The FCA has updated its webpage on the AIFMD to clarify how
alternative investment fund managers (AIFMs) can comply in a
proportionate way, with the AIFMD's Article 15 requirement, for
hierarchical and functional segregation of a firm's risk
management function. In assessing this segregation, the FCA will
review compliance with this requirement in accordance with the
principle of proportionality set out in Article 15(1) of the AIFMD
and Article 42(3) of the AIFMD delegated Regulation.
If a AIFM firm wants to comply with Article 15(1) other than
through functional and hierarchical separation, and on the basis of
proportionality, then the FCA advises that it should describe
briefly in the notes to its AIFM application form (which AIFM
application form the FCA expects to be submitted by no later than
22 January 2014) the specific safeguards that achieve the desired
objective and if necessary, the FCA will follow up with a request
for more information or assurances.
According to the FCA, this principle of proportionality is
intended to ensure that regulatory measures go no further than is
required to achieve a stated objective. This is to ensure an AIFM
has specific safeguards against conflicts of interest, and to allow
for the independent performance of risk-management activities.
While achieving functional and hierarchical separation may be
disproportionate for some firms, taking into account their size,
internal organisation and the nature, scale and complexity of their
business (or possibly other factors, to the extent the firm regards
such factors as relevant) the FCA considers that for the
requirements of Article 15 to be satisfied, an AIFM must be able to
demonstrate that it has specific safeguards against conflicts of
interest that allow for the independent performance of
risk-management activities. These safeguards must, as a minimum,
comply with Article 43 of the AIFMD delegated Regulation. The FCA
will review and assess the safeguards implemented by the firm to
ensure that conflicts of interest do not compromise that
independence.
Please contact the Withers UK Financial Services team if you need
any assistance with the submission of the AIFM application form
before the FCA's deadline of 22 January 2014.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
