Previously it was possible for an Australian fund manager to market an Australian fund to wholesale investors in certain European Union Member States without the need for the manager or the fund to be registered or authorized in the European Union (“EU”). The Alternative Investment Fund Managers Directive (“AIFMD”), which is due to come into force on 22 July 2013, will introduce new conditions for a non-EU manager of an Alternative Investment Fund (“AIF”) to be able to continue to rely on any such private placement regime. In the short term, EU Member States may keep their existing private placement regimes until at least July 2018 (for example in the United Kingdom). The new conditions include:
Co-operation agreements
It is now a pre-condition to any marketing that co-operation agreements are in place between the securities regulators in the EU Member States where it is intended to market the AIF and the regulators, in both the country where the relevant non-EU manager (“non-EU AIFM”) is established and, if different, the regulators of the country where the AIF is established.
Disclosure and transparency requirements
Because an Australian or other non-EU AIFM relies solely on the private placement regime of an EU Member State it will only have to comply with some of the requirements of the AIFMD. The AIFM must:
- prepare an annual report for each AIF it intends to market in the EU, which must be audited and must include information about the remuneration received by the AIFM;
- make certain disclosures to investors before they invest;
- make various ongoing disclosures to investors;
- report certain information to the regulators in each EU Member State in which it markets the AIF; and
- comply with the requirements in the AIFMD relating to the acquisition of major holdings and control of unlisted companies.
Registration
In certain EU Member States it will now be necessary to register with the relevant regulator in that country before relying on its private placement regime.
In the United Kingdom, an Australian or other non-EU AIFM need only notify the Financial Conduct Authority (“FCA”). It will not be necessary to await approval from the FCA before marketing. Instead, the FCA may retrospectively suspend or revoke the non-EU AIFM’s entitlement to market if it does not think the relevant requirements of the AIFMD have been satisfied.
Transitional provisions
While EU Member States were required to implement the AIFMD by 22 July 2013, the AIFMD envisages a 12 month transitional period for existing AIFMs. How individual Member States decide to implement this transitional period may differ (eg the United Kingdom extends it to non-EU AIFMs as well as EUAIFMs).
A note of warning: Managing an EU AIF
The above points all focus on the marketing of a non-EU AIF into the EU. But, if an Australian AIFM manages an AIF established in the EU then it should be aware that the AIFMD contains provisions which allow the European Securities and Markets Authority and the European Commission to decide whether, from September 2015, the Australian AIFM will be required to:
comply with the full scope of the AIFMD;
- designate an “EU Member State of reference”;
- appoint a legal representative in the Member State; and
- become authorized in that Member State.
Recent Australian tax changes
There are a number of recent changes to the Australian tax rules that make offshore investment in Australian managed funds more attractive. Chief among these is the managed investment trust (“MIT”).
Under the MIT regime, foreign investors in certain jurisdictions – including a number of EU States such as France, Germany and the UK – are able to access a concessional rate of taxation (15% or, in some cases, 10%) on distributions of rent and taxable Australian capital gains on real property from qualifying MITs.
Members of the One Investment Group act as trustee for in excess of 100 trusts. Should you be seeking to establish a trust raise capital offshore into an Australian Managed Investment Trust structure or alternatively we would be happy to discuss further with you.