[ESMA34-32-352] Q&A on the Application of the AIFMD

ESMA published an updated version of its Questions and Answers (Q&As) on the application of the Alternative Investment Fund Managers Directive (AIFMD). ESMA added 5 questions in Section II, IV and VII of the document which reads as follows (the following text is quoted):
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#### Section II: Notifications of AIFs
Question 9: Where an investment strategy is developed by a third party (the fund initiator), are the obligations set out in Article 30a of the AIFMD applicable to this third party? (new) // page 10
Answer: Yes. Pursuant to Article 30a(3) AIFMD, pre-marketing can be conducted by the EU AIFM or by a third party on behalf of an authorised EU AIFM only if that third party is authorised as an investment firm in accordance with Directive 2014/65/EU, as a credit institution in accordance with Directive 2013/36/EU, as a UCITS management company in accordance with Directive 2009/65/EC, as an AIFM in accordance with AIFMD, or acts as a tied agent in accordance with Directive 2014/65/EU. Moreover, such third party is subject to the conditions for pre-marketing set out in Article 30a AIFMD.
Question 10: Are registered AIFMs referred to in Article 3(2) of the AIFMD, which do not qualify as EuSEF manager or EuVECA manager, subject to the obligation to notify pre-marketing pursuant to Article 30a(1) of the AIFMD? (new) // page 10
Answer: No, unless it is required otherwise under national rules. Article 30a AIFMD applies to the authorised EU AIFMs. Sub-threshold EU AIFMs covered by Article 3(2) AIFMD, which have not opted in under Article 3(4) AIFMD, are referred to as registered AIFMs in AIFMD, which do not have the EU-wide AIFM passport to exert asset management activities across the borders. Except for Article 3(3) and (4) and Article 46 AIFMD activities of sub-threshold EU AIFMs are governed by the national rules, including those on pre-marketing.
Question 11: In case there are no investors in a host Member State, do AIFMs wishing to de-notify the arrangements previously made for marketing the units or shares of the EU AIFs they manage have to comply with the obligations set out in Article 32a(1) of the AIFMD? (new) // page 11
Answer: Yes. Article 32a(1), point (a), AIFMD lays down an explicit exemption referring to closed-ended European long-term investment funds governed by Regulation (EU) 2015/760. In all other cases not covered by that exemption, all the conditions laid down in Article 32a(1) AIFMD are to be complied with, making sure that there are no investors uninformed about the AIFM’s market exit, that all marketing is publicly terminated and any marketing arrangements with the third parties are terminated or modified to prevent any further marketing of the de-notified AIF. Finally, Article 32a(1), second subparagraph, AIFMD remains applicable. That provision requires the AIFM to cease any new or further marketing of units or shares of the AIF it manages in the Member State in respect of which it has submitted a de-notification.
#### Section IV: Notification of AIFMs
Question 6: When an AIFM intends to provide the activities and services for which it has been authorised in a host Member State, either directly or through a branch, may that AIFM passport in that host Member State only the other functions that an AIFM may additionally perform in the course of the collective management of an AIF, which are referred to in point (2) of Annex I to the AIFMD, without also passporting investment management functions? (new) // page 32
Answer: No. The AIFMD passporting regime is linked to the management of an EU AIF. Annex I lists the investment management functions which an AIFM shall at least perform when managing an AIF (point 1) and the other functions that an AIFM may additionally perform in the course of the collective management of an AIF (point 2). The activities referred to in Annex I, point 2 are therefore ancillary to the activities referred to in Annex I, point 1 and cannot be exercised independently from those. That is also the case when AIFM passport their services in another Member State. Furthermore, pursuant to Article 33(2), point (b), AIFMD, an AIFM intending to manage EU AIFs established in another Member State is to communicate to the competent authorities of its home Member State a program of operations referring to the services it intends to provide and the EU AIF it intends to manage. That requirement cannot be interpreted otherwise than referring to investment management foremost whereas auxiliary services remain as such auxiliary and are to be performed only in addition to the management of an EU AIF.
#### Section VII: Calculation of leverage
Question 8: When calculating the leverage of an AIF whose core investment policy is to invest in real estate directly or indirectly, shall the AIFM include the exposure contained in financial or legal structures involving third parties controlled by that AIF as referred to in Article 6(1) and (3) of Delegated Regulation (EU) 231/2013? (new) // page 43
Answer: Yes. Under Article 6(3) of Delegated Regulation (EU) 231/2013, an AIFM must include the exposure contained in financial or legal structures involving third parties controlled by the AIF when calculating the leverage of such AIF, where these structures are specifically set up to directly or indirectly increase the exposure at the level of the AIF. For instance, financial or legal structures involving third parties (eg. special purpose vehicles controlled by the AIF), put in place to acquire real estate assets, which obtain leverage for that purpose, directly or indirectly create leverage at the level of the AIF investing in real estate.
The exemption referred to in the second sentence of Article 6(3) of Delegated Regulation (EU) 231/2013 for AIFs whose core investment policy is to acquire control of non-listed companies or issuers, applies solely to non-listed companies (mostly venture capital and private equity funds), provided that the AIF or the AIFM acting on behalf of the AIF does not have to bear potential losses beyond its investment in the respective company or issuer. Therefore, that exemption should not apply to AIFs, which acquire real estate assets indirectly through nonlisted companies, as such non-listed companies are being utilised by the AIF with the purpose of implementing the AIF’s investment policy, which is the acquisition of real estate assets.