (a) of paragraph 7 or generally invest in issuers or non-listed

companies in order to potentially acquire control over such companies in accordance with

what is set forth in Article 26, such as private equity funds, venture capital funds and real

estate funds, Member States may allow that a notary, a lawyer a registrar or another entity

is appointed to carry out depositary functions as part of professional or business activities

in respect of which it is subject to mandatory professional registration recognized by law or

to legal or regulatory provisions or rules of professional conduct and which can furnish

sufficient financial and professional guarantees to be able to effectively perform the

relevant depositary functions and meet the commitments inherent in those functions. This

takes account of current practice for certain types of closed-ended funds. However, for all

other AIF, the depositary needs to be a credit institution, an investment firm or another

entity permitted under the UCITS Directive, given the importance of the custody function.

For non-EU AIF only, the depositary can also be a credit institution or any other entity of

the same nature as the entities set forth above as long as the entity is subject to effective

prudential regulation and supervision to the same effect as the provisions laid down in

European Union law and which are being effectively enforced.

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(25)

The depositary should have its registered office or a branch in the same country as the AIF.

For a non-EU AIF, the depositary can only be established in this third country if certain

additional conditions are met. On the basis of the criteria set forth in delegated acts, the

Commission shall be empowered to adopt implementing measures, stating that prudential

regulation and supervision of a third country are to the same effect as the provisions laid

down in European Union law and are effectively enforced. Further, the mediation

procedure set forth in Article 11 of Regulation (EU) No .../2010 [ESMA] shall apply in the

event that competent authorities disagree on the correct applications of the other additional

conditions. As an alternative, for non-EU AIF, the depositary can also be established in the

home Member State or, as the case may be, the Member State of reference of the AIFM

managing the AIF.

The Commission is invited to examine the possibilities of putting forward an appropriate

horizontal legislative proposal that clarifies the responsibilities and liabilities of a

depositary and governs the right of a depositary in one Member State to provide its

services in another Member State.

(26)

The depositary should be responsible (i) for the proper monitoring of the AIF's cash flows,

and especially for ensuring that investor money and cash belonging to the AIF, or, as the

case may be, to the AIFM acting on behalf of the AIF is booked correctly on accounts

opened in the name of the AIF or in the name of the AIFM acting on behalf of the AIF or

in the name of the depositary acting on behalf of the AIF, (ii) for the safe-keeping of the

assets of the AIF, including (a) the holding in custody of financial instruments that can be

registered in a financial instruments account opened in the depositary’s books and all

financial instruments that can be physically delivered to the depositary, and (b) the

verification of ownership of all other assets by the AIF or the AIFM on behalf of the AIF.

When ensuring investor money is booked in cash accounts, the depositary should take into

account the principles set forth in article 16 of Commission Directive 2006/73/EC of 10

August 2006 implementing Directive 2004/39/EC of the European Parliament and of the

Council as regards organisational requirements and operating conditions for investment

firms and defined terms for the purposes of that Directive.

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(27)

A depositary should act honestly, fairly, professionally, independently and in the interest of

the AIF or, as the case may be, the investors of the AIF.

(28)

The safe-keeping of assets could be delegated to a third party, which in its turn could

delegate this function. However, both delegation and sub-delegation should be objectively

justified and subject to strict requirements in relation to the suitability of the third party

entrusted with this function, and in relation to the due skill, care and diligence that

the depositary should employ to select, appoint and review this third party.

A third party to whom the depositary function of safekeeping of assets is delegated may

maintain a common segregated account for multiple AIF (a so-called omnibus account).

Entrusting the custody of assets to the operator of a securities settlement system as

designated for the purposes of Directive 98/26/EC of the European Parliament and of the

Council of 19 May 1998 on settlement finality in payment and securities settlement

systems by securities settlement systems or the provision of similar services by non-

European securities settlement systems shall not be considered a delegation of custody

functions.

The strict limitations and requirements set forth on the delegation of tasks by the

depositary apply to the delegation of its specific functions as a depositary, i.e. the

monitoring of the cash flow, the safe-keeping of assets and the oversight functions.

Delegation of other supporting tasks that are linked to its depositary tasks, such as

administrative or technical functions performed by the depositary in function of its

depositary tasks are not subject to the specific limitations and requirements set forth in the

Directive.

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(29)

The Directive also takes account of the fact that many AIF and in particular hedge funds

currently make use of a prime broker. The Directive ensures that AIF may continue to use

the function of one or more prime brokers. However, unless it has functionally and

hierarchically separated the performance of its depositary functions from its tasks as prime

broker and the potential conflicts of interest are properly identified, managed and disclosed

to the investors of the AIF, no prime broker should be appointed as a depositary, since

prime brokers act as counterparties to AIF and therefore cannot at the same time act in the

best interest of the AIF as is required of a depositary. Depositaries should be able to

delegate custody tasks to one or more prime brokers or other third parties. In addition to

the delegated custody tasks prime brokers should be allowed to provide prime brokerage

activities to the AIF. These prime brokerage activities do not form part of the delegation

arrangement.

(30)

The depositary should be liable for the losses suffered by the AIFM, the AIF and the

investors. The Directive distinguishes between the loss of financial instruments held in

custody, and any other losses. In the latter case, the depositary should be liable in case of

intent or negligence. Where the depositary holds assets in custody and those assets are lost,

the depositary should be liable, unless it can prove that the loss is the result of an external

event beyond its reasonable control, the consequences of which would have been

unavoidable despite all reasonable efforts to the contrary. In this regard, a depositary can,

by way of an example, not invoke certain internal situations such as a fraudulent act by an

employee to discharge itself from its liability.

Where the depositary delegates custody tasks and the financial instruments held in custody

by a third party are lost, the depositary should be liable. However, provided (i) that the

depositary is explicitly allowed to discharge itself from its liability subject to the condition

precedent of a contractual transfer of such liability to that third party, pursuant to a written

contract between the depositary and the AIF, or as the case may be, the AIFM acting on

behalf of the AIF, in which such a discharge is objectively justified, and (ii) that the third

party can indeed be held liable for the loss based on a contract between the depositary and

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the third party, the depositary can discharge itself in such a case of its liability if it can

prove that it has duly performed its due diligence duties and that the specific requirements

for delegation are met. By imposing the requirement of a contractual transfer of liability to

the third party, the Directive intends to attach external effects to such contract, making the

third party directly liable to the AIF, or as the case may be, the investors of the AIF, for the

loss of the financial instruments held in custody.

Further, where the law of a third country requires that certain financial instruments are held

in custody by a local entity and there are no local entities that satisfy the depositary

delegation requirements, the depositary can discharge itself of its liability provided that: (i)

the fund rules or the articles of association of the AIF concerned expressly allow for such a

discharge; (ii) the investors have been duly informed of this discharge and the

circumstances justifying the discharge prior to their investment; (iii) the AIF or the AIFM

on behalf of the AIF instructed the depositary to delegate the custody of such financial

instruments to a local entity; (iv) there is a written contract between the depositary and the

AIF, or, as the case may be, the AIFM acting on behalf of the AIF, which expressly allows

such a discharge; and (v) there is a written contract between the depositary and the third

party that explicitly transfers the liability of the depositary to that third party and makes it

possible for the AIF, or as the case may be, the AIFM acting on behalf of the AIF, to make

a claim against the third party in respect of the loss of financial instruments or for the

depositary to make such a claim on their behalf.

(31)

This Directive should be without prejudice to any future legislative measures with respect

to the depositary in the UCITS Directive, as UCITS and AIF are different both in the

investment strategies they follow and in the type of investors they are intended for.

(32)

An AIFM must, for each of the EU AIF it manages and for each of the AIF it markets in

the European Union, make available an annual report for each financial year no later than

six months following the end of the financial year in accordance with what is set forth in

this Directive. The period of six months is without prejudice to the right of the Member

States to impose a shorter period.

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(33)

Given that an AIFM may employ leverage and may, under certain conditions, contribute to

the build up of systemic risk or disorderly markets, special requirements should be

imposed on AIFM employing leverage. The information needed to detect, monitor and

respond to those risks has not been collected in a consistent way throughout the Union, and

shared across Member States so as to identify potential sources of risk to the stability of

financial markets in the Union. To remedy this situation, special requirements should apply

to AIFM, which employ leverage on a substantial basis at the level of the AIF. Such AIFM

should be obliged to disclose information regarding the overall level of leverage employed,

the leverage arising from borrowing of cash or securities and the leverage arising from

position held in derivatives, the reuse of assets and the main sources of leverage in their

AIF. Information gathered by competent authorities should be shared with other authorities

in the Union, with ESMA and the ESRB so as to facilitate a collective analysis of the

impact of the leverage of AIF managed by AIFM on the financial system in the Union, as

well as a common response. If one or several AIF managed by an AIFM could potentially

constitute an important source of counterparty risk to a credit institution or other

systemically relevant institutions in other Member States, such information should also be

shared with the relevant authorities.

In order to ensure a proper assessment of the risks induced by the use of leverage by an

AIFM with respect to the AIF it manages, it is required that the AIFM demonstrates that

the leverage limits for each AIF it manages are reasonable and that this AIFM

demonstrates how it complies at all times with those limits. It is considered necessary to

allow the competent authorities of the home Member State of the AIFM to impose limits

on the level of leverage that AIFM could employ in AIF where the stability and integrity of

the financial system may be threatened. ESMA and the ESRB shall be informed about any

actions taken in this respect.

It is also considered necessary to allow ESMA, after taking into account the advice of the

ESRB, to determine that the leverage used by an AIFM or by a group of AIFM, poses a

substantial risk to the stability and the integrity of the financial system and to issue an

advice to competent authorities specifying the remedial measures to be taken.

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(34)

It is necessary to ensure that the competent authorities of the AIFM, the companies over

which AIF managed by an AIFM exercise control and the employees of such companies

receive certain information necessary for the company to assess how this control will

impact the company’s situation.

When AIFM are managing AIF which exercise control over an issuer whose shares are

admitted to trading on a regulated market, information should generally be disclosed

according to Directive 2004/25/EC of the European Parliament and of the Council of 21

April 2004 on takeover bids and Directive 2004/109/EC of the European Parliament and of

the Council of 15 December 2004 on the harmonisation of transparency requirements in

relation to information about issuers whose securities are admitted to trading on a regulated

market and amending Directive 2001/34/EC2. To this end, specific requirements should

apply to AIFM managing AIF which exercise control over a non-listed company. In order

to ensure transparency regarding the controlled company, enhanced transparency,

disclosure and reporting requirements should apply. Further, the annual reports of the

relevant AIF should be supplemented with regard to the controlled company or such

additional information should be included in the annual report of the controlled company.

Such information should then be made available to the (representatives of the) employees

of the company and to the investors of the relevant AIF.

The specific information requirement towards employees of a certain company apply in

case an AIF has acquired control over such a company in accordance with this Directive.

However, as the AIFM in most cases, unless it is an internally managed AIF, ultimately

has no control over the AIF and, further, as there is, in accordance with the general

principles of company law, no direct relationship between the shareholders and the

(representatives of) the employees of a company, pursuant to this Directive no direct

information requirements towards the (representatives of) the employees of a company

can be imposed on (the manager of) a shareholder, i.e. the AIFM and the AIF.

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Therefore, as regards the information requirements towards such (representatives of) the

employees, the Directive sets forth a best efforts obligation on the AIFM concerned to

require that the board of directors of the relevant company discloses the relevant

information as required by this Directive to the (representatives of) the employees of the

company.

The Commission is invited to examine the need and the possibilities to amend the

information and disclosure requirements applicable in case of control over non listed

companies or issuers provided in Articles 26 to 30 in this Directive on a general level,

regardless of the type of investor.

(35)

When an AIFM manages AIF which reach a position to exercise control over a non-listed

company, the AIFM should also be obliged to provide the competent authorities of its

home Member State with information on the financing of the acquisition. This obligation

to provide information on financing should also apply when an AIFM manages AIF which

reach a position to exercise control over an issuer of shares admitted to trading on a

regulated market.

(36)

When an AIFM manages AIF which reach a position to exercise control over a non-listed

company or an issuer, such AIFM shall before the end of the period expiring 24 months

following the acquisition of control of the company by the AIF (i) not be allowed to

facilitate, support or instruct any distribution, capital reduction, share redemption and/or

acquisition of own shares by the company in accordance with what is set forth in the

Directive; and (ii) insofar as the AIFM is authorised to vote on behalf of the AIF at the

governing bodies of the company, not vote in favour of a distribution, capital reduction,

share redemption and/or acquisition of own shares by the company in accordance with

what is set forth in the Directive; and finally (iii) in any event use its best efforts to prevent

distributions, capital reductions, share redemptions and/or the acquisition of own shares by

the company in accordance with what is set forth in the Directive.

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(37)

The information and disclosure requirements and the specific safeguards against asset

stripping in case of control over a non-listed company, or, as the case may be, an issuer,

are subject to a general exception for control over small and medium sized enterprises and

special purpose vehicles with the purpose of purchasing, holding or administrating real

estate. Further, the information rules do not aim at making public propriety information

which would put the AIFM at a disadvantage vis-à-vis other possible competitors such as

sovereign wealth funds or competitors that may want to put the target company out of

business by using the information to its advantage. Therefore all the obligations to report

and provide information apply without prejudice to Directive 2002/14/EC of the European

Parliament and of the Council of 11 March 2002 establishing a general framework for

informing and consulting employees in the European Community and Directives

2004/25/EC and 2004/109/EC. This means inter alia that Member States should provide

that the relevant AIFM should not request the communication of information by the board

of directors to the (representatives of the) employees, when the nature of that information

is such that, according to objective criteria, it would seriously harm the functioning of the

company concerned or would be prejudicial to it.

These obligations also apply without prejudice to the stricter rules adopted by Member

States.

(38)

This Directive further lays down the conditions under which an EU AIFM may market the

units or shares of an EU AIF to professional investors in the European Union. Such

marketing by EU AIFM is only allowed insofar as the AIFM complies with the provisions

of this Directive and occurs with a passport. This is without prejudice to the marketing of

AIFM falling below the above mentioned thresholds. Marketing of these AIF can still be

allowed by the Member States subject to national provisions.

Units or shares of an AIF may only be listed on a stock exchange in the EU or offered or

placed by third parties acting on behalf of the AIFM in a given Member State if the AIFM

which manages the AIF is itself permitted to market the units or shares of the AIF in that

Member State. In addition, other national and EU laws, such as Directives 2003/71/EC and

2004/39/EC, may also regulate the distribution of AIF to investors in the EU.

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(39)

Many EU AIFM currently manage non-EU AIF. It is appropriate to allow authorised EU

AIFM to manage non-EU AIF without marketing them in the territory of the European

Union, without imposing on them the strict depositary requirements and the requirements

relating to the annual report as set forth in this Directive, as these requirements have been

included for the protection of European investors.

(40)

After the entry into force of a delegated act adopted by the Commission in this regard,

which will in principle, taking into account the advice given by ESMA in this regard, occur

two years after the final transposition date of this Directive, authorised EU AIFM intending

to market non-EU AIF to professional investors in their home Member State and/or in

other Member States should be allowed to do so with a passport insofar as they comply

with all the provisions of this Directive. That right shall be subject to notification

procedures and the fulfilment of conditions in relation to the third country of the non-EU

AIF.

(41)

During a transitional period, which will in principle, depending on the advice given by

ESMA in this regard, be terminated by a delegated act three years after the entry into force

of the delegated act pursuant to which the European passport has become applicable, EU

AIFM intending to market non-EU AIF within the territory of certain Member States of the

European Union, but without a passport, may also be permitted to do this by the relevant

Member States, but only insofar as they comply with all the provisions of the Directive

with the exception of the depositary requirements. However, such AIFM must ensure that

one or more entities are appointed to carry out the duties of the depositary and appropriate

cooperation arrangements for the purpose of systemic risk oversight and in line with

international standards should be in place between the competent authorities of the home

Member State of the AIFM and the supervisory authorities of the third country of the non-

EU AIF in order to

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ensure an efficient exchange of information that allows competent authorities of the

relevant Member State to carry out their duties according to this Directive. The cooperation

arrangements should not be used as a barrier to impede third country funds from being

marketed in a Member State. Further, the third country where the non-EU AIF is

established may not be listed as Non-Cooperative Country and Territory by the Financial

Action Task Force on anti-money laundering and terrorist financing.

(42)

After the entry into force of a delegated act adopted by the Commission in this regard,

which will in principle, taking into account the advice given by ESMA in this regard, occur

two years after the final transposition date of this Directive, a basic principle of this

Directive shall be that a non-EU AIFM established in a third country should benefit from

the rights conferred under this Directive (such as to market shares and units in AIF

throughout the European Union with a passport) but only where it is subject to the

obligations of this Directive. This should ensure a level playing field between EU and non-

EU AIFM. This Directive therefore sets forth a procedure for non-EU AIFM to be

authorised under this Directive which will become applicable after the entry into force of

the delegated act adopted by the Commission in this regard. To ensure that such

compliance is enforced, this Directive further sets forth that the competent authorities of a

Member State shall enforce compliance with this Directive. For such non-EU AIFM the

competent supervisory authorities will be the competent authorities of the Member State of

reference, as defined in this Directive.

Therefore, where a non-EU AIFM intends to manage EU AIF and/or market AIF in the

territory of the European Union with a passport, it should also be required to comply with

all the provisions of this Directive, so that it is subject to the same obligations as AIFM

established in the Union. In very exceptional circumstances, if and to the extent

compliance with a provision of this Directive is incompatible with compliance with the law

to which the non-EU AIFM and/or, as the case may be, the non-EU AIF marketed in the

European Union, is submitted, the non-EU AIFM may be exempted from compliance with

that provision of the Directive if it can demonstrate that: (i) it is impossible to combine

compliance with a provision of this Directive with compliance with a mandatory provision

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in the law to which the non- EU AIFM and/or, as the case may be, the non- EU AIF

marketed in the European Union, is submitted; (ii) the law to which the non-EU AIFM

and/or the non-EU AIF is submitted provides for an equivalent rule having the same

regulatory purpose and offering the same level of protection to the investors of the relevant

AIF; and (iii) the non-EU AIFM and/or the non-EU AIF complies with that equivalent

rule.

Further, such a non-EU AIFM shall have to comply with a specific authorisation procedure

and certain specific requirements concerning the third country of the non-EU AIFM, and,

as the case may be, of the third country of the non-EU AIF should be satisfied.

ESMA shall give advice on the determination of the Member State of reference, and as the

case may be, the exemption in case of incompatibility with an equivalent rule. Specific

information requirements from the competent authorities of the Member State of reference

to the competent authorities of the host Member States of the AIFM shall apply. Further,

the mediation procedure set forth in Article 11 of [ESMA regulation] shall apply in case of

disagreement between competent authorities of Member States on the determination of the

Member State of reference, the application of the exemption in case of incompatibility of

equivalent rules and the assessment regarding the fulfilment of the specific requirements

concerning the third country of the non-EU AIFM, and, as the case may be, of the third

country of the non-EU AIF.

ESMA shall, on an annual basis, conduct peer review analysis of the supervisory activities

of the competent authorities in relation to the authorisation and the supervision of non-EU

AIFM, to further enhance consistency in supervisory outcomes, in accordance with Article

15 of Regulation …/… [ESMA Regulation].

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(43)

During a transitional period, which will in principle, depending on the advice given by

ESMA in this regard, be terminated by a delegated act three years after the entry into force

of the delegated act pursuant to which the European passport has become applicable, a

non-EU AIFM intending to market AIF in the territory of certain Member States of the

European Union only and without such a passport, may also be permitted to do this by the

relevant Member States, but only insofar certain minimum conditions are satisfied. Those

AIFM should be subject at least to rules similar to those applicable to EU AIFM managing

EU AIF with respect to the disclosure to investors. In order to facilitate the monitoring of

systemic risk those AIFM should also be subject to disclosure requirements vis-à-vis the

competent authorities of their home Member State. Therefore, such AIFM must comply

with the transparency requirements set forth in the Directive, and with Section 2 of Chapter

V. Further, appropriate cooperation arrangements for the purpose of systematic risk

oversight and in line with international standards should be in place between the competent

authorities of the Member State(s) where the AIF are marketed, if applicable, the

competent authorities of the EU AIF and the supervisory authorities of the third country of

the non-EU AIFM in order to ensure an efficient exchange of information that allows

competent authorities of the relevant Member States to carry out their duties according to

this Directive. The cooperation arrangements should not be used as a barrier to impede

third country funds from being marketed in a Member State. Finally, the third country

where the non-EU AIFM, and as the case may be, the non-EU AIF is established may not

be listed as Non-Cooperative Country and Territory by the Financial Action Task Force on

anti-money laundering and terrorist financing.

(44)

This Directive should not affect the current situation, whereby a professional investor

established in the Union may invest in AIF at its own initiative, irrespective of where the

AIFM and/or the AIF is established.

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(45)

Member States should be able to allow the marketing of all or certain types of AIF

managed by AIFM to retail investors on their territory. If a Member State allows the

marketing of certain types of AIF, the Member State should make an assessment on a case-

by-case basis to determine whether a specific AIF may be considered as a type of AIF

which may be marketed to retail investors on its territory. Without prejudice to the

application of other instruments of European Union law, Member States may in such cases

impose stricter requirements on AIF and AIFM as a precondition for marketing to retail

investors than is the case for AIF marketed to professional investors on their territory,

irrespective of whether AIF are marketed on a domestic or cross-border basis. Where a

Member State allows the marketing of AIF to retail investors on its territory, this

possibility should be available regardless of the Member State where the AIFM is

established, and Member States may not impose stricter requirements on AIF established

in the Union and marketed on a cross-border basis than on AIF marketed domestically. In

addition, AIFM, investment firms authorised under Directive 2004/39/EC and credit

institutions authorised under Directive 2006/48/EC which provide investment services to

retail clients have to take into account any additional requirements when assessing whether

a certain AIF is suitable or appropriate for an individual retail client or whether it is a

complex or non-complex financial instrument.

(46)

It is necessary to clarify the powers and duties of the competent authorities responsible for

implementing this Directive, and to strengthen the mechanisms necessary to ensure

effective cross-border supervisory cooperation. Under certain circumstances the competent

authorities of the host Member States of the AIFM shall be allowed to take direct action

relating to the provisions under their responsibility. For the other provisions the competent

authorities of the host Member States shall under certain circumstances be allowed to

request action from the competent authorities of the home Member State and to intervene if

no such action is undertaken.

This Directive further foresees a general coordinating role for ESMA, and the possibility of

binding mediation procedures chaired by ESMA to resolve disputes between competent

authorities.

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ESMA shall develop technical regulatory standards on the contents of the cooperation

arrangements that must be concluded by the home Member State, or, as the case may be,

the Member State of reference of the AIFM and the relevant supervisory authorities from

outside the European Union and on the procedures for the exchange of information. The

technical standards should ensure that pursuant to these cooperation arrangements all

necessary information should be provided for the competent authorities of both the home

as the host Member States to be able to exercise their supervisory and investigatory powers

under this Directive. ESMA shall also have a facilitating role in the negotiation and

conclusion of the cooperation arrangements. For example, ESMA can use its facilitating

role by providing for a standard format for such cooperation arrangements.

(47)

Member States should lay down rules on sanctions applicable to infringements of the

provisions of this Directive and ensure that they are implemented. The sanctions should be

effective, proportionate and dissuasive.

(48)

This Directive respects the fundamental rights and observes the principles recognized in

particular in the Treaty on the Functioning of the European Union and in the Charter of

Fundamental Rights of the European Union, notably the right to the protection of personal

data recognized in Article 16 of the Treaty and in Article 8 of the Charter. Any exchange

or transmission of information by competent authorities should be in accordance with the

rules on the transfer of personal data as laid down in Directive 95/46/EC of the European

Parliament and of the Council of 24 October 1995 on the protection of individuals with

regard to the processing of personal data and on the free movement of such data. Any

exchange or transmission of information by ESMA should be in accordance with the rules

on the transfer of personal data as laid down in Regulation (EC) No 45/2001 of the

European Parliament and of the Council of 18 December 2000 on the protection of

individuals with regard to the processing of personal data by the Community institutions

and bodies and on the free movement of such data, which should be fully applicable to the

processing of personal data for the purposes of this Directive.

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(49)

The measures necessary for the implementation of this Directive should be adopted by

means of implementing acts in accordance with Article 291 of the Treaty on the

Functioning of the European Union (TFEU).

The Commission will be empowered to adopt delegated acts in accordance with Article

290 of the TFEU where explicitly allowed in this Directive. In particular, the Commission

should be empowered to adopt delegated acts specifying how to calculate the thresholds

for the lighter regime and how to treat AIFM whose assets under management, including

any assets acquired through use of leverage, in one and the same calendar year

occasionally exceed and/or fall below the relevant threshold; the obligations to register for

the entities falling below the thresholds and to provide information in order to effectively

monitor systemic risk a; and the obligations to notify the relevant competent authorities.

Delegated acts should also be adopted to clarify the methods of leverage, including any

financial and/or legal structures involving third parties controlled by the relevant AIF and

how leverage is to be calculated. Delegated acts should also be adopted to specify the risks

the additional own funds or the professional indemnity insurance must cover; the

conditions for determining the appropriateness of additional own funds or the coverage of

the professional indemnity insurance; and the manner of determining ongoing adjustments

of the additional own funds or of the coverage of the professional indemnity insurance.

Delegated acts should also be adopted to specify the criteria to be used by competent

authorities to assess whether AIFM comply with their obligations as regards their conduct

of business, their obligation to act in the best interests of the AIF or the investors of the

AIF it manages and the integrity of the market; to have and employ effectively the

resources and procedures that are necessary for the proper performance of its business

activities; to take all reasonable steps to avoid conflicts of interests and, when they cannot

be avoided, to identify, prevent, manage and monitor, and where applicable, disclose, those

conflicts of interest in order to prevent them from adversely affecting the interests of the

AIF and its investors and to ensure that the AIF it manages are fairly treated; to comply

with all regulatory requirements applicable to the conduct of its business activities so as to

promote the best interests of the AIF or the investors of the AIF it manages and the

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integrity of the market; and to treat all AIF investors fairly. Delegated acts should further

be adopted to specify the type of conflicts of interests AIFM have to identify, as well as the

reasonable steps AIFM are expected to take in terms of structures and organizational and

administrative procedures in order to identify, prevent, manage monitor and disclose

conflicts of interest. Delegated acts should also be adopted to specify the risk management

functions to be employed; the appropriate frequency for review of the risk management

system; how the risk management function shall be functionally and hierarchically

separated from the operating units, including the portfolio management function; the

specific safeguards against conflicts of interests; and the risk management requirements to

be employed by AIFM. Delegated acts should also be adopted to specify the liquidity

management systems and procedures that AIFM should employ and the alignment of the

investment strategy, liquidity profile and redemption policy. Delegated acts should also be

adopted to specify the requirements that originators , the sponsors or the original lenders of

securitisation instruments have to meet in order for an AIFM to be allowed to invest in

such instruments issued after 1 January 2011. Delegated acts should also be adopted to

specify the requirements that AIFM have to comply with when investing in such

securitisation instruments. Delegated acts should also be adopted specifying the

administrative and accounting procedures, control and safeguard arrangements for

electronic data processing and adequate internal control mechanisms. Delegated acts

should also be adopted to specify the procedures for the proper valuation of the assets and

the calculation of the net asset value per share or unit of the AIF; the professional

guarantees the external valuer must be able to furnish; and the periodicity for valuation

appropriate for open-ended funds. Delegated acts should also be adopted to specify the

conditions under which the delegation of AIFM functions should be approved and the

conditions under which the manager has delegated its functions to the extent that it

becomes a letter-box entity and could no longer be considered to be the manager of the

AIF. As regards depositaries, delegated acts should also be adopted to specify the criteria

for assessing that the prudential regulation and supervision of third countries where the

depositaries are established are to the same effect as the provisions laid down in European

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law and are effectively enforced, the particulars that need to be included in the standard

agreement; the conditions for performing the depositary functions, including the type of

financial instruments that shall be included in the scope of the depositary's custody duties,

the conditions upon which the depositary may exercise its custody duties over financial

instruments registered with a central depositary and the conditions upon which the

depositary shall safe keep the financial instruments issued in a nominative form and

registered with an issuer or a registrar; the due diligence duties of depositaries; the

segregation obligation; the conditions and circumstances under which financial instruments

held in custody shall be considered as lost; what is to be understood by external events

beyond reasonable control, the consequences of which would have been unavoidable

despite all reasonable efforts to the contrary; and the conditions and circumstances under

which there is an objective reason to contract a discharge of liability. Delegated acts should

also be adopted to specify the content and format of the annual report that AIFM have to

make available for each AIF they manage and to specify the disclosure obligations of

AIFM to investors and reporting requirements to competent authorities as well as their

frequency. Delegated acts should also be adopted to specify when leverage is considered to

be employed on a substantial basis. Delegated acts should be adopted to specify the

principles competent authorities should use when considering implementation of limits on

leverage. Delegated acts should also be adopted to specify the cooperation arrangements in

relation to non-EU AIFM and/or non-EU AIF in order to design a common framework to

facilitate the establishment of those cooperation arrangements with third countries.

Delegated acts should also be adopted to specify the content of exchange of information

regarding AIFM between competent authorities and the provision of certain information to

ESMA.

Depending on the advice of ESMA in this regard and the criteria set forth in the Directive,

a delegated act shall also be adopted in order to extent the European passport to EU AIFM

marketing non-EU AIF in the European Union and to non-EU AIFM managing and/or

marketing AIF in the European Union, and another delegated act shall be adopted to

terminate the application of national private placement regimes in this regard.

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The European Parliament or the Council have a period of three months from the date of

notification to object to a delegated act. At the initiative of the European Parliament or the

Council, this period can be prolonged by three months in significant areas of concern. The

European Parliament and the Council may inform the other institutions of their intention

not to raise objections. This early approval of delegated acts is of particular importance

when deadlines need to be respected, for example to allow Member States to transpose

delegated acts within the transposition period laid down in Article 63 of this Directive,

where relevant.

(50)

In accordance with Declaration 39 on Article 290 of the TFEU, annexed to the Final Act of

the Intergovernmental Conference which adopted the Treaty of Lisbon, signed on 13

December 2007, the Commission should consult experts appointed by the Member States

in the preparation of draft delegated acts in the financial services area, in accordance with

its established practice.

(51)

Since the objectives of this Directive, namely to ensure a high level of investor protection

by laying down a common framework for the authorisation and supervision of AIFM,

cannot be sufficiently achieved by the Member States, as evidenced by the deficiencies of

existing nationally based regulation and oversight of these actors, and can therefore, be

better achieved at European Union level, the Union may adopt measures, in accordance

with the principle of subsidiarity as set out in Article 5 of the Treaty on European Union.

In accordance with the principle of proportionality, as set out in that Article, this Directive

does not go beyond what is necessary in order to achieve those objectives.

(52)

Two years after the final transposition date of this Directive, ESMA shall issue an opinion

on the functioning of the European passport then in force and on the functioning of

national private placement regimes. It shall also issue advice on the extension of the

European passport to EU AIFM marketing non-EU AIF in the European Union and to non-

EU AIFM managing and/or marketing AIF in the European Union. The Commission shall

adopt a delegated act within three months after having received the ESMA advice and

opinion and taking into account the criteria listed in paragraph 2 of Article 63bis and the

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objectives of this Directive, inter alia the internal market, investor protection and the

effective monitoring of systemic risk, specifying the date when the rules set forth in

Articles 35, 37, 37a, 38, 39 and 39bis shall become applicable in all Member States.

At the April 2009 summit in London, G20 Leaders agreed that hedge funds or their

managers should be registered and should be required to disclose appropriate information

on an ongoing basis to supervisors or regulators. They should be subject to oversight to

ensure that they have adequate risk management. In June 2010, G20 Leaders in Toronto

reaffirmed their commitment and also committed to accelerate the implementation of

strong measures to improve transparency and regulatory oversight of hedge funds in an

internationally consistent and non-discriminatory way. In order to support the G20

objectives, IOSCO issued high level principles of hedge fund oversight in June 2009 to

guide the development of internationally consistent regulation in this area. On 16

September 2010 the European Council agreed “on the need for Europe to promote its

interest and values more assertively and in a spirit of reciprocity and mutual benefit in the

context of the Union's external relations and to take steps to, inter alia, secure greater

market access for European business and deepen regulatory cooperation with major trade

partners. The Commission will endeavour to ensure that these commitments are

implemented in a similar way by our international partners."

(53)

Three years after the entry into force of the delegated act pursuant to which the European

passport has become applicable for all AIFM, ESMA shall issue an opinion on the

functioning of the European passport then in force and on the functioning of national

private placement regimes. It shall also issue an advice on the termination of such national

regimes. The Commission shall adopt a delegated act within three months after having

received the ESMA advice and opinion and taking into account the criteria listed in

paragraph 2 of Article 63ter and the objectives of this Directive, inter alia the internal

market, investor protection and the effective monitoring of systemic risk, specifying the

date when the national regimes set forth in Articles 36 and 40 shall have to be terminated

in all Member States.

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(54)

Four years after the transposition date of this Directive, the Commission shall, on the basis

of public consultation and in the light of the discussions with competent authorities,

commence with a review of the application and the scope of this Directive. The review

should analyse the experience acquired in applying the Directive, its impact on investors,

AIF or AIFM, both within and outside the Union, and in how far the objectives of the

Directive have been achieved and, if necessary, propose appropriate amendments. The

examination shall include a general survey of the functioning of the rules in this Directive

and the experience acquired in applying them. The Commission shall in its review examine

the functions of ESMA and the EU competent Authorities in ensuring effective supervision

of all AIFM operating in the EU markets in the context of this Directive, including inter

alia – as consistent with the ESMA Regulation - entrusting ESMA with further supervisory

responsabilities in the field of authorisation and supervision of non-EU AIFM. In this

conctext the Commission shall assess the costs and benefits of entrusting ESMA with such

tasks.

This Directive aims at establishing a framework capable of addressing the potential risks

which might arise from the activities of AIFM and the effective monitoring of these risks

by the competent authorities within the European Union. It is necessary to provide for a

stringent regulatory and supervisory framework which leaves no gaps in financial

regulation. In this regard reference is made to the already existing due diligence

requirements applicable to professional investors pursuant to the relevant regulation

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applicable to such investors. Further, the Commission is also invited to review the relevant

legislation with respect to professional investors in order to assess the need to impose

tighter requirements regarding the due diligence procedure to be undertaken by a European

professional investors investing on its own initiative in non-EU financial products, such as

inter alia non-EU AIF.

At the end of the review the Commission shall present a report to the Council and the

European Parliament, including, if appropriate, proposed amendments taking into account

the objectives of the Directive and potential impacts on investors, AIF or AIFM, both

within and outside the Union.

CHAPTER I

GENERAL PROVISIONS

Article 1

Subject matter

This Directive lays down the rules for the authorisation, ongoing operation and transparency of the

managers of alternative investment funds (AIFM) which manage and/or market such funds in the

Union.

Article 2

Scope

Subject to the exceptions set forth herein, this Directive shall apply to:

(i)

all EU AIFM, which manage one or more alternative investment funds (AIF)

irrespective of whether the AIF is an EU AIF or a non-EU AIF;

(ii)

all non-EU AIFM, which manage one or more EU AIF; and

(iii) all non-EU AIFM, which market one or more AIF in the European Union,

irrespective of whether the AIF is an EU AIF or a non-EU AIF.

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In this regard, it is of no significance

(a)

(b)

whether the AIF belongs to the open-ended or closed-ended type;

whether the AIF is constituted under the law of contract or under trust law, under

statute or has any other legal form;

(c)

what the legal structure of the AIFM is.

The Directive shall not apply to the following entities:

(a)

(b)

holding companies;

institutions which are covered by Directive 2003/41/EC of the European Parliament

and the Council of 3 June 2003 on the activities and supervision of institutions for

occupational retirement provision (IORP), including, where applicable, the

authorised entities responsible for managing IORP and acting on their behalf referred

to in Article 2(1) of that Directive or the appointed investment managers pursuant to

Article 19(1) of the same Directive, insofar as they do not manage AIF;

(c)

supranational institutions, such as the World Bank, the IMF, the ECB, the EIB, the

European development finance institutions (DFIs) and bilateral development banks,

the EIF, other supranational institutions and similar international organisations, in

case such institutions or organisations manage one or several AIF in so far as those

AIF act in the public interest;

(d)

(e)

national central banks;

national, regional and local governments and bodies or other institutions which

manage funds supporting social security and pension systems;

(f)

(g)

employee participation schemes or employee saving schemes;

securitisation special purpose entities.

Member States shall take the necessary steps to ensure that AIFM referred to in paragraph

1 comply with the applicable requirements of this Directive on an ongoing basis.

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Article 3

Exemptions

This Directive shall not apply to AIFM insofar as they manage one or more AIF whose

only investors are the AIFM or the parent undertakings or the subsidiaries of the AIFM or

other subsidiaries of those parent undertakings, provided that none of those investors itself

is an AIF.

Without prejudice to the application of Article 44, for the following AIFM, the application

of the Directive shall be limited to the provisions set forth in paragraphs 3 and 4 below:

(a)

AIFM which either directly or indirectly through a company with which the AIFM is

linked by common management or control, or by a substantive direct or indirect

holding, manage portfolios of AIF whose assets under management, including any

assets acquired through use of leverage, in total do not exceed a threshold of EUR

100 million; or

(b)

AIFM which either directly or indirectly through a company with which the AIFM is

linked by common management or control, or by a substantive direct or indirect

holding, manage portfolios of AIF whose assets under management, in total do not

exceed a threshold of EUR 500 million when the portfolio of AIF consists of AIF

that are not leveraged and have no redemption rights exercisable during a period of 5

years following the date of initial investment in each AIF.

Member States shall ensure that AIFM referred to in paragraph 2 shall at least:

(a)

be subject to a registration with the competent authorities of its home Member State;

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(b)

at the time of registration identify itself and the AIF managed by it to the competent

authorities of its home Member State;

(c)

at the time of registration provide information on the investment strategies of the AIF

managed by it to the competent authorities of its home Member State;

(d)

provide regularly the competent authorities of its home Member State with

information on the main instruments in which they are trading and on the principal

exposures and most important concentrations of AIF they manage in order to enable

the competent authorities to effectively monitor systemic risk, and

(e)

notify the competent authorities of its home Member State in the event that they no

longer comply with the conditions referred to in paragraph 2.

Paragraphs 2 and 3 of this Article shall apply without prejudice to the stricter rules adopted

by Member States with respect to AIFM falling under one of the exemptions set forth in

paragraph 2.

Member States shall take the necessary steps to ensure that where the conditions set out in

paragraph 2 are no longer fulfilled, the AIFM concerned seeks authorisation within 30

calendar days in accordance with the relevant procedures laid down in this Directive.

AIFM referred to in paragraph 2 do not benefit from any of the rights granted under this

Directive, unless the AIFM chooses to opt-in under this Directive in which case the entire

Directive, subject to the exceptions set forth herein, shall be applicable to those AIFM.

The Commission shall, in accordance with the regulatory procedure referred to in Article

57(2), adopt implementing measures with a view to specifying the procedures for AIFM

which choose to opt-in under this Directive in accordance with paragraph 4.

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The Commission shall adopt by means of delegated acts, in accordance with Article 54,

and subject to the conditions laid down in Articles 55 and 56, measures specifying:

(a)

how to calculate the thresholds referred to in paragraph 2 and to treat AIFM whose

assets under management, including any assets acquired through use of leverage, in

one and the same calendar year occasionally exceed and/or fall below the relevant

threshold

(b)

the obligations to register for the entities set forth in paragraph 2 and to provide

information in order to effectively monitor systemic risk as set forth in paragraph 3,

and

(c)

the obligations to notify competent authorities referred to in paragraph 3.

Article 4

Definitions

For the purpose of this Directive, the following definitions shall apply, unless specifically

provided otherwise in this Directive:

(a)

'Activities related to the assets of AIF' means performing services necessary to meet

the fiduciary duties of the AIFM, facilities management, real estate administration

activities, advice to undertakings on capital structure, industrial strategy and related

matters, advice and services relating to mergers and the purchase of undertakings and

other services connected to the management of the AIF and the companies and other

assets it has invested in.

'AIF' or 'alternative investment fund’ means any collective investment undertaking,

including investment compartments thereof,

(i) which raises capital from a number of investors, with a view to investing it in

accordance with a defined investment policy for the benefit of those investors;

and

(b)

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(ii) which does not require authorisation pursuant to Article 5 of Directive

2009/65/EC of the European Parliament and of the Council of 13 July 2009 on

the coordination of laws, regulations and administrative provisions relating to

undertakings for collective investment in transferable securities (UCITS);

(c)

'AIFM' or ‘manager of alternative investment funds’ means any legal person whose

regular business is managing one or more AIF;

(d)

‘Branch’ means a place of business which, in case of an AIFM, is a part of the

AIFM, which has no legal personality and which, in case of an AIFM, provides the

services for which the AIFM has been authorised; all the places of business

established in the same Member State by an AIFM with its registered office in

another Member State or a third country shall be regarded as a single branch;

(e)

'Carried interest’ means a share in the profits of the AIF accrued to the AIFM as

compensation for the management of the AIF and excluding any share in the profits

of the AIF accrued to the AIFM as a return on any investment by the AIFM into the

AIF.

(f)

‘Close links’ means a situation in which two or more natural or legal persons are

linked by :

(i) participation, which means the ownership, direct or by way of control, of 20% or

more of the voting rights or capital of an undertaking,

(ii) control, which means the relationship between a parent undertaking and a

subsidiary, in all the cases referred to in Article 1(1) and (2) of Seventh Council

Directive 83/349/EEC of 13 June 1983, or a similar relationship between any

natural or legal person and an undertaking, any subsidiary undertaking of a

subsidiary undertaking also being considered a subsidiary of the parent

undertaking which is at the head of those undertakings.

A situation in which two or more natural or legal persons are permanently linked to

one and the same person by a control relationship shall also be regarded as

constituting a close link between such persons.

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(g)

‘Competent authorities’ means the national authorities of Member States, which are

empowered by law or regulation to supervise AIFM;

‘Competent authorities of a depositary’ means

(i) if the depositary is a credit institution authorised under Directive 2006/48/EC,

the competent authorities as defined in Article 4(4) of that Directive;

(ii) if the depositary is an investment firm authorised under Directive 2004/39/EC,

the competent authorities as defined in Article 4(1)(22) of that Directive;

(iii) if the depositary is a legal person referred to in point (c) of the first subparagraph

of Article 21(3), the national authorities of its home Member State which are

empowered by law or regulation to supervise such legal persons;

(iv) if the depositary is an entity referred to in the third subparagraph of Article

21(3), the national authorities of the Member State in which this entity has its

registered office and which are empowered by law or regulation to supervise

such entity or, as the case may be, the official body competent to register or

supervise such entity pursuant to the rules of professional conduct applicable to

it;

(v) if the depositary is appointed as depositary for a non-EU AIF in accordance with

paragraph (b) of Article 21(5), and is not any of the entities referred to above,

the relevant national authorities of the third country where the depositary has its

registered office;

‘Competent authorities of an EU AIF’ means the national authorities of a Member

State which are empowered by law or regulation to supervise AIF;

‘Control’ means control as defined in Article 1 of the Seventh Council Directive

83/349/EEC of 13 June 1983;

(h)

(i)

(j)

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(k)

'Established' means

(i) for AIFM, 'having its registered office in';

(ii) for AIF, 'being authorised or registered in', or, as the case may be if it is not

authorised or registered, 'having its registered office in';

(iii) for depositaries, 'having its registered office or branch in';

(iv) for legal representatives that are legal persons, 'having its registered office or

branch in', for legal representatives that are natural persons 'domiciled in'.

(l)

'EU AIF' means

(i) any AIF which is authorised or registered in a Member State of the European

Union under the applicable national law; and

(ii) any AIF which is not authorised or registered in a Member State, but has its

registered office and/or head office in a Member State of the European Union;

(m) 'EU AIFM' means any AIFM which has its registered office in a Member State of the

European Union;

(n)

‘Feeder AIF’ means an AIF which:

(i) invests at least 85 % of its assets in shares or units of another AIF (the master

AIF); or

(ii) invests at least 85% of its assets in more than one master AIF where those

master AIF have identical investment strategies; or

(iii) has otherwise an exposure of at least 85% of its assets to one or more such

master AIF.

(o)

‘Financial instrument’ means an instrument as specified in Annex I Section C of

Directive 2004/39/EC;

(p)

‘Initial capital’ means the funds as referred to in Article 57(a) and (b) of Directive

2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating

to the taking up and pursuit of the business of credit institutions (recast);

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(q)

‘Issuer’ means any issuer within the meaning of Article 2(1)(d) of Directive

2004/109/EC of the European Parliament and of the Council of 15 December 2004

on the harmonisation of transparency requirements in relation to information about

issuers whose securities are admitted to trading on a regulated market and amending

Directive 2001/34/EC which has its registered office in the European Union, and

whose shares are admitted to trading on a regulated market within the meaning of

Article 4(1), point 14, of Directive 2004/39/EC of the European Parliament and of

the Council of 21 April 2004 on markets in financial instruments amending Council

Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European

Parliament and of the Council and repealing Council Directive 93/22/EEC;

(r)

'Holding company' means a company with shareholdings in one or more other

companies the commercial purpose of which is to carry out a business strategy or

strategies through its subsidiaries, associated companies or participations in order to

contribute to their long term value and which is either:

(i) a company whose shares are admitted to trading on a European regulated market

and which is operating for its own account; or

(ii) not established for the main purpose of generating returns for its investors by

means of divestment of its subsidiaries or associated companies as is evidenced

in the company's annual report or other official documents.

(s)

‘Home Member State of an AIF' means

(i) the Member State in which the AIF is authorised or registered under applicable

national law, or in case of multiple authorisations or registrations, the Member

State in which the AIF has been authorised or registered for the first time; or

(ii) if the AIF is not authorised or registered in a Member State, the Member State in

which the AIF has its registered office and/or head office;

‘Home Member State of an AIFM'' means the Member State in which the AIFM has

its registered office;

(t)

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(u)

‘Host Member State of an AIFM' means, as the case may be,

(i) The Member State, other than the home Member State, within the territory of

which an EU AIFM markets shares or units of an EU AIF; or

(ii) The Member State, other than the home Member State, within the territory of

which an EU AIFM manages EU AIF; or

(iii) The Member State, other than the home Member State, within the territory of

which an EU AIFM markets shares or units of a non-EU AIF; or

(iv) The Member State, other than the Member State of reference, within the territory

of which a non-EU AIFM manages EU AIF; or

(v) The Member State, other than the Member State of reference, within the territory

of which a non-EU AIFM markets shares or units of an EU AIF; or

(vi) The Member State, other than the Member State of reference, within the territory

of which a non-EU AIFM markets shares or units of a non-EU AIF.

‘Legal representative’ means any natural or legal person having its domicile, for

natural persons, or its registered office, for legal persons, in the European Union

who, explicitly designated by a non-EU AIFM, acts on behalf of such non-EU AIFM

and may be addressed by authorities, clients, bodies and counterparties to the non-

EU AIFM in the European Union instead of the non-EU AIFM with regard to the

latter's obligations under this Directive.

(v)

(w) ‘Leverage’ means any method by which the AIFM increases the exposure of an AIF

it manages whether through borrowing of cash or securities, or leverage embedded in

derivative positions or by any other means;

(x)

‘Managing AIF’ means providing at least investment management services referred

to in point 1(a) or (b) of Annex I to one or more AIF;

(y)

'Marketing' means any direct or indirect offering or placement at the initiative of the

AIFM or on behalf of the AIFM of units or shares in an AIF it manages to or with

investors domiciled in the Union;

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(z)

'Master AIF' means any AIF in which another AIF invests or has an exposure in

accordance with what is set forth in point (n) above.

(aa) 'Member State of reference' means the Member State of reference for a non-EU

AIFM as determined in accordance with Article 37 paragraph 4;

(ab) 'Non-EU AIF' means any AIF which is not an EU AIF;

(ac) 'Non-EU AIFM' means any AIFM which is not an EU AIFM;

(ad) ‘Non-listed company’ means any company which has its registered office in the

European Union whose shares are not admitted to trading on a regulated market

within the meaning of Article 4(1), point 14, of Directive 2004/39/EC of the

European Parliament and of the Council of 21 April 2004 on markets in financial

instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive

2000/12/EC of the European Parliament and of the Council and repealing Council

Directive 93/22/EEC;

(ae) ‘Own funds’ means own funds as referred to in Title V, Chapter 2, Section 1 of

Directive 2006/48/EC of the European Parliament and of the Council of 14 June

2006 relating to the taking up and pursuit of the business of credit institutions

(recast);

(af) ‘Parent undertaking’ means a parent undertaking as defined in Articles 1 and 2 of the

Seventh Council Directive 83/349/EEC of 13 June 1983 based on the Article

54(3)(g) of the Treaty on consolidated accounts;

(ag) 'Prime broker' means a credit institution, a regulated investment firm or an other

entity subject to prudential regulation and ongoing supervision, offering one or more

services to professional investors primarily to finance or execute transactions in

financial instruments as counterparty and which may also provide other services such

as clearing and settlement of trades, custodial services, securities lending, customised

technology and operational support facilities;

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(ah) ‘Professional investor’ means any investor which is considered to be a professional

client or may be treated as a professional client on request within the meaning of

Annex II of Directive 2004/39/EC of the European Parliament and of the Council of

21 April 2004 on markets in financial instruments amending Council Directives

85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament

and of the Council and repealing Council Directive 93/22/EEC;

(ai) ‘Qualifying holding’ means any direct or indirect holding in an AIFM which

represents 10% or more of the capital or of the voting rights, as set out in Articles 9

and 10 of Directive 2004/109/EC of the European Parliament and of the Council of

15 December 2004 on the harmonisation of transparency requirements in relation to

information about issuers whose securities are admitted to trading on a regulated

market and amending Directive 2001/34/EC, taking into account the conditions

regarding aggregation thereof laid down in Article 12(4) and (5) of that Directive, or

which makes it possible to exercise a significant influence over the management of

the AIFM in which that holding subsists;

(aj) ‘Representatives of employees’ means representatives of employees as defined by

Article 2(e) of Directive 2002/14 of 11 March 2002 establishing a general framework

for informing and consulting employees in the European Community;

(ak) ‘Retail investor’ means any investor who is not a professional investor;

(al) 'Subsidiary’ means a subsidiary undertaking as defined in Articles 1 and 2 of the

Seventh Council Directive 83/349/EEC of 13 June 1983, including any subsidiary of

a subsidiary undertaking of an ultimate parent undertaking;

(am) 'Supervisory authorities of a non-EU AIF' means the national authorities of a third

country which are empowered by law or regulation to supervise AIF;

(an) 'Supervisory authorities of a non-EU AIFM' means the national authorities of a third

country which are empowered by law or regulation to supervise AIFM;

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(ao) ’Securitisation special purpose entity’ means, for the purpose of paragraph 2(g) of

Article 2, an entity whose sole purpose is to carry on a securitisation or

securitisations within the meaning of Article 1(2) of Regulation (EC) No 24/2009 of

the European Central Bank of 19 December 2008 concerning statistics on the assets

and liabilities of financial vehicle corporations engaged in securitisation transactions

(ECB/2008/30) and other activities which are appropriate to accomplish that

purpose;

(ap) 'UCITS' means an undertaking for collective investment in transferable securities

authorised in accordance with Article 5 of Directive 2009/65/EC of the European

Parliament and of the Council of 13 July 2009 on the coordination of laws,

regulations and administrative provisions relating to undertakings for collective

investment in transferable securities (UCITS).

For the purposes of point (ae) of paragraph 1, Articles 13 to 16 of Directive 2006/49/EC of

the European Parliament and of the Council of 14 June 2006 on the capital adequacy of

investment firms and credit institutions (recast) shall apply mutatis mutandis.

The Commission shall adopt by means of delegated acts, in accordance with Article 54,

and subject to the conditions laid down in Articles 55 and 56, measures specifying:

(a)

the methods of leverage, including any financial and/or legal structures involving

third parties controlled by the relevant AIF, as defined in point (w) of paragraph 1;

and

(b)

how leverage shall be calculated.

ESMA shall develop draft regulatory technical standards to determine, where relevant in

the application of this Directive and to ensure a uniform conditions of application, the

types of AIFM.

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Power is conferred on the Commission to adopt the draft regulatory technical standards

referred to in the first subparagraph in accordance with Article 7 to 7d of Regulation (EU)

No .../2010 [ESMA].

Article 5

Determination of AIFM

Member States shall ensure that each AIF managed within the scope of this Directive shall

have a single AIFM, which shall be responsible for ensuring compliance with the

requirements of the Directive. The AIFM shall be either:

(a)

an external manager, which is the legal person appointed by the AIF or on behalf of

the AIF and which through this appointment is responsible for managing the AIF; or

(b)

where the legal form of the AIF permits an internal management and where the

AIF’s governing body chooses not to appoint an external AIFM, the AIF itself,

which shall then be authorised as AIFM.

In cases where an externally appointed AIFM is unable to ensure compliance with

requirements of this Directive for which an AIF or another entity on its behalf is

responsible, it shall immediately inform the competent authorities of its home Member

State and, insofar applicable, the competent authorities of the EU AIF concerned. The

competent authorities of the home Member State of the AIFM shall require the AIFM to

take the necessary steps to remedy the situation.

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If, despite such steps referred to in paragraph 2, the non-compliance persists, and insofar it

concerns an EU AIFM or an EU AIF, the competent authorities of the home Member State

of the AIFM shall require that it resigns as AIFM of that AIF. In that case the AIF may no

longer be marketed in the European Union. If it concerns a non-EU AIFM managing a

non-EU AIF, the AIF may no longer be marketed in the European Union. The competent

authorities of the home Member State of the AIFM shall immediately inform the

competent authorities of the host Member States of the AIFM.

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CHAPTER II

AUTHORISATION OF AIFM

Article 6

Conditions for taking up activities as AIFM

Member States shall ensure that no AIFM manages one or more AIF unless it has been

authorised in accordance with this Directive.

An AIFM authorised in accordance with this Directive has to comply with the conditions

for authorisation established in this Directive at all times.

Member States shall require that no externally appointed AIFM shall engage in activities

other than those referred to in Annex I of this Directive and the additional management of

UCITS subject to authorisation under Directive 2009/65/EC of the European Parliament

and of the Council of 13 July 2009 on the coordination of laws, regulations and

administrative provisions relating to undertakings for collective investment in transferable

securities (UCITS).

Member States shall require that no internally managed AIF shall engage in activities other

than the internal management of that AIF in accordance with Annex I.

By way of derogation from paragraph 2 Member States may authorise an externally

appointed AIFM to provide the following services:

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(a)

management of portfolios of investments, including those owned by pension funds

and institutions for occupational retirement provision in accordance with Article

19(1) of Directive 2003/41/EC of the European Parliament and of the Council of 3

June 2003 on the activities and supervision of institutions for occupational retirement

provision, in accordance with mandates given by investors on a discretionary, client-

by-client basis;

(b)

as non-core services:

(i) investment advice;

(ii) safe-keeping and administration in relation to shares or units of collective

investment undertakings;

(iii) reception and transmission of orders in relation to one or more financial

instruments.

AIFM shall not be authorised under this Directive to provide only the services referred to

in paragraph 4, or to provide non-core services referred to in point (b) of paragraph 4

without being authorised for the services referred to in point (a) of paragraph 4, or to

provide only the activities referred to in point 2 of Annex I of this Directive, or to provide

the services referred to in point 1(a) of Annex I without providing the services referred to

in point 1(b) of Annex I and vice versa.

Article 2(2) and Articles 12, 13 and 19 of Directive 2004/39/EC of the European

Parliament and of the Council of 21 April 2004 on markets in financial instruments

amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the

European Parliament and of the Council and repealing Council Directive 93/22/EEC shall

apply to the provision of the services referred to in paragraph 4 of this Article by AIFM.

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Member States shall require that the AIFM provides the competent authorities of the home

Member State of the AIFM with the information they require to monitor compliance with

the conditions referred to in this Directive on a continuous basis.

Investment firms authorised under Directive 2004/39/EC of the European Parliament and

of the Council of 21 April 2004 on markets in financial instruments amending Council

Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European

Parliament and of the Council and repealing Council Directive 93/22/EEC and credit

institutions authorised under Directive 2006/48/EC of the European Parliament and of the

Council of 14 June 2006 relating to the taking up and pursuit of the business of credit

institutions (recast) are not be required to obtain an authorisation under this Directive in

order to provide investment services such as individual portfolio management in respect of

AIF. However, investment firms can only, directly or indirectly, offer or place shares or

units of AIF to or with investors in the European Union in respect of AIF, if and to the

extent the units or shares thereof can be marketed in accordance with this Directive.

Article 7

Application for authorisation

Member States shall require that AIFM have to apply for authorisation at the competent

authorities of the home Member State of the AIFM.

Member States shall require that an AIFM applying for an authorisation shall provide the

following information relating to the AIFM to the competent authorities of its home

Member State:

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(a)

(b)

Information on the persons effectively conducting the business of the AIFM;

Information on the identities of the AIFM shareholders or members, whether direct

or indirect, natural or legal persons, that have qualifying holdings and of the amounts

of those holdings;

(c)

A programme of activity setting out the organisational structure of the AIFM,

including information on how the AIFM intends to comply with its obligations under

Chapters II, III, IV, and where applicable, V, VI, VII and VIII;

(d)

(e)

Information on the remuneration policies and practices pursuant to Article 13;

Information on arrangements made for the delegation and sub delegation to third

parties of functions as referred to in Article 20.

Member States shall require that an AIFM applying for an authorisation shall further

provide the following information on the AIF it intends to manage to the competent

authorities of its home Member State:

(a)

Information about the investment strategies including the types of underlying funds if

the AIF is a fund of fund and the AIFM’s policy as regards the use of leverage, and

the risk profiles and other characteristics of the AIF it manages or intends to manage,

including information about the Member States or third countries in which they are

established or are expected to be established;

(b)

(c)

Information on where the master AIF is established if the AIF is a feeder AIF;

The fund rules or instruments of incorporation of each AIF the AIFM intends to

manage;

(d)

Information on the arrangements made for the appointment of the depositary in

accordance with Article 21 for each AIF the AIFM intends to manage;

(e)

Any additional information referred to in Article 23(1) for each AIF the AIFM

manages or intends to manage.

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Where a management company is authorised pursuant to Directive 2009/65/EC of the

European Parliament and of the Council of 13 July 2009 on the coordination of laws,

regulations and administrative provisions relating to undertakings for collective investment

in transferable securities (UCITS) and applies for authorisation as an AIFM under this

Directive, the competent authorities should not require the management company to

provide information or documents which the management company already provided when

applying for authorisation under Directive 2009/65/EC, provided that such information or

documents is still up to date.

The competent authorities shall inform ESMA on a quarterly basis of authorisations

granted or withdrawn in accordance with this Chapter IV.

ESMA shall keep a central public register identifying each AIFM authorised under this

Directive, a list of the AIF managed and/or marketed in the European Union by such AIFM

and the competent authority for each such AIFM. The register shall be made available in

electronic format.

In order to ensure consistent harmonisation of this Article, ESMA may develop draft

regulatory technical standards to specify the information to be provided to the competent

authorities in the application for the authorisation of the AIFM, including the programme

of activity.

Power is delegated to the Commission to adopt the draft regulatory technical standards

referred to in the first subparagraph in accordance with Articles 7 to 7d of Regulation (EU)

No .../2010 [ESMA].

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In order to ensure uniform conditions of application of this Article, ESMA may develop

draft implementing technical standards to determine standard forms, templates and

procedures for the provision of information provided in the first subparagraph of paragraph

Power is conferred on the Commission to adopt the draft implementing technical standards

referred to in the fourth subparagraph in accordance with Article 7e of Regulation (EU) No

.../2010 [ESMA].

Article 8

Conditions for granting the authorisation

The competent authorities of the home Member State of an AIFM shall not grant an

authorisation unless the following conditions are met:

(a)

The relevant competent authorities are satisfied that the AIFM will be able to fulfil

the conditions of this Directive;

(b)

The AIFM has sufficient initial capital and own funds in accordance with the

requirements of Article 9;

(c)

The persons who effectively conduct the business of an AIFM are of sufficiently

good repute and are sufficiently experienced also in relation to the investment

strategies pursued by the AIF managed by the AIFM, the names of those persons and

of every person succeeding them in office being communicated forthwith to the

competent authorities of the home Member State of the AIFM and the conduct of the

business of an AIFM being decided by at least two persons meeting such conditions;

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(d)

The shareholders or members of the AIFM that have qualifying holdings are suitable

taking into account the need to ensure the sound and prudent management of the

AIFM; and

(e)

The head office and the registered office of the AIFM are located in the same

Member State.

The authorisation shall be valid for all Member States.

The relevant competent authorities of the other Member States involved shall be consulted

beforehand in relation to the authorisation of any AIFM which is one of the following:

(a)

a subsidiary of another AIFM, a management company authorised under Directive

2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the

coordination of laws, regulations and administrative provisions relating to

undertakings for collective investment in transferable securities (UCITS) (hereinafter

referred to as a UCITS management company), an investment firm, a credit

institution or an insurance undertaking authorised in another Member State;

(b)

a subsidiary of the parent undertaking of another AIFM, a UCITS management

company, an investment firm, a credit institution or an insurance undertaking

authorised in another Member State; or

(c)

a company controlled by the same natural or legal persons as control another AIFM,

a UCITS management company, an investment firm, a credit institution or an

insurance undertaking authorised in another Member State.

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The competent authorities of the home Member State of the AIFM shall refuse

authorisation where the effective exercise of their supervisory functions is prevented by

any of the following:

(a)

(b)

close links between the AIFM and other natural or legal persons;

the laws, regulations or administrative provisions of a third country governing one or

more natural or legal persons with which the AIFM has close links;

(c)

difficulties involved in the enforcement of those laws, regulations and administrative

provisions.

The competent authorities of the home Member State of the AIFM may restrict the scope

of the authorisation, in particular as regards the investment strategies of AIF the AIFM is

allowed to manage.

The competent authorities of the home Member State of the AIFM shall inform the

applicant in writing within three months of the submission of a complete application,

whether or not authorisation has been granted. The competent authorities may prolong this

period for up to three additional months, where they consider it necessary due to the

specific circumstances of the case and after having notified the AIFM accordingly.

For the purpose of this paragraph an application is deemed complete, if the AIFM has at

least submitted the information referred to in Articles 7(2)(a) to (d) and 7(3)(a) and (b).

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AIFM may start managing AIF with investment strategies described in the application in

accordance with Article 7(3)(a) in their home Member State as soon as the authorisation is

granted, but not earlier than one month after having submitted any missing information

referred to in Articles 7(2)(e) and 7(3)(c) to (e).

In order to ensure consistent harmonisation of this Article, ESMA may develop draft

regulatory technical standards to

specify the requirements applicable to the AIFM under paragraph 3;

specify the requirements applicable to shareholders and members with qualifying

holdings referred to in paragraph 1(d), as well as to specify obstacles which may

prevent effective exercise of the supervisory functions of the competent authorities.

Power is delegated to the Commission to adopt the draft regulatory technical standards

referred to in points (a) and (b) in accordance with Articles 7 to 7d of Regulation [ESMA].

Article 9

Initial capital and own funds

Member States shall require that an AIFM which is an internally managed AIF has an

initial capital of at least EUR 300 000.

Where an AIFM is appointed as external manager of one or more AIF, the AIFM shall

have an initial capital of at least EUR 125 000, taking into account the following

paragraphs.

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Where the value of the portfolios of AIF managed by the AIFM exceeds EUR 250 million,

the AIFM shall provide an additional amount of own funds. That additional amount of own

funds shall be equal to 0.02 % of the amount by which the value of the portfolios of the

AIFM exceeds EUR 250 million but the required total of the initial capital and the

additional amount must not, however, exceed EUR 10 million.

For the purpose of paragraph 3, AIF managed by the AIFM, including AIF for which the

AIFM has delegated one or more functions in accordance with Article 20 but excluding

AIF portfolios that the AIFM is managing under delegation, shall be deemed to be the

portfolios of the AIFM.

Irrespective of the amount of the requirements set out in paragraph 3, the own funds of the

AIFM shall never be less than the amount required under Article 21 of Directive

2006/49/EC of the European Parliament and of the Council of 14 June 2006 on the capital

adequacy of investment firms and credit institutions (recast).

Member States may authorise AIFM not to provide up to 50 % of the additional amount of

own funds referred to in paragraph 3 if they benefit from a guarantee of the same amount

given by a credit institution or an insurance undertaking which has its registered office in a

Member State, or in a third country where it is subject to prudential rules considered by the

competent authorities as equivalent to those laid down in Union law.

To cover potential professional liability risks resulting from activities the AIFM may carry

out pursuant to this Directive, both internally managed AIF and externally appointed

AIFM shall:

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(a)

either have additional own funds which are appropriate to cover potential liability

risks arising from professional negligence; or

(b)

hold an appropriate professional indemnity insurance against liability arising from

professional negligence which is appropriate to the risks covered.

Own funds, including any additional own funds as referred to in paragraph 7(a), shall be

invested in liquid assets or assets readily convertible to cash in the short term and shall not

include speculative positions.

The Commission shall adopt by means of delegated acts, in accordance with Article 54,

and subject to the conditions laid down in Articles 55 and 56, measures specifying:

(a)

the risks the additional own funds or the professional indemnity insurance referred to

in paragraph 7 must cover;

(b)

the conditions for determining the appropriateness of additional own funds or the

coverage of the professional indemnity insurance referred to in paragraph 7;

(c)

the manner of determining ongoing adjustments of the additional own funds or of the

coverage of the professional indemnity insurance referred to in paragraph 7.

10.

With the exception of paragraphs 7 and 8 and their implementing measures by means of

delegated acts, this Article shall not apply to AIFM which are also authorised as

management companies under Directive 2009/65/EC of the European Parliament and of

the Council of 13 July 2009 on the coordination of laws, regulations and administrative

provisions relating to undertakings for collective investment in transferable securities

(UCITS).

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Article 10

Changes in the scope of the authorisation

Member States shall require that AIFM, before implementation, notify the competent authorities of

the home Member State of the AIFM of any material changes to the conditions for initial

authorisation, in particular material changes to the information provided in accordance with

Article 7.

If the competent authorities of the relevant home Member State decide to impose restrictions or

reject those changes, they shall, within one month of receipt of that notification, inform the AIFM.

The competent authorities may prolong this period for up to one additional month, where they

consider it necessary due to the specific circumstances of the case and after having notified the

AIFM accordingly. If the relevant competent authorities do not oppose the changes within the

relevant assessment period, they may be effected.

Article 11

Withdrawal of the authorisation

The competent authorities of the home Member States of the AIFM may withdraw the authorisation

issued to an AIFM where that AIFM:

(a)

does not make use of the authorisation within 12 months, expressly renounces the

authorisation or has ceased the activity covered by this Directive for the preceding six

months, unless the Member State concerned has provided for authorisation to lapse in such

cases;

(b)

(c)

has obtained the authorisation by making false statements or by any other irregular means;

no longer fulfils the conditions under which authorisation was granted;

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(d)

no longer complies with Directive 2006/49/EC of the European Parliament and of the

Council of 14 June 2006 on the capital adequacy of investment firms and credit institutions

(recast) if its authorisation also covers the discretionary portfolio management service

referred to in paragraph 4(a) of Article 6 of this Directive;

(e)

has seriously or systematically infringed the provisions adopted pursuant to this Directive;

(f)

falls within any of the cases where national law, in respect of matters outside the scope of

this Directive, provides for withdrawal.

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CHAPTER III

OPERATING CONDITIONS FOR AIFM

ECTION

1 : G

ENERAL

RINCIPLES

Article 12

General principles

Member States shall ensure that AIFM comply with the following on an ongoing basis.

The AIFM shall:

(a)

(b)

act honestly, with due skill, care and diligence and fairly in conducting its activities;

act in the best interests of the AIF or the investors of the AIF it manages and the

integrity of the market;

(c)

have and employ effectively the resources and procedures that are necessary for the

proper performance of its business activities;

(d)

take all reasonable steps to avoid conflicts of interests and, when they cannot be

avoided, to identify, prevent, manage and monitor, and where applicable, disclose,

those conflicts of interest in order to prevent them from adversely affecting the

interests of the AIF and its investors and to ensure that the AIF it manages are fairly

treated;

(e)

comply with all regulatory requirements applicable to the conduct of its business

activities so as to promote the best interests of the AIF or the investors of the AIF it

manages and the integrity of the market;

(f)

treat all AIF investors fairly.

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No investor in an AIF may obtain a preferential treatment, unless this is disclosed in the

relevant AIF's rules or instruments of incorporation.

Each AIFM the authorisation of which also covers the discretionary portfolio management

service referred to in paragraph 4(a) of Article 6 shall:

(a)

not be permitted to invest all or a part of the client's portfolio in units or shares of the

AIF it manages, unless it receives prior general approval from the client;

(b)

with regard to the services referred to in paragraph 4 of Article 6 be subject to the

provisions laid down in Directive 97/9/EC of the European Parliament and of the

Council of 3 March 1997 on investor-compensation schemes.

The Commission shall adopt by means of delegated acts, in accordance with Article 54,

and subject to the conditions laid down in Articles 55 and 56, measures specifying the

criteria to be used by the relevant competent authorities to assess whether AIFM comply

with their obligations under paragraph 1.

Article 13

Remuneration

Member States shall require AIFM to have remuneration policies and practices for those

categories of staff, including senior management, risk takers, control functions and any

employee receiving total remuneration that takes them into the same remuneration bracket

as senior management and risk takers, whose professional activities have a material impact

on the risk profiles of AIF they manage, that are consistent with and promote sound and

effective risk management and do not encourage risk-taking which is inconsistent with the

risk profiles, fund rules or instruments of incorporation of the AIF it manages.

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The AIFM shall determine the remuneration policies and practices in accordance with what

is set forth in Annex II.

ESMA shall ensure the existence of guidelines on sound remuneration policies which

comply with the principles set out in Annex II. The guidelines shall take into account the

principles on sound remuneration policies set out in the Commission Recommendation of

30 April 2009 on remuneration policies in the financial services sector, the size of the

AIFM and the size of AIF they manage, their internal organisation and the nature, the

scope and the complexity of their activities. ESMA shall cooperate closely with the

European Banking Authority (EBA) established by Regulation (EU) no .../2010 of the

European Parliament and of the Council of […] establishing a European Supervisory

Authority (European Banking Authority).

Article 14

Conflicts of interest

Member States shall require AIFM to take all reasonable steps to identify conflicts of

interest that arise in the course of managing one or more AIF between:

(a)

the AIFM, including their managers, employees or any person directly or indirectly

linked to the AIFM by control, and the AIF managed by the AIFM or the investors of

this AIF;or

(b)

(c)

(d)

one AIF or the investors of this AIF and another AIF or the investors of this AIF, or

the AIF or the investors of the AIF and another client of the AIFM; or

the AIF or the investors of the AIF and a UCITS managed by the AIFM or the

investors of such UCITS; or

(e)

two of the AIFM's clients.

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AIFM shall maintain and operate effective organisational and administrative arrangements

with a view to taking all reasonable steps designed to identify, prevent, manage and

monitor conflicts of interest in order to prevent them from adversely affecting the interests

of the AIF and its investors.

AIFM shall segregate within its own operating environment, tasks and responsibilities

which may be regarded as incompatible with each other or which may potentially generate

systematic conflicts of interest. AIFM shall assess whether its operating conditions may

involve any other material conflicts of interest and disclose them to the AIF investors.

Where organisational arrangements made by the AIFM to identify, prevent, manage and

monitor conflicts of interest are not sufficient to ensure, with reasonable confidence, that

risks of damage to investors' interests will be prevented, the AIFM shall clearly disclose

the general nature or sources of conflicts of interest to the investors before undertaking

business on their behalf, and develop appropriate policies and procedures.

Where the AIFM on behalf of the AIF uses the services of a prime broker, the terms shall

be set out in a written contract. In particular any possibility of transfer and reuse of AIF

assets shall be provided for in that contract and shall comply with the AIF rules. The

contract shall provide that the depositary be informed of the contract.

AIFM shall exercise due skill, care and diligence in the selection and appointment of prime

brokers with whom a contract is to be concluded.

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The Commission shall adopt by means of delegated acts, in accordance with Article 54,

and subject to the conditions laid down in Articles 55 and 56, measures specifying:

(a)

(b)

the types of conflicts of interests as referred to in paragraph 1;

specifying the reasonable steps AIFM are expected to take in terms of structures and

organizational and administrative procedures in order to identify, prevent, manage,

monitor and disclose conflicts of interest.

Article 15

Risk management

The AIFM shall functionally and hierarchically separate the functions of risk management

from the operating units, including the portfolio management.

The functional and hierarchical separation of the functions of risk management in

accordance with subparagraph 1 shall be reviewed by the competent authorities of the

home Member State of the AIFM in line with the principle of proportionality, in the

understanding that the AIFM must in any event be able to demonstrate that specific

safeguards against conflicts of interest allow for the independent performance of risk

management activities and that the risk management process satisfies the requirements of

this Article and is consistently effective.

The AIFM shall implement adequate risk management systems in order to identify,

measure, manage and monitor appropriately all risks relevant to each AIF investment

strategy and to which each AIF is or can be exposed

The AIFM shall review the risk management systems with appropriate frequency, no less

than once a year, and adapt it, whenever necessary.

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The AIFM shall at least:

(a)

implement an appropriate, documented and regularly updated due diligence process

when investing on behalf of the AIF, according to the investment strategy, the

objectives and risk profile of the AIF;

(b)

ensure that the risks associated to each investment position of the AIF and their

overall effect on the AIF’s portfolio can be properly identified, measured managed

and monitored on an ongoing basis including through the use of appropriate stress

testing procedures;

(c)

ensure that the risk profile of the AIF shall correspond to the size, portfolio structure

and investment strategies and objectives of the AIF as laid down in the AIF rules or

instruments of incorporation, prospectus and offering documents.

The AIFM shall set a maximum level of leverage which the AIFM may employ on behalf

of each AIF it manages as well as extent of the right of the re-use of collateral or

guarantee that could be granted under the leveraging arrangement, taking into account,

inter alia:

(a)

(b)

(c)

(d)

the type of AIF;

their strategy;

the sources of their leverage;

any other interlinkage or relevant relationships with other financial services

institutions, which could pose systemic risk;

(e)

(f)

(g)

(h)

the need to limit the exposure to any one counterparty;

the extent to which the leverage is collateralised;

the assets liability ratio;

the scale, nature and extent of the AIFM's activity in the markets concerned.

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The Commission shall adopt by means of delegated acts, in accordance with Article 54,

and subject to the conditions laid down in Articles 55 and 56, measures specifying:

(a)

the risk management systems to be employed by AIFM as a function of the risks

which the AIFM incurs on behalf of the AIF that it manages;

(b)

(c)

the appropriate frequency of review of the risk management system;

how the risk management function shall be functionally and hierarchically separated

from the operating units, including the portfolio management function;

(d)

specific safeguards against conflicts of interest referred to in subparagraph 2 of

paragraph 1;

(e)

the requirements referred to in paragraph 3.

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Article 16

Liquidity management

The AIFM shall for each AIF it manages, that is not an unleveraged closed-ended AIF,

employ an appropriate liquidity management system and adopt procedures which enable it

to monitor the liquidity risk of the AIF and to ensure that the liquidity profile of the

investments of the AIF complies with its underlying obligations.

The AIFM shall regularly conduct stress tests, under normal and exceptional liquidity

conditions, which enable it to assess the liquidity risk of the AIF and monitor the liquidity

risk of the AIF accordingly.

The AIFM shall ensure that for each AIF it manages the investment strategy, the liquidity

profile and the redemption policy are consistent.

The Commission shall adopt by means of delegated acts, in accordance with Article 54,

and subject to the conditions laid down in Articles 55 and 56, measures specifying

(a)

(b)

the liquidity management systems and procedures,

the alignment of the investment strategy, liquidity profile and redemption policy set

out in paragraph 2.

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Article 17

Investment in securitisation positions

In order to ensure cross-sectoral consistency and to remove misalignment between the

interest of firms that repackage loans into tradable securities and originators within the

meaning of Article 4(41) of Directive 2006/48/EC of the European Parliament and of the

Council of 14 June 2006 relating to the taking up and pursuit of the business of credit

institutions (recast), and AIFM that invest in these securities or other financial instruments

on behalf of one or more AIF, the Commission shall adopt by means of delegated acts, in

accordance with Article 54, and subject to the conditions laid down in Articles 55 and 56,

measures laying down the requirements in the following areas :

(a)

the requirements that need to be met by the originator, the sponsor or the original

lender, in order for an AIFM to be allowed to invest in securities or other financial

instruments of this type issued after 1 January 2011 on behalf of one or more AIF,

including requirements that ensure that the originator, the sponsor or the original

lender, retains a net economic interest of not less than 5 per cent.

(b)

qualitative requirements that must be met by AIFM which invest in these securities

or other financial instruments on behalf of one or more AIF.

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ECTION

2 : O

RGANISATIONAL REQUIREMENTS

Article 18

General principles

Member States shall require that AIFM shall, at all times, use adequate and appropriate

human and technical resources that are necessary for the proper management of AIF.

In particular, the competent authorities of the home Member State of the AIFM, having

regard also to the nature of the AIF managed by the AIFM, shall require that the AIFM has

sound administrative and accounting procedures, control and safeguard arrangements for

electronic data processing and adequate internal control mechanisms including, in

particular, rules for personal transactions by its employees or for the holding or

management of investments in order to invest on its own account and ensuring, at least,

that each transaction involving the AIF may be reconstructed according to its origin, the

parties to it, its nature, and the time and place at which it was effected and that the assets of

the AIF managed by the AIFM are invested according to the fund rules or the instruments

of incorporation and the legal provisions in force.

The Commission shall adopt by means of delegated acts, in accordance with Article 54,

and subject to the conditions laid down in Articles 55 and 56, measures specifying the

procedures and arrangements as referred to under paragraph 1.

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Article 19

Valuation

The AIFM shall ensure that, for each AIF that it manages, appropriate and consistent

procedures are established so that a proper and independent valuation of the assets of the

AIF can be performed in accordance with this Article and the applicable national and AIF

rules.

The rules applicable to the valuation of assets and the calculation of the net asset value per

share or unit of the AIF shall be laid down in the law of the country where the AIF has its

registered office and/or in the AIF rules or instruments of incorporation.

The AIFM shall also ensure that the net asset value per share or unit of AIF is calculated

and disclosed to the investors in accordance with this Article, the applicable national law

and the AIF rules or instruments of incorporation.

The valuation procedures used shall ensure that the assets are valued and the net asset

value per share or unit are calculated at least once a year.

If the AIF is of the open-ended type, such valuations and calculations shall also be carried

out at a frequency which both is appropriate to the assets held by the fund and its issuance

and redemption frequency.

If the AIF is of the closed-ended type, such valuations and calculations shall also be carried

out in case of an increase or decrease of the capital by the relevant AIF.

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The investors are informed of the valuations and calculations in the way set forth in the

relevant AIF's rules or instruments of incorporation.

The AIFM shall ensure that the valuation function is either performed by:

(a)

an external valuer, being a legal or natural person independent from the AIF, the

AIFM and from any other persons with close links to the AIF or the AIFM; or

(b)

the AIFM itself, provided that the valuation task is functionally independent from the

portfolio management and the remuneration policy and other measures ensure that

conflicts of interest are mitigated and that undue influence upon the employees is

prevented.

The depositary appointed for an AIF cannot be appointed as external valuer of that AIF,

unless it has functionally and hierarchically separated the performance of its depositary

functions from its tasks as external valuer and the potential conflicts of interest are

properly identified, managed, monitored and disclosed to the investors of the AIF.

When an external valuer is performing the valuation function, the AIFM shall be able to

demonstrate that:

(a)

the external valuer is subject to mandatory professional registration recognized by

law or to legal or regulatory provisions or rules of professional conduct; and

(b)

the external valuer can furnish sufficient professional guarantees to be able to

effectively perform the relevant valuation function in accordance with paragraphs 1,

2 and 3; and

(c)

the appointment of the external valuer complies with the requirements of Article 20

(1) and their implementing measures by means of delegated acts.

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The appointed external valuer may not delegate the valuation function to a third party.

The AIFM shall notify the appointment of the external valuer to the competent authorities

of their home Member State which may require that another external valuer be appointed

instead, if the conditions laid down in paragraph 5 are not or no longer met.

The valuation shall be performed impartially and with all due skill, care and diligence.

When the valuation function is not performed by an independent external valuer, the

competent authorities of the home Member State of the AIFM may require the AIFM to

have its valuation procedures and/or valuations verified by an external valuer or, where

appropriate, an auditor.

10.

The AIFM is responsible for the proper valuation of AIF assets, the calculation of the net

asset value and the publication of that net asset value. Therefore, in no case shall the

AIFM's liability towards the AIF and its investors be affected by the fact that the AIFM

has appointed an external valuer.

However, notwithstanding the above and irrespective of any contractual arrangements

providing otherwise, the external valuer shall be liable to the AIFM for any losses suffered

by the AIFM as a result of the external valuer's negligence or intentional failure to perform

its tasks.

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11.

The Commission shall adopt by means of delegated acts, in accordance with Article 54,

and subject to the conditions laid down in Articles 55 and 56, measures specifying:

(a)

the criteria concerning the procedures for the proper valuation of the assets and the

calculation of the net asset value per share or unit;

(b)

the professional guarantees the external valuer must be able to furnish to effectively

perform the valuation function;

(c)

the frequency of valuation carried out by open-ended funds which is both appropriate

to the assets held by the fund and its issuance and redemption policy.

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SECTION

3 : D

ELEGATION OF

AIFM

FUNCTIONS

Article 20

Delegation

AIFM which intend to delegate to third parties the task of carrying out on their behalf one

or more of their functions shall notify the competent authorities of their home Member

State before the delegation arrangements become effective.

The following conditions have to be complied with:

(a)

the AIFM must be able to justify its entire delegation structure with objective

reasons;

(b)

the delegate must dispose of sufficient resources to perform the respective tasks and

the persons who effectively conduct the business must be of sufficiently good repute

and sufficiently experienced;

(c)

where the delegation concerns the portfolio management or the risk management, the

mandate must be given only to undertakings which are authorised or registered for

the purpose of asset management and subject to supervision. Where this condition

cannot be satisfied, delegation may only be given on the condition of prior approval

by the competent authorities of the home Member State of the AIFM;

(d)

where the delegation concerns the portfolio management or the risk management and

is given to a third-country undertaking, in addition to the requirements in point (c),

co-operation between the competent authorities of the home Member State of the

AIFM and the supervisory authority of the undertaking shall be ensured;

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(e)

the delegation shall not prevent the effectiveness of supervision of the AIFM, and in

particular, it must not prevent the AIFM from acting, or the AIF from being

managed, in the best interests of its investors;

(f)

the AIFM must be able to demonstrate that the delegate is qualified and capable of

undertaking the functions in question, that it was selected with all due care and that

the AIFM is in a position to monitor effectively at any time the delegated activity, to

give at any time further instructions to the delegate and to withdraw the delegation

with immediate effect when this is in the interest of investors.

No delegation of portfolio management or risk management shall be given to

(i)

(ii)

the depositary or to a delegate of the depositary, or

any other entity whose interests may conflict with those of the AIFM or the investors

of the AIF, unless such entity has functionally and hierarchically separated the

performance of its portfolio management or risk management tasks from its other

potentially conflicting tasks, and the potential conflicts of interest are properly

identified, managed, monitored and disclosed to the investors of the AIF.

The AIFM shall review the services provided by each delegate on an ongoing basis.

In no case shall the AIFM's liability towards the AIF and its investors be affected by the

fact that the AIFM has delegated functions to a third party, or by any further sub-

delegation, nor shall the AIFM delegate its functions to the extent that, in essence, it can no

longer be considered to be the manager of the AIF and to the extent that it becomes a

letter-box entity.

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The third party may sub-delegate any of the functions delegated to it as long as the

following conditions are fulfilled:

(a)

(b)

the AIFM consented prior to the sub-delegation;

the AIFM notified the competent authorities of its home Member State before the

sub-delegation arrangements become effective;

(c)

the conditions set forth in paragraph 1 points (a) to (f), in the understanding that all

references to the 'delegate' shall be read as references to the 'sub-delegate'.

No sub-delegation of portfolio management or risk management shall be given to

(i)

(ii)

the depositary or to a delegate of the depositary, or

any other undertaking whose interests may conflict with those of the AIFM or the

investors of the AIF, unless such entity has functionally and hierarchically separated

the performance of its portfolio management or risk management tasks from its other

potentially conflicting tasks, and the potential conflicts of interest are properly

identified, managed, monitored and disclosed to the investors of the AIF.

The relevant delegate shall review the services provided by each sub-delegate on an

ongoing basis.

Where the sub-delegate further delegates any of the functions delegated to it, the

conditions set forth in paragraph 3 shall apply mutatis mutandis.

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The Commission shall adopt by means of delegated acts, in accordance with Article 54,

and subject to the conditions laid down in Articles 55 and 56, measures specifying:

(a)

(b)

the conditions for fulfilling the requirements set out in paragraphs 1 and 3;

the conditions under which the manager has delegated its functions to the extent that

it becomes a letter-box entity and could no longer be considered to be the manager of

the AIF as set out in paragraph 2.

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SECTION

4 : D

EPOSITARY

Article 21

Depositary

For each AIF it manages, the AIFM shall ensure that a single depositary is appointed in

accordance with the provisions set forth below.

The appointment of the depositary shall be evidenced by a contract in writing. The contract

shall, among others, regulate the flow of information deemed necessary to allow the

depositary to perform its functions for the AIF for which it has been appointed as

depositary, as set out in this Directive and in other relevant laws, regulations or

administrative provisions.

The depositary shall be either:

(a)

a credit institution having its registered office in the European Union and authorised

in accordance with Directive 2006/48/EC of the European Parliament and of the

Council of 14 June 2006 relating to the taking up and pursuit of the business of credit

institutions (recast), or

(b)

an investment firm having its registered office in the European Union, subject to

capital adequacy requirements according to Article 20 (1) of Directive 2006/49/EC

of the European Parliament and of the Council of 14 June 2006 on the capital

adequacy of investment firms and credit institutions including capital requirement for

operational risks and authorised in accordance with Directive 2004/39/EC of the

European Parliament and of the Council of 21 April 2004 on markets in financial

instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive

2000/12/EC of the European Parliament and of the Council and repealing Council

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Directive 93/22/EEC, and which also provide the ancillary service of safe-keeping

and administration of financial instruments for the account of clients in accordance

with Section B(1) of Annex I to that Directive; such investment firms shall in any

case have own funds not less than the amount of initial capital referred to in Article 9

of Directive 2006/49/EC; or

(c)

other categories of institutions which are subject to prudential regulation and ongoing

supervision and which at the date of entry into force of this Directive pursuant to

Article 55 belong to those categories determined by Member States to be eligible to

be depositaries under Article 23 (3) of Directive 2009/65/EC of the European

Parliament and of the Council of 13 July 2009 on the coordination of laws,

regulations and administrative provisions relating to undertakings for collective

investment in transferable securities (UCITS).

For non-EU AIF only, and without prejudice to what is set forth in paragraph 5(b), the

depositary can also be a credit institution or any other entity of the same nature as the

entities set forth in subparagraphs (a) and (b) as long as such entity is subject to effective

prudential regulation and supervision of the same effect as the provisions laid down in

European Union law and which are effectively enforced.

In addition to the provisions of the first and second subparagraph, Member States may

allow that for AIF (i) which have no redemption rights exercisable during the period of

five years from the date of the initial investments and (ii) which, in accordance with their

core investment policy, generally do not invest in assets that must be held in custody in

accordance with point (a) of paragraph 7 or generally invest in issuers or non-listed

companies in order to potentially acquire control over such companies in accordance with

what is set forth in Article 26, the depositary may be an entity which carries out depositary

functions as part of its professional or business activities in respect of which such entity is

subject to mandatory professional registration recognized by law or to legal or regulatory

provisions or rules of professional conduct and which can furnish sufficient financial and

professional guarantees to be able to effectively perform the relevant depositary functions

and meet the commitments inherent to those functions.

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In order to avoid conflict of interests between the depositary, the AIFM and/or the AIF

and/or its investors:

(a)

(b)

an AIFM is not allowed to act as depositary;

a prime broker acting as counterparty to an AIF is not allowed to act as depositary

for this AIF, unless it has functionally and hierarchically separated the performance

of its depositary functions from its tasks as prime broker and the potential conflicts

of interest are properly identified, managed, monitored and disclosed to the

investors of the AIF. Delegation by the depositary to such prime broker of its

custody tasks in accordance with paragraph 10 is allowed if the relevant conditions

are met.

The depositary shall be located as follows:

(a)

For EU AIF, the depositary shall be established in the home Member State of the

AIF;

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(b)

For non-EU AIF, the depositary shall be established in the third country where the

AIF is established, or in the home Member State of the AIFM managing the AIF, or,

as the case may be, in the Member State of reference of the AIFM managing the AIF.

Without prejudice to the requirements set forth in paragraph 3, the appointment of a

depositary established in a third country shall at all times be subject to the following

conditions:

(i)

the competent authorities of the Member States in which the shares or units of

the third country AIF are intended to be marketed, and, insofar different, of the

home Member State of the AIFM, have signed cooperation and exchange of

information arrangements with the competent authorities of the depositary;

(ii)

in the third country where the depositary is established depositaries are subject

to effective prudential regulation (including minimum capital requirements)

and supervision which are to the same effect as the provisions laid down in

European Union law and which are effectively enforced;

(iii) the third country where the depositary is established is not listed as Non-

Cooperative Country and Territory by the Financial Action Task Force on anti-

money laundering and terrorist financing;

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(iv) the Member States in which the shares or units of the third country AIF are

intended to be marketed, and, insofar different, of the home Member State of

the AIFM, have signed an agreement with the third country where the

depositary is established which fully complies with the standards laid down in

Article 26 of the OECD Model Tax Convention and ensures an effective

exchange of information in tax matters including, if any, multilateral tax

agreements;

(v)

the depositary shall by contract be liable to the AIF, or, as the case may be, to

the investors of the AIF, consistently with the paragraphs 11 and 12 of this

Article and shall explicitly agree to comply with paragraph 10 of this Article.

Where a competent authority of another Member State disagrees with the assessment

made on the application of points (i), (ii), (iii) or (v) of subparagraph (b) by the

competent authorities of the home Member State of the AIFM, the competent

authorities concerned may refer the matter to the ESMA which may act in

accordance with the powers conferred on it under Article 11 of Regulation (EU) No

.../2010 [ESMA].

The Commission shall adopt, by means of delegated acts in accordance with Article

54 and subject to the conditions laid down in Articles 55 and 56, measures specifying

the criteria for assessing that the prudential regulation and supervision of third

countries are to the same effect as the provisions laid down in European law and are

effectively enforced, as referred to in point (ii) of this paragraph 5.

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On the basis of the criteria referred to in third subparagraph, the Commission shall

adopt, in accordance with the procedure referred to in Article 57(2), implementing

measures, stating that prudential regulation and supervision of a third country are to

the same effect as the provisions laid down in European Union law and are

effectively enforced.

The depositary shall in general ensure that the AIF's cash flows are properly monitored,

and shall in particular ensure that all payments made by or on behalf of investors upon the

subscription of shares or units of an AIF have been received and that all cash of the AIF

has been booked in one or more cash accounts opened in the name of the AIF or in the

name of the AIFM acting on behalf of the AIF or in the name of the depositary acting on

behalf of the AIF at an entity referred to in Article 18 (1) (a) to (c) of Commission

Directive 2006/73/EC of 10 August 2006 implementing Directive 2004/39/EC of the

European Parliament and of the Council as regards organisational requirements and

operating conditions for investment firms and defined terms for the purposes of that

Directive, or an other entity of the same nature as the entity referred to in Article 18 (1) (a)

to (c) of that Commission Directive 2006/73/EC in the relevant market where cash

accounts are required as long as such entity is subject to effective prudential regulation and

supervision of the same effect as the provisions laid down in European Union law and

which are effectively being enforced, and in accordance with the principles set forth in

Article 16 of Commission Directive 2006/73/EC of 10 August 2006 implementing

Directive 2004/39/EC of the European Parliament and of the Council as regards

organisational requirements and operating conditions for investment firms and defined

terms for the purposes of that Directive.

In case the cash accounts are opened in the name of the depositary acting on behalf of the

AIF, no cash of the entity referred to in the first subparagraph and none of the depositary's

own cash shall be booked on such accounts.

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The assets of the AIF, or, as the case may be, the AIFM acting on behalf of the AIF, shall

be entrusted to the depositary for safe-keeping, as follows:

(a)

Financial instruments that can be held in custody

(i)

The depositary shall hold in custody all financial instruments that can be

registered in a financial instruments account opened in the depositary’s books

and all financial instruments that can be physically delivered to the depositary;

(ii)

For this purpose, the depositary shall ensure that all those financial instruments

that can be registered in a financial instruments account opened in the

depositary’s books, are registered in the depositary's books within segregated

accounts in accordance with the principles set forth in Article 16 of

Commission Directive 2006/73/EC of 10 August 2006 implementing Directive

2004/39/EC of the European Parliament and of the Council as regards

organisational requirements and operating conditions for investment firms and

defined terms for the purposes of that Directive, opened in the name of the AIF

or, as the case may be, the AIFM acting on behalf of the AIF, so that they can

at all times be clearly identified as belonging to the AIF in accordance with the

applicable law.

(b)

Other assets

(i)

For all other assets of the AIF, the depositary shall verify the ownership of the

AIF, or, as the case may be, the AIFM acting on behalf of the AIF, of such

assets and shall maintain a record of those assets for which it is satisfied that

the AIF, or, as the case may be, the AIFM acting on behalf of the AIF, holds

the ownership of such assets;

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(ii)

The assessment whether the AIF, or, as the case may be, the AIFM acting on

behalf of the AIF, holds the ownership shall be based on information or

documents provided by the AIF or the AIFM and, where available, on external

evidence;

(iii) The depositary shall keep this record up to date.

In addition to the tasks referred to in paragraph 6 and 7, the depositary shall:

(a)

ensure that the sale, issue, re-purchase, redemption and cancellation of shares or units

of the AIF are carried out in accordance with the applicable national law and the AIF

rules or instruments of incorporation;

(b)

ensure that the value of the shares or units of the AIF is calculated in accordance

with the applicable national law and the AIF rules or instruments of incorporation

and procedures laid down in Article 19;

(c)

carry out the instructions of the AIFM, unless they conflict with the applicable

national law or the AIF rules or instruments of incorporation;

ensure that in transactions involving the AIF’s assets any consideration is remitted to

the AIF within the usual time limits;

ensure that an AIF’s income is applied in accordance with the applicable national law

and the AIF rules.

(d)

(e)

In the context of their respective roles, the AIFM and the depositary shall act honestly,

fairly, professionally, independently and in the interest of the AIF and the investors of the

AIF.

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A depositary may not carry out activities with regard to the AIF or, as the case may be, the

AIFM on behalf of the AIF that may create conflicts of interest between the AIF, its

investors, the AIFM and the relevant entity acting as a depositary, unless the depositary has

functionally and hierarchically separated the performance of its depositary tasks from its

other potentially conflicting tasks, and the potential conflicts of interest are properly

identified, managed, monitored and disclosed to the investors of the AIF.

The assets referred to in paragraph 7 may not be re-used by the depositary without the prior

consent of the AIF or, as the case may be, the AIFM acting on behalf of the AIF.

10.

The depositary may not delegate to third parties any of its functions as described in this

Article, other than those referred to in paragraph 7.

The depositary may only delegate to third parties the functions referred to in paragraph 7,

provided that:

(a)

the tasks are not delegated with the intention to avoid the requirements of this

Directive, and

(b)

the depositary can demonstrate that there is an objective reason for the delegation;

and

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(c)

the depositary has exercised all due skill, care and diligence in the selection and the

appointment of any third party to whom it wants to delegate parts of its tasks, and

shall keep exercising all due skill, care and diligence in the periodic review and

ongoing monitoring of any third party to whom it has delegated parts of its tasks and

of the arrangements of the third party in respect of the matters delegated to it; and

(d)

the depositary has ensured that the third party fulfils the following conditions and on

an ongoing basis ensures that it will remain to fulfil such conditions during the

performance of the tasks delegated to it:

(i)

it has the structures and the expertise that are adequate and proportionate to the

nature and complexity of the assets of the AIF or the AIFM acting on behalf of

the AIF which have been entrusted to it in accordance with paragraph 7;

(ii)

as far as the delegation of custody tasks referred to in point (a) of paragraph 7

are concerned, it is subject to effective prudential regulation (including

minimum capital requirements) and supervision in the jurisdiction concerned;

(iii) as far as the delegation of custody tasks referred to in point (a) of paragraph 7

are concerned, it is subject to external periodic audit to ensure that the financial

instruments are in its possession;

(iv) it segregates the assets of the depositary's clients from its own assets and from

the assets of the depositary in such a way that they can at any time be clearly

identified as belonging to clients of a given depositary;

(v)

it may not make use of the assets without the prior consent of the AIF or, as the

case may be, the AIFM acting on behalf of the AIF, and a prior information of

the depositary; and

(vi) it complies with the general obligations and prohibitions set forth in paragraph

7 and 9.

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However, where the law of a third country requires that certain financial instruments are

held in custody by a local entity and there are no local entities that satisfy the delegation

requirements laid down in paragraph 10(d) (ii) and/or (iii), the depositary can delegate its

functions to such local entity notwithstanding that the requirements have not be fulfilled, if

and to the extent (i) required by the law of the third country; and (ii) only as long as there

are no local entities that satisfy the delegation requirements; and (iii) the investors of the

relevant AIF have been duly informed of this delegation required due to legal constraints in

the law of the third country and the circumstances justifying the delegation prior to their

investment; and (iv) the AIF or the AIFM on behalf of the AIF instructed the depositary to

delegate the custody of such financial instruments to such local entity.

The third party may in turn sub-delegate these tasks, provided that the same conditions are

met. In such case, paragraph 12 shall apply mutatis mutandis to the relevant parties.

For purposes of this paragraph, the provision of services as specified by Directive

98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement

finality in payment and securities settlement systems by securities settlement systems as

designated for the purposes of that Directive 98/26/EC or the provision of similar services

by non-European securities settlement systems shall not be considered a delegation of its

custody functions.

11.

The depositary shall be liable to the AIF, or, as the case may be, to the investors of the

AIF, for the loss by the depositary, or as the case may be, a third party to whom the

custody has been delegated, of financial instruments held in custody according to point (a)

of paragraph 7.

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In the case of such a loss of a financial instrument held in custody, the depositary shall

return a financial instrument of the identical type or the corresponding amount to the AIF

or, as the case may be, the AIFM acting on behalf of the AIF without undue delay. The

depositary shall not be liable if it can prove that the loss has arisen as a result of an external

event beyond its reasonable control, the consequences of which would have been

unavoidable despite all reasonable efforts to the contrary.

The depositary shall also be liable to the AIF, or, as the case may be, to the investors of the

AIF, for all other losses suffered by them as a result of the depositary's negligent or

intentional failure to properly perform its obligations pursuant to this Directive.

12.

The depositary's liability shall not be affected by any delegation referred to in paragraph

10.

However, in case of a loss of financial instruments held in custody by a third party

pursuant to paragraph 10, provided that there is a written contract between the depositary

and the AIF, or, as the case may be, the AIFM acting on behalf of the AIF, which expressly

allows such a discharge under the explicit condition precedent of the existence of a written

contract in accordance with point (i) below and which establishes the objective reason to

contract such a discharge, the depositary can discharge itself of its liability if it can prove:

(i)

that all requirements for the delegation of its custody tasks, as set forth in paragraph

10 (a) to (d), are met, and

(ii)

that there is a written contract between the depositary and the third party that

explicitly transfers the liability of the depositary to that third party and makes it

possible for the AIF, or as the case may be, the AIFM acting on behalf of the AIF, to

make a claim against the third party in respect of the loss of financial instruments or

for the depositary to make such a claim on their behalf.

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Further, where the law of a third country requires that certain financial instruments are held

in custody by a local entity and there are no local entities that satisfy the delegation

requirements laid down in paragraph 10(d) (ii) and/or (iii), the depositary can discharge

itself of its liability provided that the following conditions are fulfilled:

(i)

the fund rules or the articles of association of the AIF concerned expressly allow for

such a discharge under the conditions set forth below; and

(ii)

the investors of the relevant AIF have been duly informed of this discharge and the

circumstances justifying the discharge prior to their investment; and

(iii) the AIF or the AIFM on behalf of the AIF instructed the depositary to delegate the

custody of such financial instruments to a local entity, and

(iv) there is a written contract between the depositary and the AIF, or, as the case may be,

the AIFM acting on behalf of the AIF, which expressly allows such a discharge; and

(v)

there is a written contract between the depositary and the third party that explicitly

transfers the liability of the depositary to that local entity and makes it possible for

the AIF, or as the case may be, the AIFM acting on behalf of the AIF, to make a

claim against that local entity in respect of the loss of financial instruments or for the

depositary to make such a claim on their behalf.

13.

Liability to the investors of the AIF may be invoked directly or indirectly through the

AIFM, depending on the legal nature of the relationship between the depositary, the AIFM

and the investors.

14.

The depositary shall make available on request to its competent authorities all information

which it has obtained while undertaking its duties and that may be necessary for the

competent authorities of the AIF or the AIFM. If the competent authorities of the AIF or

the AIFM are different from those of the depositary, the competent authorities of the

depositary shall share the information received without delay with the competent

authorities of the AIF and the AIFM.

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15.

The Commission shall adopt by means of delegated acts, in accordance with Article 54,

and subject to the conditions laid down in Articles 55 and 56, measures specifying:

(a)

the particulars that need to be included in the standard agreement as referred to in

paragraph 2;

(b)

general criteria for assessing whether the prudential regulation and supervision of

third countries as referred to in the second subparagraph of paragraph 2 are to the

same effect as the provisions laid down in European Union law and are effectively

enforced;

(c)

the conditions for performing the depositary functions pursuant to paragraphs 6, 7

and 8, including:

- the type of financial instruments that shall be included in the scope of the

depositary's custody duties according to point (a) of paragraph 7;

- the conditions upon which the depositary may exercise its custody duties

over financial instruments registered with a central depositary; and

- the conditions upon which the depositary shall safe keep according to point

(b) of paragraph 7 the financial instruments issued in a nominative form

and registered with an issuer or a registrar;

(d)

(e)

(f)

the due diligence duties of depositaries pursuant to paragraph 10 (c);

the segregation obligation set forth in paragraph 10 (d) (iv):

the conditions and circumstances under which financial instruments held in custody

shall be considered as lost;

(g)

what is to be understood by external events beyond reasonable control, the

consequences of which would have been unavoidable despite all reasonable efforts to

the contrary pursuant to paragraph 11;

(h)

the conditions and circumstances under which there is an objective reason to contract

a discharge pursuant to paragraph 12.

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CHAPTER IV

TRANSPARENCY REQUIREMENTS

Article 22

Annual report

An AIFM shall, for each of the EU AIF it manages and for each of the AIF it markets in

the European Union, make available an annual report for each financial year no later than

six months following the end of the financial year. The annual report shall be provided to

investors on request. The annual report shall be made available to the competent authorities

of the home Member State of the AIFM, and, where applicable, the home Member State of

the AIF.

Where the AIF is required to make public an annual financial report in accordance with

Directive 2004/109/EC only such additional information referred to in points (a) to (f) of

paragraph 2 needs to be provided to investors on request, either separately or as an

additional part of the annual financial report. In the latter case the annual financial report

shall be made public no later than four months following the end of the financial year.

The annual report shall at least contain the following:

(a)

(b)

(c)

(d)

a balance-sheet or a statement of assets and liabilities;

an income and expenditure account for the financial year;

a report on the activities of the financial year;

any material changes in the information listed in Article 23 during the financial year

covered by the report;

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(e)

the total amount of remuneration for the financial year, split into fixed and variable

remuneration paid by the AIFM to its staff members, and number of beneficiaries,

and, where relevant, carried interests paid by the AIF;

(f)

the aggregate amount of remuneration broken down by senior management and

members of staff of the AIFM whose actions have a material impact on the risk

profile of the AIF.

The accounting information given in the annual report shall be prepared in accordance with

the accounting standards of the home Member State of the AIF, or, as the case may be, in

accordance with the accounting standards of the third country where the AIF has its

registered office and with the accounting rules laid down in the fund rules or in the

instruments of incorporation of the AIF.

The accounting information given in annual report shall be audited by one or more persons

empowered by law to audit accounts in accordance with Directive 2006/43/EC of the

European Parliament and of the Council of 17 May 2006 on statutory audits of annual

accounts and consolidated accounts, amending Council Directives 78/660/EEC and

83/349/EEC and repealing Council Directive 84/253/EEC. The auditor's report, including

any qualifications, shall be reproduced in full in the annual report.

By way of derogation from the second subparagraph, Member States may permit AIFM

marketing non-EU AIF to subject the annual reports of those AIF to an audit meeting

international auditing standards in force in the country where the AIF has its registered

office.

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The Commission shall adopt by means of delegated acts, in accordance with Article 54,

and subject to the conditions laid down in Articles 55 and 56, measures specifying the

content and format of the annual report. These measures shall be adapted to the type of

AIF to which they apply.

Article 23

Disclosure to investors

AIFM shall for each of the EU AIF it manages and for each of the AIF it markets in the

European Union make available to AIF investors, in a way as set forth in the AIF's fund

rules or articles of association, the following information before they invest in the AIF, as

well as any material changes thereof:

(a)

a description of the investment strategy and objectives of the AIF, information on

where any master AIF is established, information on where the underlying funds are

established if the AIF is a fund of fund, the types of assets which the AIF may invest

in and of the techniques it may employ and of all associated risks, any applicable

investment restrictions, the circumstances in which the AIF may use leverage, the

types and sources of leverage permitted and the associated risks, any restrictions to

the use of leverage and of any collateral and asset re-use arrangements, and

information on the maximum level of leverage which the AIFM may employ on

behalf of the AIF;

(b)

a description of the procedures by which the AIF may change its investment strategy

or investment policy, or both;

(c)

a description of the main legal implications of the contractual relationship entered

into for the purpose of investment, including information on jurisdiction, applicable

law and on the existence, or not, of any legal instruments providing for the

recognition and enforcement of judgments on the territory where the AIF is

established;

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(d)

the identity of the AIFM, the AIF’s depositary, auditor and any other service

providers and a description of their duties and the investors’ rights;

(e)

(f)

a description of how the AIFM is complying with the requirements of Article 9(7);

a description of any delegated management function as referred to in Annex 1 by the

AIFM and of any safekeeping function delegated by the depositary, the identification

of the delegate and any conflicts of interest that may arise from such delegations;

a description of the AIF’s valuation procedure and of the pricing methodology for

valuing assets, including the methods used in valuing hard-to-value assets, according

to Article 19;

a description of the AIF’s liquidity risk management, including the redemption rights

both in normal and exceptional circumstances, existing redemption arrangements

with investors;

(g)

(h)

(i)

a description of all fees, charges and expenses and of the maximum amounts thereof

which are directly or indirectly borne by investors;

(j)

how the AIFM ensures a fair treatment of investors and, whenever an investor

obtains a preferential treatment or the right to obtain preferential treatment, a

description of that preferential treatment, the type of investors who obtain such

preferential treatment as well as, where relevant, their legal or economic links with

the AIF or AIFM;

(k)

(l)

the latest annual report referred to in Article 22;

the procedure and conditions of issue and sale of units or shares;

(m) the latest net asset value of the AIF or the latest market price of the unit or share of

the AIF, according to Article 19;

(n)

where available, the historical performance of the AIF;

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(o)

the identity of the prime broker and a description of any material arrangement of the

AIF with its prime brokers and the way the conflicts of interests in relation thereof

are managed and, as the case may be, the provision in the contract with the

depositary on the possibility of transfer and reuse of AIF assets, and about any

transfer of liability to the prime broker that may exist;

(p)

how and when the information required by paragraphs 4 and 5 will be disclosed.

The AIFM shall inform the investors before they invest in the AIF of any arrangement

made by the depositary to contractually discharge itself of the liability in accordance with

Article 21(12). The AIFM shall also inform investors of any changes with respect to

depositary liability without delay.

Where the AIF is required to publish a prospectus in accordance with Directive

2003/71/EC of the European Parliament and of the Council of 4 November 2003 on the

prospectus to be published when securities are offered to the public or admitted to trading

and amending Directive 2001/34/EC or in accordance with national law, only such

information referred to in paragraph 1 and paragraph 2 which is in addition to that

contained in the prospectus need to be disclosed separately or as additional information in

the prospectus.

AIFM shall for each of the EU AIF it manages and for each of the AIF it markets in the

European Union shall periodically disclose to investors:

(a)

the percentage of the AIF’s assets which are subject to special arrangements arising

from their illiquid nature;

(b)

(c)

any new arrangements for managing the liquidity of the AIF;

the current risk profile of the AIF and the risk management systems employed by the

AIFM to manage these risks.

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AIFM managing one or more EU AIF employing leverage or marketing in the European

Union one or more AIF employing leverage, shall for each such AIF disclose on a regular

basis:

(a)

any changes to the maximum level of leverage which the AIFM may employ on

behalf of the AIF as well as any right of the re-use of collateral or any guarantee

granted under the leveraging arrangement;

(b)

the total amount of leverage employed by that AIF.

The Commission shall adopt by means of delegated acts, in accordance with Article 54,

and subject to the conditions laid down in Articles 55 and 56, measures specifying the

disclosure obligations of AIFM referred to in paragraphs 4 and 5, including the frequency

of the disclosure set forth in paragraph 5. These measures shall be adapted to the type of

AIFM to which they apply.

Article 24

Reporting obligations to competent authorities

AIFM shall regularly report to the competent authorities of its home Member State on the

principal markets and instruments in which it trades on behalf of the AIF it manages.

It shall provide information on the main instruments in which it is trading, markets of

which it is a member or where it actively trades, and on the principal exposures and most

important concentrations of each of the AIF it manages.

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An AIFM shall provide for each of the EU AIF it manages and for each of the AIF it

markets in the European Union the following to the competent authorities of its home

Member State:

(a)

the percentage of the AIF’s assets which are subject to special arrangements arising

from their illiquid nature;

(b)

(c)

any new arrangements for managing the liquidity of the AIF;

the actual risk profile of the AIF and the risk management tools employed by the

AIFM to manage the market risk, liquidity risk, counterparty risk and other risks

including operational risk;

(d)

(e)

the main categories of assets in which the AIF invested;

the results of the stress tests performed according to Article 15(3)(b) and Article

16(1) second subparagraph.

The AIFM shall provide on request the following documents to the competent authorities

of its home Member State:

(a)

an annual report of each EU AIF managed by the AIFM and, as the case may be, for

each AIF marketed in the European Union, for each financial year, according to

Article 22(1);

(b)

a detailed list of all AIF which the AIFM manages for the end of each quarter.

AIFM managing one or more AIF employing leverage on a substantial basis shall make

available information about the overall level of leverage employed by each AIF it

manages, a break-down between leverage arising from borrowing of cash or securities and

leverage embedded in financial derivatives and the extent to which their assets have been

reused under leveraging arrangements to the competent authorities of its home Member

State.

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That information shall include the identity of the five largest sources of borrowed cash or

securities for each of the AIF managed by the AIFM, and the amounts of leverage received

from each of those entities for each of the AIF managed by the AIFM.

For the non-EU AIFM, the reporting obligations set forth in this paragraph are limited to

the EU AIF managed by them and the non-EU AIF marketed by them in the European

Union.

Where necessary for the effective monitoring of systemic risk, the competent authorities of

the home Member State may require information in addition to that described in this

Article, on a periodic as well as on an ad-hoc basis. The competent authorities shall inform

ESMA about the additional information requirements.

In exceptional circumstances and where required in order to ensure the stability and

integrity of the financial system, or to promote long term sustainable growth, ESMA may

request the competent authorities of the home Member State to impose additional reporting

requirements.

The Commission shall adopt by means of delegated acts, in accordance with Article 54,

and subject to the conditions laid down in Articles 55 and 56, measures specifying:

(a)

for the purposes of paragraph 4, when leverage is considered to be employed on a

substantial basis;

(b)

the obligations to report and provide information referred to in paragraphs 1 through

Those measures shall take into account the need to avoid excessive administrative burden

for competent authorities.

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CHAPTER V

AIFM MANAGING SPECIFIC TYPES OF AIF

SECTION

1 : AIFM

MANAGING

EVERAGED

AIF

Article 25

Use of information by competent authorities, supervisory cooperation and limits to leverage

Member States shall ensure that the competent authorities of the home Member State of the

AIFM use the information to be gathered under Article 24 for the purposes of identifying

the extent to which the use of leverage contributes to the build-up of systemic risk in the

financial system or risks of disorderly markets or risks to the long term growth of the

economy.

The competent authorities of the home Member States of the AIFM shall ensure that all

information gathered under Article 24, in respect of all AIFM that they supervise and the

information gathered under Article 7, is made available to competent authorities of other

relevant Member States, ESMA and the ESRB through the procedures set out in Article 48

on supervisory co-operation. They shall, without delay, also provide information through

this mechanism, and bilaterally to the competent authorities of other Member States

directly concerned, if an AIFM under their responsibility, or AIF managed by this AIFM

could potentially constitute an important source of counterparty risk to a credit institution

or other systemically relevant institutions in other Member States.

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The AIFM must demonstrate that the leverage limits for each AIF it manages are

reasonable and that it complies at all times with the leverage limits set by it. Competent

authorities shall assess the risks that the use of leverage by an AIFM with respect to the

AIF it manages could entail, and when it is deemed necessary in order to ensure the

stability and integrity of the financial system, the competent authorities of the home

Member State of the AIFM, after having notified ESMA, the ESRB and, as the case may

be, the competent authorities of the relevant AIF, shall impose limits to the level of

leverage that an AIFM may employ or other restrictions on the management of the AIF

with respect to the AIF under its management to limit the extent to which the use of

leverage contributes to the build-up of systemic risk in the financial system or risks of

disorderly markets. The competent authorities of the home Member State of the AIFM

shall duly inform ESMA and the ESRB and, as the case may be, the competent authorities

of the AIF, of actions taken in this respect, through the procedures set out in Article 48 on

supervisory co-operation.

The notification referred to in paragraph 3 shall be made not less than ten working days

before the proposed measure is intended to take effect or to be renewed. The notification

shall include details of the proposed measure, the reasons for the measure and when the

measure is intended to take effect. In exceptional circumstances, the competent authorities

of the home Member State of the AIFM may decide that the proposed measure takes effect

within that period.

ESMA shall perform a facilitation and coordination role, and in particular try to ensure that

consistent approach is taken by competent authorities, in relation to measures proposed by

competent authorities under paragraph 3.

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After receiving notification referred to in paragraph 4, ESMA shall issue advice to the

competent authorities of the home Member State of the AIFM about the measure that is

proposed or taken. The advice may in particular address whether the conditions for taking

action appear to be satisfied, whether the measures are appropriate and the duration of the

measures.

On the basis of the information received according to paragraph 2, and after taking into

account the advice of the ESRB, ESMA may determine that the leverage employed by an

AIFM, or by a group of AIFM, poses a substantial risk to the stability and integrity of the

financial system and may issue advice to competent authorities specifying the remedial

measures to be taken (including limits to the level of leverage, which that AIFM, or that

group of AIFMs, can employ). ESMA shall immediately inform the competent authorities

concerned, the ESRB, and the Commission of any such determination.

If a competent authority proposes to take action contrary to the ESMA advice referred to in

paragraphs 6 or 7 it shall inform ESMA, stating its reasons. ESMA may publish the fact

that a competent authority does not comply or intend to comply with its advice. ESMA

may also decide, on a case by case basis, to publish the reasons provided by the competent

authority for not complying with the advice. The competent authorities concerned shall

receive advanced notice about such a publication.

The Commission shall adopt by means of delegated acts, in accordance with Article 54,

and subject to the conditions laid down in Articles 55 and 56, measures setting out

principles specifying the circumstances in which competent authorities exercise the

provisions in paragraph 3, taking into account different strategies of AIF, different market

conditions in which AIF operate and possible pro-cyclical effects following from

exercising the provisions.

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SECTION

2 :

OBLIGATIONS FOR

AIFM

MANAGING

AIF

WHICH ACQUIRE CONTROL OF NON LISTED

COMPANIES AND ISSUERS

Article 26

Scope

Section 2 of Chapter V shall apply to the following:

(a)

AIFM managing one or more AIF which either individually or jointly on the basis of

an agreement aimed at acquiring control, acquire control of a non-listed company in

accordance with paragraph 5 below;

(b)

AIFM cooperating with one or more other AIFM on the basis of an agreement

pursuant to which the AIF managed by these AIFM jointly, acquire control of a non-

listed company in accordance with paragraph 5 below.

Section 2 of Chapter V shall not apply where the non-listed companies concerned are:

(i)

small and medium enterprises within the meaning of article 2(1) of the annex of

Commission Recommendation 2003/361/EC, concerning the definition of micro,

small and medium sized enterprises; or

(ii)

special purpose vehicles with the purpose of purchasing, holding or administrating

real estate.

Without prejudice to the previous paragraphs, paragraph 1 of Article 27 shall also apply to

AIFM managing AIF that acquire a non-controlling participation in a non-listed company.

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Paragraph 1 and 2 of Article 28 and Article 30 shall apply also with regard to issuers. For

the purposes of that Article, the first and second paragraph of this Article shall apply

mutatis mutandis.

For the purpose of this Section, for non-listed companies control shall mean more than

50% of the voting rights of the company.

When calculating the percentage of voting rights held by the relevant AIF, not only the

voting rights held directly by the relevant AIF shall be taken into account, but also the

voting rights of (i) any undertaking controlled by the AIF and (ii) those of any natural or

legal person acting in its own name but on behalf of the AIF or of any undertaking

controlled by the AIF, whereby control by the over such undertakings shall be established

on the basis of what is set forth in the first subparagraph.

The percentage of voting rights shall be calculated on the basis of all the shares to which

voting rights are attached even if the exercise thereof is suspended.

For the purpose of paragraph 1 and 2 of Article 28 and Article 30, for issuers control shall

be defined as in Article 5(3) of Directive 2004/25/EC of the European Parliament and of

the Council of 21 April 2004 on takeover bids.

This Section shall apply subject to the conditions and restrictions relating to Article 6 of

Directive 2002/14/EC of the European Parliament and of the Council of 11 March 2002

establishing a general framework for informing and consulting employees in the European

Union.

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This Section shall apply without prejudice to the stricter rules adopted by Member States

with respect to the acquisition of holdings in issuers and non-listed companies in their

territories.

Article 27

Notification of the acquisition of major holdings and control of non-listed companies

Member States shall require that when an AIF acquires, disposes or holds shares of a non-

listed company, the AIFM managing this AIF notifies the competent authorities of its

home Member State of the proportion of voting rights of the non-listed company held by

the AIF any time when that proportion reaches, exceeds or falls below the thresholds of

10%, 20%, 30%, 50% and 75%.

Member States shall require that when an AIF acquires, individually or jointly, control

over a non-listed company pursuant to paragraph 1 juncto paragraph 5 of Article 26, the

AIFM managing such AIF shall notify

(i)

(ii)

the non-listed company,

the shareholders of which the identities and addresses are available to the AIFM

or can be made available by the non-listed company or through a register to which

the AIFM has or can get access, and

(iii)

the competent authorities of the home Member State of the AIFM,

of the acquisition of control by the AIF.

The notification required under paragraph 2 shall contain the following additional

information:

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(a)

(b)

the resulting situation in terms of voting rights;

the conditions under which control has been reached, including information about the

identity of the different shareholders involved, any natural person or legal entity

entitled to exercise voting rights on their behalf and, if applicable, the chain of

undertakings through which voting rights are effectively held;

(c)

the date on which control was reached.

In its notification to the non-listed company, the AIFM shall request the board of directors

of the company to inform the representatives of employees or, where there are no such

representatives, the employees themselves, without undue delay of the acquisition of

control by the AIF managed by the AIFM and of the information referred to in paragraph 3

above. The AIFM shall use its best efforts to ensure that the representatives of employees

or, where there are no such representatives, the employees themselves, are duly informed

by the board of directors in accordance with what is set forth above.

The notifications referred to in paragraphs 1 to 3 above shall be made as soon as possible,

but not later than ten working days the first of which being the day on which the AIF has

reached, exceeded or fallen below the relevant threshold, or, as the case may be, has

acquired control over the non-listed company.

Article 28

Disclosure in case of acquisition of control

Member States shall require that when an AIF acquires, individually or jointly, control of a

non-listed company or an issuer pursuant to paragraph 1 juncto paragraph 5 of Article 26,

the AIFM managing such AIF shall make the information set out in the second

subparagraph available to

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(i)

(ii)

the company concerned,

the shareholders of the company of which the identities and addresses are

available to the AIFM or can be made available by the company or a register to

which the AIFM has or can get access to, and

(iii)

the competent authorities of the home Member State of the AIFM.

Member States may require that the information set out in the second subparagraph is also

made available to the national competent authorities of the non-listed company the

Member States may designate to that effect.

The AIFM shall make available:

(a)

The identity of the AIFM which either individually or in agreement with other AIFM

manage(s) the AIF that has/have reached control;

(b)

The policy for preventing and managing conflicts of interests, in particular between

the AIFM, the AIF and the company, and including information about the specific

safeguards established to ensure that any agreement between the AIFM and/or the

AIF and the company shall be at arms length;

(c)

The policy for external and internal communication relating to the company in

particular as regards employees.

In its notification to the company pursuant to paragraph 1(i) above, the AIFM shall request

the board of directors of the company to inform the representatives of employees or, where

there are no such representatives, the employees themselves, without undue delay of the

information referred to in paragraph 1 above. The AIFM shall use its best efforts to ensure

that the representatives of employees or, where there are no such representatives, the

employees themselves, are duly informed by the board of directors in accordance with

what is set forth above.

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Member States shall require that when an AIF acquires, individually or jointly, control of a

non-listed company pursuant to paragraph 1 juncto paragraph 5 of Article 26, the AIFM

managing such AIF shall ensure that the AIF, or the AIFM acting on behalf of the AIF,

makes available its intentions with regard to the future business of the non-listed company

and the likely repercussions on employment, including any material change in the

conditions of employment, to

(i)

(ii)

the non-listed company, and

the shareholders of the non-listed company of which the identities and addresses

are available to the AIFM or can be made available by the non-listed company or

a register to which the AIFM has or can get access to.

In addition, the AIFM managing the relevant AIF shall request and use its best efforts to

make sure that the board of the non-listed company makes available the information set

forth in the first subparagraph to the representatives of employees, or, where there are no

such representatives, the employees themselves, of the non-listed company.

Member States shall require that when an AIF reaches a position to exercise control of a

non-listed company pursuant to paragraph 1 juncto paragraph 5 of Article 26, the AIFM

managing such AIF shall provide the competent authorities of its home Member State and

the investors of the AIF with information on the financing of the acquisition.

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Article 29

Specific provisions regarding the annual report of AIF exercising control of non-listed companies

Member States shall require that when an AIF acquires, individually or jointly, control of a

non-listed company pursuant to paragraph 1 juncto paragraph 5 of Article 26, the AIFM

managing such AIF shall

(i)

either request and use its best efforts to make sure that the annual report of the

non-listed company is drawn up in accordance with paragraph 2 is made available

by the board of the company to all representatives of employees or, where there

are no such representatives, to the employees themselves within the period such

annual report has to be drawn up in accordance with the national applicable law;

(ii)

for each such AIF include in the annual report provided for in Article 22 the

information relating to the relevant non-listed company referred to in paragraph 2.

The additional information to be included in the annual report of the company, or, as the

case may be, the AIF, in accordance with paragraph 1, must include at least a fair review of

the development of the company's business representing the situation at the end of the

period covered by the annual report. The report shall also give an indication of:

(a)

(b)

(c)

any important events that have occurred since the end of the financial year;

the company's likely future development;

the information concerning acquisitions of own shares prescribed by Article 22 (2)

of Directive 77/91/EEC.

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The AIFM managing the relevant AIF shall

(i)

request and use its best efforts to make sure that the board of the non-listed

company makes available the information relating to the company concerned as

referred to in paragraph 1(ii) above to all representatives of employees of the

relevant company within the period referred to in Article 22 (1); or, as the case

may be,

(ii)

make available the information referred to in paragraph 1(i) above to the investors

of the AIF, insofar already available, within the period referred to in Article 22 (1)

and in any event not later than the date when the annual report of the non-listed

company has been drawn up in accordance with the national applicable law.

Article 30

Asset stripping

Member States shall require that when an AIF, individually or jointly, acquires control of a

non-listed company or an issuer pursuant to paragraph 1 juncto paragraph 5 of Article 26,

the AIFM managing such AIF shall before the end of the period expiring 24 months

following the acquisition of control of the company by the AIF:

(i)

not be allowed to facilitate, support or instruct any distribution, capital reduction,

share redemption and/or acquisition of own shares by the company as described in

paragraph 2 below; and

(ii)

insofar the AIFM is authorised to vote on behalf of the AIF at the governing

bodies of the company, not vote in favour of a distribution, capital reduction,

share redemption and/or acquisition of own shares by the company as described in

paragraph 2 below; and

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(iii)

in any event use its best efforts to prevent distributions, capital reductions, share

redemptions and/or the acquisition of own shares by the company as described in

paragraph 2 below.

The obligations imposed on the AIFM pursuant to paragraph 1 shall relate to the following:

(a)

any distribution to shareholders made when on the closing date of the last

financial year the net assets as set out in the company’s annual accounts are, or

following such a distribution would become, lower than the amount of the

subscribed capital plus those reserves which may be not distributed under the law

or the statutes, in the understanding that where the uncalled part of the subscribed

capital is not included in the assets shown in the balance sheet, this amount shall

be deducted from the amount of subscribed capital;

(b)

any distribution to shareholders the amount of which would exceed the amount of

the profits at the end of the last financial year plus any profits brought forward and

sums drawn from reserves available for this purpose, less any losses brought

forward and sums placed to reserve in accordance with the law or the statutes;

(c)

to the extent that acquisitions of own shares are permitted, the acquisitions by the

company, including shares previously acquired by the company and held by it,

and shares acquired by a person acting in his own name but on the company’s

behalf, that would have the effect of reducing the net assets below the amount

mentioned in paragraph (a);

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in the understanding that (i) the expression “distribution” used in subparagraphs (a) and (b)

includes in particular the payment of dividends and of interest relating to shares, (ii) the

provisions on capital reductions do not apply on a reduction in the subscribed capital

whose purpose it is to offset losses incurred or to include sums of money in a non-

distributable reserve provided that, following this operation, the amount of such reserve is

not more than 10 % of the reduced subscribed capital, and (iii) that the restriction in

accordance with subparagraph (c) shall be subject to the exceptions and conditions laid

down in Article 20 (1) (b) to (h) of the Second Company Law Directive.

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CHAPTER VI

RIGHTS OF EU AIFM TO MARKET AND MANAGE EU AIF IN THE EUROPEAN

UNION

Article 31

Marketing of shares or units of EU AIF in the home Member State of the AIFM

Member States shall ensure that an authorised EU AIFM may market shares or units of any

EU AIF that it manages to professional investors in the home Member State of the AIFM

as soon as the conditions laid down in this Article are met.

Where the EU AIF is a feeder AIF the right to market referred to in the first subparagraph

is subject to the condition that the master AIF is also an EU AIF which is managed by an

authorised EU AIFM.

The AIFM shall submit a notification to the competent authorities of its home Member

State in respect of each EU AIF that it intends to market.

That notification shall comprise the documentation and information as set forth in Annex

III A

No later than twenty working days after receipt of a complete notification file pursuant to

paragraph 2, competent authorities of the home Member State of the AIFM shall inform

the AIFM whether it may start marketing the AIF identified in the notification referred to

in paragraph 2. The competent authorities of the home Member State of the AIFM may

only prevent the marketing of the AIF if the AIFM’s management of the AIF is not or will

not be in accordance with one or more provisions of this Directive or in general the AIFM

will not or does not comply with one or more provisions of this Directive . In case of a

positive decision, the AIFM may start marketing the AIF in its home Member State as of

the date of the notification by the competent authorities confirming that the AIFM may

start marketing the AIF.

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Insofar they are different, the competent authorities of the home Member State of the

AIFM shall also inform the competent authorities of the AIF that the AIFM may start

marketing shares or units of the AIF.

In the event of a material change in any of the particulars communicated in accordance

with paragraph 2, the AIFM shall give written notice of that change to the competent

authorities of its home Member State at least one month before implementing the change

for any changes planned by the AIFM, or, as the case may be, immediately after the

change took place for any unplanned facts triggering a change.

If pursuant to a planned change, the AIFM’s management of the AIF would no longer be in

accordance with one or more provisions of this Directive, or, in general the AIFM would

no longer comply with one or more provisions of this Directive, the relevant competent

authorities shall inform the AIFM without undue delay that it cannot implement the

change.

If the planned change is implemented notwithstanding the above, or, if an unplanned fact

triggering a change has taken place pursuant to which the AIFM’s management of the AIF

would no longer be in accordance with one or more provisions of this Directive, or, in

general the AIFM would no longer comply with one or more provisions of this Directive,

the competent authorities of the home Member State of the AIFM shall take all due

regulatory measures in accordance with Article 44, including if necessary the explicit

prohibition of marketing of the AIF.

In order to ensure uniform conditions of application of this Article, ESMA may develop

draft implementing technical standards to determine:

(a)

the form and content of a standard model of the notification letter referred to in

paragraph 2;

(b)

the form of the written notice referred to in paragraph 4.

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Power is conferred on the Commission to adopt the draft implementing technical standards

referred to in the first subparagraph in accordance with Article 7e of Regulation (EU) No

.../2010 [ESMA].

Without prejudice to Article 41(1), Member States shall require that the AIF managed and

marketed by the AIFM are only marketed to professional investors.

Article 32

Marketing of shares or units of EU AIF in other Member States than in

the home Member State of the AIFM

Member States shall ensure that an authorised EU AIFM may market shares or units of an

EU AIF that it manages to professional investors in another Member State than the home

Member State of the AIFM as soon as the conditions laid down in this Article are met.

Where the EU AIF is a feeder AIF the right to market referred to in the first subparagraph

is subject to the condition that the master AIF is also an EU AIF and is managed by an

authorised EU AIFM.

The AIFM shall submit a notification to the competent authorities of its home Member

State in respect of each EU AIF that it intends to market.

That notification shall comprise the documentation and information as set forth in Annex

III B.

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The competent authorities of the home Member State of the AIFM shall, no later than

twenty working days after the date of receipt of the complete notification file referred to in

paragraph 2, transmit the complete notification file to the competent authorities of the

Member State(s) where the AIF is proposed to be marketed. Such transmission shall only

occur if the AIFM’s management of the AIF is and will be in accordance with the

provisions of this Directive and that in general the AIFM complies with the provisions of

this Directive.

The competent authorities of the home Member State of the AIFM shall enclose an

attestation that the AIFM concerned is authorised to manage AIF with that particular

investment strategy.

Upon transmission of the notification file, the competent authorities of the home Member

State of the AIFM shall without delay notify the AIFM about the transmission. The AIFM

may start marketing the AIF in the host Member State(s) of the AIFM as of the date of that

notification.

Insofar they are different, the competent authorities of the home Member State of the

AIFM shall also inform the competent authorities of the AIF that the AIFM may start

marketing the shares or units of the AIF in the host Member State(s) of the AIFM.

Arrangements referred to in point (h) of Annex III B shall be subject to the laws and

supervision of the host Member State(s) of the AIFM.

Member States shall ensure that the notification letter by the AIFM referred to in paragraph

2 and the attestation referred to in paragraph 3 are provided in a language customary in the

sphere of international finance.

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Member States shall ensure that electronic transmission and filing of the documents

referred to in paragraph 3 is accepted by their competent authorities.

In the event of a material change in any of the particulars communicated in accordance

with paragraph 2, the AIFM shall give written notice of that change to the competent

authorities of its home Member State at least one month before implementing the change

for any changes planned by the AIFM, or, as the case may be, immediately after the

change took place for any unplanned facts triggering a change.

If pursuant to the planned change, the AIFM’s management of the AIF would no longer be

in accordance with one or more provisions of this Directive, or, in general the AIFM would

no longer comply with one or more provisions of this Directive, the relevant competent

authorities shall inform the AIFM without undue delay that it cannot implement the

change.

If the planned change is implemented notwithstanding the above, or, if an unplanned fact

triggering a change has taken place pursuant to which the AIFM’s management of the AIF

would no longer be in accordance with one or more provisions of this Directive, or, in

general the AIFM would no longer comply with one or more provisions of this Directive,

the competent authorities of the home Member State of the AIFM shall take all due

regulatory measures in accordance with Article 44, including if necessary the explicit

prohibition of marketing of the AIF.

If the changes are acceptable, i.e. if they do not influence the AIFM’s management of the

AIF being in accordance with the provisions of this Directive, or, in general the

compliance by the AIFM with the provisions of this Directive, the competent authorities of

the home Member State of the AIFM shall without delay inform the competent authorities

of the host Member State(s) of the AIFM of those changes.

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In order to ensure uniform conditions of application of this Article, ESMA may develop

draft implementing technical standards to determine:

(a)

the form and content of a standard model of the notification letter referred to in

paragraph 2;

(b)

(c)

(d)

the form and content of a standard model of attestation referred to in paragraph 3;

the form of the transmission referred to in paragraph 3;

the form of the written notice referred to in paragraph 7.

Power is conferred on the Commission to adopt the draft implementing technical standards

referred to in the first subparagraph in accordance with Article 7e of Regulation (EU) No

.../2010 [ESMA].

Without prejudice to Article 41(1), Member States shall require that the AIF managed and

marketed by the AIFM are only marketed to professional investors.

Article 33

Conditions for managing AIF established in other Member States

Member States shall ensure that an authorised EU AIFM may manage EU AIF established

in another Member State either directly or via the establishment of a branch, provided that

the AIFM is authorised to manage that type of AIF.

Any AIFM intending to manage EU AIF established in another Member State for the first

time shall communicate the following information to the competent authorities of its home

Member State:

(a)

(b)

the Member State in which it intends to manage AIF directly or establish a branch;

a programme of operations stating in particular the services which it intends to

perform and identifying the AIF it intends to manage.

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If the AIFM intends to establish a branch, it shall provide, in addition to paragraph 2, the

following information:

(a)

(b)

the organisational structure of the branch;

the address in the home Member State of the AIF from which documents may be

obtained;

(c)

the names and contact details of persons responsible for the management of the

branch.

The competent authorities of the home Member State of the AIFM shall, within one month

of receiving the complete documentation in accordance with paragraphs 2 or within two

months of receiving the complete documentation in accordance with paragraph 3, transmit

this complete documentation to the competent authorities of the host Member State of the

AIFM. Such transmission shall only occur if the AIFM’s management of the AIF is and

will be in accordance with the provisions of this Directive and that the AIFM complies

with the provisions of this Directive.

The competent authorities of the home Member State of the AIFM shall enclose an

attestation that the AIFM concerned is authorised by them.

The competent authorities of the home Member State of the AIFM shall immediately

notify the AIFM about the transmission. Upon receipt of the transmission notification the

AIFM may start to provide its services in the host Member State of the AIFM.

The host Member State of the AIFM shall not impose any additional requirements on the

AIFM concerned in respect of the matters covered by this Directive.

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In the event of a change in any of the information communicated in accordance with

paragraph 2, and, as the case may be, paragraph 3, an AIFM shall give written notice of

that change to the competent authorities of its home Member State at least one month

before implementing the change for any changes planned by the AIFM, or, as the case may

be, immediately after the change took place for any unplanned facts triggering a change.

If pursuant to the planned change, the AIFM’s management of the AIF would no longer be

in accordance with one or more provisions of this Directive, or, in general the AIFM would

no longer comply with one or more provisions of this Directive, the competent authorities

of the home Member State of the AIFM shall inform the AIFM without undue delay that it

cannot implement the change.

If the planned change is implemented notwithstanding the above, or, if an unplanned fact

triggering a change has taken place pursuant to which the AIFM’s management of the AIF

would no longer be in accordance with one or more provisions of this Directive, or, in

general the AIFM would no longer comply with one or more provisions of this Directive,

the competent authorities of the home Member State of the AIFM shall take all due

regulatory measures in accordance with Article 44.

If the changes are acceptable, i.e. if they do not influence the AIFM’s management of the

AIF being in accordance with the provisions of this Directive, or, in general the

compliance by the AIFM with the provisions of this Directive, the competent authorities of

the home Member State of the AIFM shall without undue delay inform the competent

authorities of the host Member State(s) of the AIFM of those changes.

In order to ensure consistent harmonisation of this Article, ESMA may develop draft

regulatory technical standards to specify the information to be notified in accordance with

paragraphs 2 and 3.

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Power is delegated to the Commission to adopt the draft regulatory technical standards

referred to in the first subparagraph in accordance with Articles 7 to 7d of Regulation (EU)

No .../2010 [ESMA].

In order to ensure uniform conditions of application of this Article, ESMA may develop

draft implementing technical standards to establish standard forms, templates and

procedures for the transmission of information in accordance with paragraphs 2 and 3.

Power is conferred on the Commission to adopt the draft implementing technical standards

referred to in the third subparagraph in accordance with Article 7e of Regulation (EU) No

.../2010 [ESMA].

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CHAPTER VII

SPECIFIC RULES IN RELATION TO THIRD COUNTRIES

Article 34

Conditions for EU AIFM which manage non-EU AIF which are not marketed in Member States

Member States shall ensure that an authorised EU AIFM may manage non-EU AIF which

are not marketed in the European Union provided that:

(a)

The AIFM complies with all the requirements established in this Directive except for

Article 21 and Article 22 in respect of those AIF; and,

(b)

Appropriate cooperation arrangements are in place between the competent authorities

of the home Member State of the AIFM and the supervisory authorities of the third

country where the non-EU AIF is established in order to ensure at least an efficient

exchange of information that allows competent authorities of the home Member State

of the AIFM to carry out their duties according to this Directive.

The Commission shall adopt by means of delegated acts, in accordance with Article 54 and

subject to the conditions set forth in Articles 55 and 56, measures regarding the

cooperation arrangements referred to in paragraph 1 in order to design a common

framework to facilitate the establishment of those cooperation arrangements with third

countries.

In order to ensure uniform application of this Article, ESMA shall develop guidelines to

determine the conditions of application of the measures adopted by the Commission

regarding the cooperation arrangements referred to in paragraph 1.

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Article 35

Conditions for the marketing in the European Union

with a passport of a non-EU AIF managed by an EU AIFM

Member States shall ensure that an authorised EU AIFM may market to professional

investors in the European Union shares or units of the non-EU AIF they manage and of EU

feeder AIF that do not fulfil the requirements referred to in the second subparagraph of

paragraph 1 of Article 31 as soon as the conditions laid down in this Article are met.

The AIFM must comply with all the requirements established in this Directive, with the

exception of Chapter VI. In addition the following conditions apply:

(a)

Appropriate cooperation arrangements are in place between the competent authorities

of the home Member State of the AIFM and the supervisory authorities of the third

country where the non-EU AIF is established in order to ensure at least an efficient

exchange of information, taking into account Article 48(4), that allows the competent

authorities to carry out their duties according to this Directive.

(b)

The third country where the non-EU AIF is established is not listed as Non-

Cooperative Country and Territory by the Financial Action Task Force on anti-

money laundering and terrorist financing.

(c)

The third country where the non-EU AIF is established has signed an agreement with

the home Member State of the authorised AIFM and with each other Member State

in which the shares or units of the non-EU AIF are proposed to be marketed, which

fully complies with the standards laid down in Article 26 of the OECD Model Tax

Convention and ensures an effective exchange of information in tax matters,

including, if any, multilateral tax agreements.

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Where a competent authority of another Member State disagrees with the assessment made

on the application of points (a) and (b) of this paragraph 2 by the competent authorities of

the home Member State of the AIFM, the competent authorities concerned may refer the

matter to the ESMA which may act in accordance with the powers conferred on it under

Article 11 of Regulation (EU) No .../2010 [ESMA].

In case the AIFM intends to market shares or units of the non-EU AIF in its home Member

State, the AIFM shall submit a notification to the competent authorities of its home

Member State in respect of each non-EU AIF that it intends to market.

That notification shall comprise the documentation and information as set forth in Annex

III A.

No later than twenty working days after receipt of a complete notification pursuant to

paragraph 3, the competent authorities of the home Member State of the AIFM shall

inform the AIFM whether it may start marketing the AIF identified in the notification

referred to in paragraph 3 in its territory. The competent authorities of the home Member

State of the AIFM may only prevent the marketing of the AIF if the AIFM’s management

of the AIF is not or will not be in accordance with one or more provisions of this Directive,

or, in general the AIFM will not or does not comply with one or more provisions of this

Directive. In case of a positive decision, the AIFM may start marketing the AIF in its home

Member State as of the date of the notification by the competent authorities confirming

that the AIFM may start marketing the AIF.

The competent authorities of the home Member State of the AIFM shall also inform

ESMA that the AIFM may start marketing shares or units of the AIF in the home Member

State of the AIFM.

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In case the AIFM intends to market shares or units of the non-EU AIF in one or more

Member State(s) other than its home Member State, the AIFM shall submit a notification

to the competent authorities of its home Member State in respect of each non-EU AIF that

it intends to market.

That notification shall comprise the documentation and information as set forth in Annex

III B.

The competent authorities of the home Member State of the AIFM shall, no later than

twenty working days after the date of receipt of the complete notification file referred to in

paragraph 5, transmit this complete notification file to the competent authorities of the

Member State where the AIF is proposed to be marketed. Such transmission will only

occur if the AIFM’s management of the AIF is and will be in accordance with the

provisions of this Directive and that in general the AIFM complies with the provisions of

this Directive.

The competent authorities of the home Member State of the AIFM shall enclose an

attestation that the AIFM concerned is authorised to manage AIF with that particular

investment strategy.

Upon transmission of the notification file, the competent authorities of the home Member

State of the AIFM shall without delay notify the AIFM about the transmission. The AIFM

may start marketing the AIF in the relevant host Member State(s) of the AIFM as of the

date of that notification by the competent authorities.

The competent authorities of the home Member State of the AIFM shall also inform

ESMA that the AIFM may start marketing the shares or units of the AIF in the host

Member State(s) of the AIFM.

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Arrangements referred to in point (h) of Annex III B shall be subject to the laws and

supervision of the host Member State(s) of the AIFM.

Member States shall ensure that the notification letter of the AIFM referred to in paragraph

5 and the attestation referred to in paragraph 6 are provided in a language customary in the

sphere of international finance.

Member States shall ensure that electronic transmission and filing of the documents

referred to in paragraph 6 is accepted by their competent authorities.

10.

In the event of a material change in any of the particulars communicated in accordance

with paragraph 3 and/or 5, the AIFM shall give written notice of that change to the

competent authorities of its home Member State, at least one month before implementing

the change for any changes planned by the AIFM, or, as the case may be, immediately

after the change took place for any unplanned facts triggering a change.

If pursuant to a planned change, the AIFM’s management of the AIF would no longer be in

accordance with one or more provisions of this Directive, or, in general the AIFM would

no longer comply with one or more provisions of this Directive, the competent authorities

of the home Member State of the AIFM shall inform the AIFM without undue delay that it

cannot implement the change.

If the planned change is implemented notwithstanding the above, or, if an unplanned fact

triggering a change has taken place pursuant to which the AIFM’s management of the AIF

would no longer be in accordance with one or more provisions of this Directive, or, in

general the AIFM would no longer comply with one or more provisions of this Directive,

the competent authorities of the home Member State of the AIFM shall take all due

regulatory measures in accordance with Article 44, including if necessary the explicit

prohibition of marketing of the AIF.

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If the changes are acceptable, i.e. if they do not influence the AIFM’s management of the

AIF being in accordance with the provisions of this Directive, or, in general the

compliance by the AIFM with the provisions of this Directive, the competent authorities of

the home Member State of the AIFM shall without delay inform ESMA insofar as the

changes concern the termination of the marketing of certain AIF or additional AIF being

marketed and, insofar applicable, the competent authorities of the host Member State(s) of

the AIFM of those changes.

11.

The Commission shall adopt by means of delegated acts, in accordance with Articles 54

and subject to the conditions set forth in Articles 55 and 56, measures regarding the

cooperation arrangements referred to in paragraph 2(a) in order to design a common

framework to facilitate the establishment of those cooperation arrangements with third

countries.

12.

In order to ensure uniform application of this Article, ESMA may develop guidelines to

determine the conditions of application of the measures adopted by the Commission

regarding the cooperation arrangements referred to in paragraph 2(a).

13.

ESMA shall develop draft regulatory technical standards to determine the minimum

content of the cooperation arrangements referred to in paragraph 2(a) so as to ensure that

both the competent authorities of the home and the host Member States receive sufficient

information in order to be able to excercise their supervisory and investigatory powers

under this Directive.

Power is conferred on the Commission to adopt the draft regulatory technical standards

referred to in the first subparagraph in accordance with Article 7 to 7d of Regulation (EU)

No .../2010 [ESMA].

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14.

In order to ensure consistent harmonisation of this Article, ESMA shall develop draft

regulatory technical standards to specify the procedures for coordination and exchange of

information between the competent authority of the home Member State and the competent

authorities of the host Member States of the AIFM.

Power is delegated to the Commission to adopt the draft regulatory technical standards

referred to in the first subparagraph in accordance with Articles 7 to 7d of Regulation (EU)

No .../2010 [ESMA].

15.

In case a competent authority rejects a request to exchange information in accordance with

what is set forth in the technical standards set forth in paragraph 14, the competent

authorities concerned may refer the matter to ESMA, which may act in accordance with

the powers conferred on it under Article 11 of Regulation [ESMA].

16.

In order to ensure uniform conditions of application of this Article, ESMA may develop

draft implementing technical standards to determine:

(a)

the form and content of a standard model of the notification letter referred to in

paragraph 3;

(b)

the form and content of a standard model of the notification letter referred to in

paragraph 5;

(c)

(d)

(e)

the form and content of a standard model of attestation referred to in paragraph 6;

the form of the transmission referred to in paragraph 6;

the form of the written notice referred to in paragraph 10.

Power is conferred on the Commission to adopt the draft implementing technical standards

referred to in the first subparagraph in accordance with Article 7e of Regulation (EU) No

.../2010 [ESMA].

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14.

Without prejudice to Article 41(1), Member States shall require that the AIF managed and

marketed by the AIFM are only marketed to professional investors.

Article 36

Conditions for the marketing in Member States without a passport of non-EU AIF managed by an

EU AIFM

Without prejudice to Article 35, Member States may allow an authorised EU AIFM to

market to professional investors, on their territory only, shares or units of non-EU AIF they

manage and of EU feeder AIF that do not fulfil the requirements referred to in the second

subparagraph of paragraph 1 of Article 31, provided that:

(a)

The AIFM complies with all the requirements established in this Directive with the

exception of Article 21. Those AIFM shall however ensure that one or more entities

are appointed to carry out the duties referred to in paragraphs 6, 7 and 8 of Article

21. The AIFM shall not perform those functions. The AIFM shall provide its

supervisory authorities with information about the identity of those entities

responsible for carrying out the duties referred to in paragraph paragraphs 6,7 and 8

of Article 21.

(b)

Appropriate cooperation arrangements for the purpose of systemic risk oversight and

in line with international standards are in place between the competent authorities of

the home Member State of the AIFM and the supervisory authorities of the third

country where the non-EU AIF is established in order to ensure an efficient exchange

of information that allows competent authorities of the home Member State of the

AIFM to carry out their duties according to this Directive.

(c)

The third country where the non-EU AIF is established is not listed as Non-

Cooperative Country and Territory by the Financial Action Task Force on anti-

money laundering and terrorist financing.

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Member States may impose stricter rules on the AIFM in respect of the marketing of units

or shares of non-EU AIF to investors on their territory for the purpose of this Article.

The Commission shall adopt by means of delegated acts, in accordance with Article 54 and

subject to the conditions set forth in Articles 55 and 56 measures regarding the cooperation

arrangements referred to in paragraph 1 in order to design a common framework to

facilitate the establishment of those cooperation arrangements with third countries.

In order to ensure uniform application of this Article, ESMA shall develop guidelines to

determine the conditions of application of the measures adopted by the Commission

regarding the cooperation arrangements referred to in paragraph 1.

Article 37

Authorisation of non-EU AIFM intending to manage EU AIF and/or market AIF managed by it in

the European Union in accordance with Article 38 or 39

Member States shall require that non-EU AIFM intending to manage EU AIF and/or to

market AIF managed by it in the territory of the European Union in accordance with

Article 38 or 39 must acquire a prior authorisation by the competent authorities of their

Member State of reference in accordance with the provisions set forth below.

A non-EU AIFM intending to obtain authorisation to manage EU AIF and/or market AIF

managed by it in the European Union in accordance with Article 38 or 39, must comply

with all provisions of this Directive, with the exception of Chapter VI in the understanding

that:

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(i)

all references in the Directive to 'the competent authorities of the home Member

State of the AIFM' shall be read as references to 'the competent authorities of the

Member State of reference of the AIFM', and

(ii)

if and to the extent compliance with a provision of this Directive is incompatible

with compliance with the law to which the non-EU AIFM and/or, as the case may be,

the non-EU AIF marketed in the European Union, is submitted, the AIFM must not

comply with that provision of the Directive if it can demonstrate that (i) it is

impossible to combine compliance with a provision of this Directive with

compliance with a mandatory provision in the law to which the non- EU AIFM

and/or, as the case may be, the non- EU AIF marketed in the European Union, is

submitted, (ii) the law to which the non-EU AIFM and/or the non-EU AIF is

submitted provides for an equivalent rule having the same regulatory purpose and

offering the same level of protection to the investors of the relevant AIF and (iii) the

non-EU AIFM and/or the non-EU AIF complies with that equivalent rule.

A non-EU AIFM intending to obtain authorisation to manage EU AIF and/or to market

AIF managed by it in the European Union in accordance with Article 38 or 39, must have a

legal representative established in its Member State of reference. The legal representative

shall be the contact point of the AIFM in the European Union and any official

correspondence between the competent authorities and the AIFM and between the EU

investors of the relevant AIF and the AIFM as set forth in this Directive shall take place

through this legal representative. The legal representative shall perform the compliance

function relating to the management and marketing activities performed by the AIFM

under this Directive together with the AIFM.

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The Member State of reference of a non-EU AIFM shall be determined as follows:

(a)

If the non-EU AIFM intends to manage only one EU AIF, or several EU AIF

established in the same Member State and does not intend to market any AIF in

accordance with Article 38 or 39 in the European Union, the home Member State of

that or those AIF is deemed to be the Member State of reference and the competent

authorities of this Member State will be competent for the authorisation procedure

and for the supervision of the AIFM.

(b)

If the AIFM intends to manage several EU AIF established in different Member

States and does not intend to market any AIF in accordance with Article 38 or 39 in

the European Union, the Member State of reference will either be,

(i)

(ii)

(c)

the Member State where most of the AIF are established, or

the Member State where the largest amount of assets is being managed.

If the non-EU AIFM intends to market only one EU AIF in only one Member State

of the European Union, the Member State of reference will be:

(i)

if the AIF is authorised or registered in a Member State, the home Member

State of the AIF or the Member State where the AIFM intends to market the

AIF;

(ii)

if the AIF is not authorised or registered in a Member State, the Member State

where the AIFM intends to market the AIF.

(d)

If the non-EU AIFM intends to market only one non-EU AIF in only one Member

State of the European Union, the Member State of reference will be that Member

State.

(e)

If the AIFM intends to market only one EU AIF, but in different Member States, the

Member State of reference shall be:

(i)

if the AIF is authorised or registered in a Member State, the home Member

State of the AIF or one of the Member States where the AIFM intends to

develop effective marketing; or

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(ii) if the AIF is not authorised or registered in a Member State one of the Member

States where the AIFM intends to develop effective marketing.

(f)

If the AIFM intends to market only one non-EU AIF, but in different Member States,

the Member State of reference shall be one of those Member States.

(g)

If the AIFM intends to market several EU AIF in the European Union, the Member

State of reference shall be:

(i)

insofar those AIF are all registered or authorised in the same Member State, the

home Member State of those AIF or the Member State where the AIFM

intends to develop effective marketing for most of those AIF;

(ii)

insofar those AIF are not all registered or authorised in the same Member State,

the Member State where the AIFM intends to develop effective marketing for

most of those AIF.

(h)

If the AIFM intends to market several EU and non-EU AIF, or several non-EU AIF

in the European Union, the Member State of reference will be the Member State

where it intends to develop effective marketing for most of those AIF.

In accordance with the criteria set forth above in points (b), (c)(i), e(i), (e)(ii), (g)(i) and (f)

several Member States of reference are possible. In such case, the Member States shall

require that the non-EU AIFM intending to manage EU AIF without marketing them

and/or market AIF managed by it in the European Union in accordance with Article 38 or

39 shall submit a request to the competent authorities of all of the Member States that are

possible Member States of reference in accordance with the criteria set forth above under

points (b), (c)(i), e(i), (e)(ii), (g)(i) or (f) to determine its Member State of reference among

each other. Those competent authorities shall jointly decide within one month who the

Member State of reference for such non-EU AIFM shall be. The competent authorities of

the Member State that is ultimately appointed as Member State of reference shall without

undue delay inform the non-EU AIFM thereof. If the non-EU AIFM is not duly informed

of the decision made by the relevant competent authorities within 7 days after the decision

or if the relevant competent authorities have not timely decided, it may itself choose its

Member State of reference based on the criteria set forth above.

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The AIFM must be able to prove its intention to develop effective marketing in any given

Member State by disclosure of its marketing strategy to the competent authorities of the

Member State as indicated by it.

Member States shall require that the non-EU AIFM intending to manage EU AIF without

marketing them and/or market AIF managed by it in the European Union in accordance

with Article 38 or 39 shall submit a request for authorisation to its Member State of

reference.

When receiving the application for authorisation, the competent authorities shall assess

whether the determination by the AIFM as regards its Member State of reference respects

the criteria laid down in paragraph 4. If the competent authorities consider that this is not

the case, they shall refuse the authorisation request of the non-EU AIFM explaining the

reasons for their refusal. On the contrary, if the competent authorities consider that the

criteria of paragraph 4 have been respected, they shall notify ESMA of this fact and shall

ask ESMA to issue an advice on the assessment made by them. In their notification to

ESMA, the competent authorities shall provide ESMA with the justification by the AIFM

of its assessment regarding the Member State of reference and with information on the

marketing strategy of the AIFM.

Within one month after having received the notification referred to in subparagraph 2,

ESMA shall issue advice to the relevant competent authorities about their assessment on

the Member State of reference in accordance with the criteria set forth in paragraph 4.

ESMA can only issue a negative advice in case it considers that the criteria of paragraph 4

have not been respected.

The term set forth in Article 8, paragraph 5 shall be suspended during the ESMA review in

accordance with this paragraph.

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If the competent authorities propose to grant authorisation contrary to the ESMA advice

referred to in subparagraph 3 it shall inform ESMA, stating its reasons. ESMA shall

publish the fact that a competent authority does not comply or intend to comply with its

advice. ESMA may also decide, on a case by case basis, to publish the reasons provided by

the competent authority for not complying with that advice. The competent authority shall

receive advanced notice about such a publication.

If the competent authorities propose to grant authorisation contrary to the ESMA advice

referred to in subparagraph 3 and the AIFM intends to market shares or units of AIF

managed by it on the territory of other Member States than the Member State of reference,

the competent authorities of the Member State of reference shall also inform the competent

authorities of those Member States thereof, stating its reasons. Insofar applicable, the

competent authorities of the Member State of reference shall also inform the competent

authorities of the home Member States of the AIF managed by the AIFM thereof, stating

its reasons.

Where a competent authority of a Member State disagrees with the determination of the

Member State of reference by the AIFM, the competent authorities concerned may refer

the matter to the ESMA which may act in accordance with the powers conferred on it

under Article 11 of Regulation (EU) No .../2010 [ESMA].

Without prejudice to what is set forth in paragraph 8, no authorisation shall be given unless

the following additional conditions are met:

(a)

The Member State of reference is indicated by the AIFM in accordance with the

criteria of paragraph 4 and supported by the disclosure of the marketing strategy, and

the procedure set forth in paragraph 5 has been followed by the relevant competent

authorities;

(b)

The AIFM has appointed a legal representative established in its Member State of

reference;

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(c)

The legal representative shall, next to the AIFM itself, be the contact person of the

non-EU AIFM for the investors of the relevant AIF, for ESMA and for the competent

authorities as regards the activities for which the AIFM is authorised in the European

Union and shall at least be sufficiently equipped to perform the compliance function

pursuant to this Directive;

(d)

Appropriate cooperation arrangements are in place between the competent authorities

of the Member State of reference, the competent authorities of the EU AIF concerned

and the supervisory authorities of the third country where the non-EU AIFM is

established in order to ensure at least an efficient exchange of information that allows

the competent authorities to carry out their duties according to this Directive;

(e)

The third country where the non-EU AIFM is established is not listed as Non-

Cooperative Country and Territory by the Financial Action Task Force on anti-

money laundering and terrorist financing;

(f)

The third country where the non-EU AIFM is established has signed an agreement

with the Member State of reference, which fully complies with the standards laid

down in Article 26 of the OECD Model Tax Convention and ensures an effective

exchange of information in tax matters, including, if any, multilateral tax

agreements;

(g)

The effective exercise by the competent authorities of their supervisory functions

under this Directive is not prevented by the laws, regulations or administrative

provisions of a third country governing the AIFM, nor by limitations in the

supervisory and investigatory powers of the third country supervisory authorities.

Where a competent authority of another Member State disagrees with the assessment made

on the application of the points (a), (b), (c), (d), (e) and (g) of this paragraph 7 by the

competent authorities of the Member State of reference of the AIFM, the competent

authorities concerned may refer the matter to the ESMA which may act in accordance with

the powers conferred on it under Article 11 of Regulation (EU) No .../2010 [ESMA].

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Where a competent authority of an EU AIF does not enter into the required cooperation

arrangements as set forth in point (d) of this paragraph 7 within a reasonable period of

time, the competent authorities of the Member State of reference may refer the matter to

the ESMA which may act in accordance with the powers conferred on it under Article 11

of Regulation (EU) No .../2010 [ESMA].

The authorisation shall take place in accordance with the provisions of Chapter IV which

shall apply mutatis mutandis in the understanding that:

(i)

the information referred to in paragraph 2 of Article 7 shall be supplemented by:

(a)

a justification by the AIFM of its assessment regarding the Member State of

reference in accordance with the criteria set forth in paragraph 4 with

information on the marketing strategy;

(b)

a list of those provisions of the Directive for which compliance by the AIFM is

impossible as compliance by the AIFM with these provisions is, in accordance

with what is set forth in paragraph 2(ii) of this Article, incompatible with

compliance with a provision in the law to which the non-EU AIFM and/or, as

the case may be, the non-EU AIF marketed in the European Union, is

submitted; and

(c)

written evidence based on the technical standards developed by ESMA that (i)

the relevant third country law provides for a rule equivalent to the provisions

for which compliance is impossible, which has the same regulatory purpose

and offers the same level of protection to the investors of the relevant AIF and

that (ii) the AIFM complies with that equivalent rule; such written evidence

being supported by a legal opinion on the existence of the relevant

incompatible provision in the law of the third country and including a

description of the regulatory purpose and the nature of the investor protection

pursued by it; and

(d)

identification and location of the legal representative of the AIFM;

(ii)

the information referred to in paragraph 3 of Article 7 may be limited to the EU AIF

the AIFM intends to manage, and, as the case may be, to those AIF managed by the

AIFM that it intends to market in the European Union with a passport;

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(iii) the condition of paragraph 1(a) of Article 8 shall be without prejudice to what is set

forth in paragraph 2(ii) of this Article 37;

(iv) the condition of paragraph 1(e) of Article 8 shall not apply;

(v)

the second subparagraph of paragraph 5 of Article 8 shall be supplemented with: "the

information provided in accordance with paragraph 13(i) of Article 37".

Where a competent authority of another Member State disagrees with the authorisation

given by the competent authorities of the Member State of reference of the AIFM, the

competent authorities concerned may refer the matter to the ESMA which may act in

accordance with the powers conferred on it under Article 11 of Regulation (EU) No

.../2010 [ESMA].

In case the competent authorities of the Member State of reference consider that the AIFM

may rely on paragraph 2 to be exempted from compliance with certain provisions of this

Directive, they shall without undue delay inform ESMA thereof. They shall support this

assessment by the information provided by the AIFM in accordance with paragraph 8(i)(b)

and 8(i)(c).

Within one month after having received the notification referred to in subparagraph 1,

ESMA shall issue advice to the competent authorities about the application of the

exemption for compliance with the Directive caused by the incompatibility in accordance

with what is set forth in paragraph 2. The advice may in particular address whether the

conditions for such exemption appear to be satisfied based on the information provided by

the AIFM in accordance with paragraph 8(i)(b) and 8(i)(c) and on the technical standards

on equivalence. ESMA shall seek to build a common European supervisory culture and

consistent supervisory practices and ensure consistent approaches among competent

authorities in relation to the application of this paragraph.

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The term set forth in Article 8, paragraph 5 shall be suspended during the ESMA review in

accordance with this paragraph.

If the competent authorities of the Member State of reference propose to grant

authorisation contrary to the ESMA advice referred to in subparagraph 2 it shall inform

ESMA, stating its reasons. ESMA shall publish the fact that a competent authority does not

comply or intend to comply with that advice. ESMA may also decide, on a case by case

basis, to publish the reasons provided by the competent authorities for not complying with

that advice. The competent authorities concerned shall receive advanced notice about such

a publication.

If the competent authorities propose to grant authorisation contrary to the ESMA advice

referred to in subparagraph 2 and the AIFM intends to market shares or units of AIF

managed by it on the territory of other Member States than the Member State of reference,

the competent authorities of the Member State of reference shall also inform the competent

authorities of those Member States thereof, stating its reasons.

Where a competent authority of another Member State disagrees with the assessment made

on the application of this paragraph 9 by the competent authorities of the Member State of

reference of the AIFM, the competent authorities concerned may refer the matter to the

ESMA which may act in accordance with the powers conferred on it under Article 11 of

Regulation (EU) No .../2010 [ESMA].

10.

The competent authorities of the Member State of reference shall without undue delay

inform ESMA on the outcome of the initial authorisation process, about any changes in the

authorisation of the AIFM and any withdrawal of authorisation.

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Competent authorities shall inform ESMA about the applications for authorisation that

they have rejected, providing data about the AIFM having asked for authorisation and the

reasons for the rejection. ESMA shall keep a central register of these data, which shall be

at the disposal of EU competent authorities, on request. Competent authorities shall treat

this information as confidential.

11.

In principle, the Member State of reference will not be affected by the further business

development of the AIFM in Europe. However, under the circumstances set forth below,

the Member State of reference must, or as the case may be, may, be changed:

(a)

If the AIFM changes its marketing strategy within two years after its initial

authorisation, and this change would have affected the determination of the Member

State of the reference if the modified marketing strategy had been the initial

marketing strategy, the AIFM shall notify the competent authorities of the initial

Member State of reference of this change before implementing it and indicate its

Member State of reference in accordance with the criteria set forth in paragraph 4

and based on the new strategy. The AIFM will justify its assessment by disclosing its

new marketing strategy to its initial Member State of reference. At the same time the

AIFM will provide information on who its legal representative, which has to be

established in the new Member State of reference, would be after the change. Such

information should include at least the identity and the location of such

representative.

The initial Member State of reference shall assess whether the determination of the

AIFM in accordance with subparagraph 1 of point (a) is correct and shall notify

ESMA of their assessment thereof. ESMA shall issue an advice on the assessment

made by the competent authorities. In their notification to ESMA, the competent

authorities shall provide ESMA with the justification by the AIFM of its assessment

regarding the Member State of reference and with information on the new marketing

strategy of the AIFM.

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Within one month after having received the notification referred to in subparagraph 2

of point (a), ESMA shall issue advice to the relevant competent authorities about

their assessment. ESMA can only issue a negative advice in case it considers that the

criteria of paragraph 4 have not been respected.

After having received the advice of ESMA, the competent authorities of the initial

Member State of reference shall inform the non-EU AIFM, its original legal

representative and ESMA of their decision.

If the competent authorities of the initial Member State of reference agree with the

assessment made by the AIFM, they will then also inform the competent authorities

of the new Member State of reference of the change. The initial Member State of

reference shall without undue delay transfer a copy of the authorisation and

supervision file of the AIFM to the new Member State of reference. As from the

transmission of the authorisation and supervision file, the competent authorities of

the new Member State will be competent for the authorisation procedure and for the

supervision of the AIFM.

If the competent authorities' final assessment is contrary to the ESMA advice

referred to in subparagraph 3 of point (a) they shall inform ESMA thereof, stating its

reasons. ESMA shall publish the fact that a competent authority does not comply or

intend to comply with its advice. ESMA may also decide, on a case by case basis, to

publish the reasons provided by the competent authorities for not complying with

that advice. The competent authorities concerned shall receive advanced notice about

such a publication.

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If the competent authorities' final assessment is contrary to the ESMA advice

referred to in subparagraph 3 of point (a) and the AIFM markets shares or units of

AIF managed by it on the territory of other Member States than the initial Member

State of reference, the competent authorities of the initial Member State of reference

shall also inform the competent authorities of those Member States thereof, stating its

reasons. Insofar applicable, the competent authorities of the Member State of

reference shall also inform the competent authorities of the home Member States of

the AIF managed by the AIFM thereof, stating its reasons.

(b)

If it appears from the actual course of the business development of the AIFM in the

European Union within two years after its authorisation that the marketing strategy

as presented by the AIFM at the time of its authorisation was untrue or that the

AIFM made false statements about it, or, if the AIFM changes its marketing strategy

without complying with what is set forth point (a), the competent authorities of the

initial Member State of reference shall request the AIFM to indicate the correct

Member State of reference based on the actual marketing strategy. The procedure set

forth in point (a) shall apply mutatis mutandis. If the AIFM does not comply with the

request of the competent authorities, they shall withdraw its authorisation.

(c)

If the AIFM changes its marketing strategy after the period set forth in point (a), and

it wants to change its Member State of reference based on the new marketing

strategy, the AIFM may submit a request to change its Member State of reference to

the competent authorities of the initial Member State of reference. The procedure set

forth in point (a) shall apply mutatis mutandis.

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Where a competent authority of a Member State disagrees with the assessment made on the

determination of the Member State of reference, the competent authorities concerned may

refer the matter to the ESMA which may act in accordance with the powers conferred on it

under Article 11 of Regulation (EU) No .../2010 [ESMA].

12.

Any disputes arising between the competent authorities of the Member State of reference

of the AIFM and the AIFM shall be settled in accordance with the law of and subject to the

jurisdiction of the Member State of reference.

Any disputes between the AIFM or the AIF and EU investors of the relevant AIF shall be

settled in accordance with the law of and subject to the jurisdiction of a Member State.

13.

The Commission shall, in accordance with the regulatory procedure referred to in Article

57(2), adopt implementing measures with a view to specifying the procedure to be

followed by the possible Member States of reference when determining the Member State

of reference among each other in accordance with the second subparagraph of paragraph 4.

14.

The Commission shall adopt by means of delegated acts, in accordance with Articles 54

and subject to the conditions set forth in Articles 55 and 56, measures regarding the

cooperation arrangements referred to in paragraph 7(d) in order to design a common

framework to facilitate the establishment of those cooperation arrangements with third

countries.

15.

In order to ensure uniform application of this Article, ESMA may develop guidelines to

determine the conditions of application of the measures adopted by the Commission

regarding the cooperation arrangements referred to in paragraph 7(d).

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16.

ESMA shall develop draft regulatory technical standards to determine the minimum

content of the cooperation arrangements referred to in paragraph 7(d) so as to ensure that

the competent authorities of the Member State of reference and the competent authorities

of the host Member States receive sufficient information in order to be able to excercise

their supervisory and investigatory powers under this Directive.

Power is conferred on the Commission to adopt the draft regulatory technical standards

referred to in the first subparagraph in accordance with Article 7 to 7d of Regulation (EU)

No .../2010 [ESMA].

17.

In order to ensure consistent harmonisation of this Article, ESMA shall develop draft

regulatory technical standards to specify the procedures for coordination and exchange of

information between the competent authority of the Member State of reference and the

competent authorities of the host Member States of the AIFM.

Power is delegated to the Commission to adopt the draft regulatory technical standards

referred to in the first subparagraph in accordance with Articles 7 to 7d of Regulation (EU)

No .../2010 [ESMA].

18.

In case a competent authority rejects a request to exchange information in accordance with

what is set forth in the technical standards set forth in paragraph 17, the competent

authorities concerned may refer the matter to ESMA, which may act in accordance with

the powers conferred on it under Article 11 of Regulation [ESMA].

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19.

In accordance with Article 14 of Regulation [ESMA], ESMA shall promote an effective

bilateral and multilateral exchange of information between the competent authorities of the

Member State of reference of the non-EU AIFM and the competent authorities of the host

Member States of the AIFM concerned, with full respect of the applicable confidentiality

and data protection provisions provided for in the relevant European Union legislation.

20.

In accordance with Article 16 of Regulation [ESMA], ESMA shall fulfil a general

coordination role between the competent authority of the Member State of reference of the

non-EU AIFM and the competent authorities of the host Member States of the AIFM

concerned. In particular, ESMA may:

a) facilitate the exchange of information between the competent authorities;

b) determine the scope of the information that the competent authority of the Member

State of reference should provide to hosts competent authorities concerned;

c) take all appropriate measures in case of developments which may jeopardise the

functioning of the financial markets with a view to facilitating the coordination of

actions undertaken by the competent authority of the Member State of reference and

the competent authorities of the host Member States in relation to non-EU AIFM;

21.

In order to ensure uniform conditions of application of this Article, ESMA may develop

draft implementing technical standards to determine the form and content of the request

referred to in paragraph 11(c).

Power is conferred on the Commission to adopt the draft implementing technical standards

referred to in the first subparagraph in accordance with Article 7e of Regulation (EU) No

.../2010 [ESMA].

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22.

In order to ensure the uniform application of this Article, ESMA shall develop draft

regulatory technical standards on the following:

The manner in which the AIFM should comply with the requirements laid down in

this Directive, taking into account that the AIFM is established in a third country. In

particular, the presentation of the information required in Articles 22 to 24.

Under which conditions the law to which a non-EU AIFM or a non-EU AIF is

submitted is considered to provide for an equivalent rule having the same regulatory

purpose and offering the same level of protection to the relevant investors.

Power is conferred on the Commission to adopt the draft regulatory technical standards

referred to in the first subparagraph in accordance with Article 7 to 7d of Regulation (EU)

No .../2010 [ESMA].

Article 37a

Peer review of authorisation and supervision of non-EU AIFM

ESMA shall, on an annual basis, conduct peer review analysis of the supervisory activities

of the competent authorities in relation to the authorisation and the supervision of non-EU

AIFM under the application of Articles 37, 38, 39 and 39bis, to further enhance

consistency in supervisory outcomes, in accordance with Article 15 of Regulation …/…

[ESMA Regulation].

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By the date laid down in the first subparagraph of paragraph 1 of Article 63 ESMA shall

develop methods to allow for objective assessment and comparison between the authorities

reviewed.

In particular, the peer review assessment shall include an assessment of:

(a)

the degree of convergence in supervisory practices achieved in the authorisation and

supervision of non-EU AIFM;

(b)

the extent to which the supervisory practice achieves the objectives set out in this

Directive;

(c)

the effectiveness and the degree of convergence achieved with regard to the

enforcement of the provisions of this Directive and its implementing measures and

the regulatory and implementing technical standards developed by ESMA pursuant

to this Directive, including administrative measures and sanctions imposed against

non-EU AIFM where these provisions have not been complied with.

On the basis of the conclusions of the peer review, ESMA may issue guidelines and

recommendations pursuant to Article 8 of Regulation …/… [ESMA regulation], with a

view to establishing consistent, efficient and effective supervisory practices of non-EU

AIFM.

The competent authorities shall make every effort to comply with those guidelines and

recommendations.

Within two months of the issuance of a guideline or recommendation, each competent

authority shall confirm whether it complies or intends to comply with that guideline or

recommendation. In the event that a competent authority does not comply or intend to

comply, it shall inform ESMA, stating its reasons.

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ESMA shall publish the fact that a competent authority does not comply or intend to

comply with that guideline or recommendation. ESMA may also decide, on a case by case

basis, to publish the reasons provided by the competent authority for not complying with

that guideline or recommendation. The competent authority shall receive advanced notice

of such a publication.

In the report referred to in Article 28(4a) of the [ESMA regulation], ESMA shall inform

the European Parliament, the Council and the Commission of the guidelines and

recommendations that are issued pursuant to this Article, stating which competent

authorities have not complied with them, and outlining how ESMA intends to ensure that

the competent authority follows its recommendations and guidelines in the future.

The Commission will take these reports duly into account in its review of this Directive

according to Article 64 and any subsequent evaluation it might conduct.

10.

ESMA shall make the best practices that can be identified from those peer reviews publicly

available. In addition, all other results of peer reviews may be disclosed publicly, subject to

the agreement of the competent authority being the subject of the peer review.

Article 38

Conditions for the marketing in the European Union with a passport of EU AIF managed by a non-

EU AIFM

Member States shall ensure that a duly authorised non-EU AIFM may market the shares or

units of an EU AIF it manages to professional investors in the European Union with a

passport as soon as the conditions laid down in this Article are met.

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In case the AIFM intends to market shares or units of the EU AIF in its Member State of

reference, the AIFM shall submit a notification to the competent authorities of its Member

State of reference in respect of each EU AIF that it intends to market.

That notification shall comprise the documentation and information as set forth in Annex

III A.

No later than twenty working days after receipt of a complete notification pursuant to

paragraph 2, the competent authorities of the Member State of reference of the AIFM shall

inform the AIFM whether it may start marketing the AIF identified in the notification

referred to in paragraph 2 in its territory. The competent authorities of the Member State of

reference of the AIFM may only prevent the marketing of the AIF if the AIFM’s

management of the AIF is not or will not be in accordance with one or more provisions of

this Directive, or, in general the AIFM will not or does not comply with one or more

provisions of this Directive. In case of a positive decision, the AIFM may start marketing

the AIF in its Member State of reference as of the date of the notification by the competent

authorities confirming that the AIFM may start marketing the AIF.

The competent authorities of the Member State of reference of the AIFM shall also inform

ESMA and the competent authorities of the AIF that the AIFM may start marketing shares

or units of the AIF in the Member State of reference of the AIFM.

In case the AIFM intends to market shares or units of the EU AIF in other Member States

than its Member State of reference, the AIFM shall submit a notification to the competent

authorities of its Member State of reference in respect of each EU AIF that it intends to

market.

That notification shall comprise the documentation and information as set forth in Annex

III B.

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The competent authorities of the Member State of reference shall, no later than twenty

working days after the date of receipt of the complete notification file referred to in

paragraph 4, transmit the complete notification file to the competent authorities of the

Member States where the units or shares of the AIF are proposed to be marketed. Such

transmission will only occur if the AIFM’s management of the AIF is and will be in

accordance with the provisions of this Directive and that in general the AIFM complies

with the provisions of this Directive.

The competent authorities of the Member State of reference of the AIFM shall enclose an

attestation that the AIFM concerned is authorised to manage AIF with that particular

investment strategy.

Upon transmission of the notification file, the competent authorities of the Member State

of reference of the AIFM shall without delay notify the AIFM about the transmission. The

AIFM may start marketing the AIF in the relevant host Member State(s) of the AIFM as of

the date of that notification.

The competent authorities of the Member State of reference of the AIFM shall also inform

ESMA and the competent authorities of the AIF that the AIFM may start marketing the

shares or units of the AIF in the host Member State(s) of the AIFM.

Arrangements referred to in point (h) of Annex III B shall be subject to the laws and

supervision of the host Member State(s) of the AIFM.

Member States shall ensure that the notification letter by the AIFM referred to in paragraph

4 and the attestation referred to in paragraph 5 are provided in a language customary in the

sphere of international finance.

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Member States shall ensure that electronic transmission and filing of the documents

referred to in paragraph 6 is accepted by their competent authorities.

In the event of a material change in any of the particulars communicated in accordance

with paragraph 2 and/or 4, the AIFM shall give written notice of that change to the

competent authorities of the Member State of reference at least one month before

implementing the change for any changes planned by the AIFM, or, as the case may be,

immediately after the change took place for any unplanned facts triggering a change.

If pursuant to the planned change, the AIFM’s management of the AIF would no longer be

in accordance with one or more provisions of this Directive, or, in general the AIFM would

no longer comply with one or more provisions of this Directive, the competent authorities

of the Member State of reference of the AIFM shall inform the AIFM without undue delay

that it cannot implement the change.

If the planned change is implemented notwithstanding the above, or, if an unplanned fact

triggering a change has taken place pursuant to which the AIFM’s management of the AIF

would no longer be in accordance with one or more provisions of this Directive, or, in

general the AIFM would no longer comply with one or more provisions of this Directive,

the competent authorities of the Member State reference of the AIFM shall take all due

regulatory measures in accordance with Article 44, including if necessary the explicit

prohibition of marketing of the AIF.

If the changes are acceptable, i.e. if they do not influence the AIFM’s management of the

AIF being in accordance with the provisions of this Directive, or, in general the

compliance by the AIFM with the provisions of this Directive, the competent authorities of

the Member State of reference shall without delay inform ESMA insofar as the changes

concern the termination of the marketing of certain AIF or additional AIF being marketed

and, insofar applicable, the competent authorities of the host Member State(s) of those

changes.

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10.

In order to ensure uniform conditions of application of this Article, ESMA may develop

draft implementing technical standards to determine:

(a)

the form and content of a standard model of the notification letter referred to in

paragraph 2 and 4;

(b)

(c)

(d)

the form and content of a standard model of attestation referred to in paragraph 5;

the form of the transmission referred to in paragraph 5;

the form of the written notice referred to in paragraph 9.

Power is conferred on the Commission to adopt the draft implementing technical standards

referred to in the first subparagraph in accordance with Article 7e of Regulation (EU) No

.../2010 [ESMA].

11.

Without prejudice to Article 41(1), Member States shall require that the AIF managed and

marketed by the AIFM are only marketed to professional investors.

Article 39

Conditions for the marketing in the European Union with a passport of non-EU AIF managed by a

non-EU AIFM

Member States shall ensure that a duly authorised non-EU AIFM may market shares or

units of a non-EU AIF it manages to professional investors in the European Union with a

passport as soon as the conditions laid down in this Article are met.

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The AIFM must comply with all the requirements established in this Directive. In addition

the following conditions apply:

(a)

Appropriate cooperation arrangements are in place between the competent authorities

of the Member State of reference and the supervisory authority of the third country

where the non-EU AIF is established in order to ensure at least an efficient exchange

of information that allows the competent authorities to carry out their duties

according to this Directive.

(b)

The third country where the non-EU AIF is established is not listed as Non-

Cooperative Country and Territory by the Financial Action Task Force on anti-

money laundering and terrorist financing.

(c)

The third country where the non-EU AIF is established has signed an agreement with

the Member State of reference and with each other Member State in which the shares

or units of the non-EU AIF are proposed to be marketed, which fully complies with

the standards laid down in Article 26 of the OECD Model Tax Convention and

ensures an effective exchange of information in tax matters including, if any,

multilateral tax agreements.

Where a competent authority of another Member State disagrees with the assessment made

on the application of points (a) and (b) of this paragraph 2 by the competent authorities of

the Member State of reference of the AIFM, the competent authorities concerned may refer

the matter to the ESMA which may act in accordance with the powers conferred on it

under Article 11 of Regulation (EU) No .../2010 [ESMA].

The AIFM shall submit a notification to the competent authorities of its Member State of

reference in respect of each non-EU AIF that it intends to market in its Member State of

reference.

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That notification shall comprise the documentation and information as set forth in Annex

III A.

No later than twenty working days after receipt of a complete notification pursuant to

paragraph 3, the competent authorities of the Member State of reference of the AIFM shall

inform the AIFM whether it may start marketing the AIF identified in the notification

referred to in paragraph 3 in its territory. The competent authorities of the Member State of

reference of the AIFM may only prevent the marketing of the AIF if the AIFM’s

management of the AIF is not or will not be in accordance with one or more provisions of

this Directive, or, in general the AIFM will not or does not comply with one or more

provisions of this Directive. In case of a positive decision, the AIFM may start marketing

the AIF in its Member State of reference as of the date of the notification by the competent

authorities confirming that the AIFM may start marketing the AIF.

The competent authorities of the Member State of reference of the AIFM shall also inform

ESMA that the AIFM may start marketing shares or units of the AIF in the Member State

of reference of the AIFM.

In case the AIFM intends to market the units or shares of non-EU AIF also in other

Member States than its Member State of reference, the AIFM shall submit a notification to

the competent authorities of its Member State of reference in respect of each non-EU AIF

that it intends to market.

That notification shall comprise the documentation and information as set forth in Annex

III B.

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The competent authorities of the Member State of reference shall, no later than twenty

working days after the date of receipt of the complete notification file referred to in

paragraph 5, transmit the complete notification file to the competent authorities of the

Member States where the units or shares of the AIF are proposed to be marketed. Such

transmission will only occur if the AIFM’s management of the AIF is and will be in

accordance with the provisions of this Directive and that in general the AIFM complies

with the provisions of this Directive.

The competent authorities of the Member State of reference of the AIFM shall enclose an

attestation that the AIFM concerned is authorised to manage AIF with that particular

investment strategy.

Upon transmission of the notification file, the competent authorities of the Member State

of reference of the AIFM shall without delay notify the AIFM about the transmission. The

AIFM may start marketing the AIF in the relevant host Member State(s) of the AIFM as of

the date of that notification.

The competent authorities of the Member State of reference of the AIFM shall also inform

ESMA that the AIFM may start marketing the shares or units of the AIF in the host

Member State(s) of the AIFM.

Arrangements referred to in point (h) of Annex III B shall be subject to the laws and

supervision of the host Member States of the AIFM, insofar these are different than the

Member State of reference.

Member States shall ensure that the notification letter by the AIFM referred to in paragraph

5 and the attestation referred to in paragraph 6 are provided in a language customary in the

sphere of international finance.

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