BDO’s Caldwell: Another New Year – but still no resolution


When I last wrote on this blog, nine months ago, the main theme was that of the Alternative Investment Fund Managers Directive and, more particularly, the subject of valuation.

At that time, I, like many, had every expectation that substantial progress would have been made with regard to implementation of the required regulations. More especially so, as both the directive and regulations have to come into effect in July of this year. It is often said that bureaucracy moves slowly; even, it seems, when there is a comparative need for urgency.

So, with less than seven months to go, surely there is clarity in respect of what will be required? Apparently not, consultation appears to be the watchword. From an EU perspective, the European Securities and Markets Authority simultaneously issued two consultation papers on 19 December 2012. One relating to guidelines on key concepts of the AIFMD, the other to draft regulatory technical standards on types of AIFM.

In the UK, the FSA is also consulting. On 14 November 2012 it issued the first of two consultation papers on rules and guidance on the Implementation of the AIFMD. All three papers have a deadline of 1 February for responses. However, the FSA will then issue its second paper in February.

Reading all this could give rise to an unease that what’s meant to happen won’t, but fear not!

ESMA states that the Guidelines and Technical Standards will be finalised in the first half of 2013. The FSA refers to the need to finalise their rules and guidance as early as possible before 22 July, with a policy statement being issued in June.

Phew! Well that’s alright then! Well, it is for the legislators, but what about those who have to comply?

Recent research has shown that compliance with, and disclosure of, regulatory information under a more burdensome regime is regarded as the main issue facing the industry. Furthermore, the AIFMD is seen as bringing about the greatest change.

Despite this, there still remains great uncertainty, which cannot be a good thing for any of the stakeholders. Whilst it may well be that the regulatory deadline is met, no-one can tell, precisely, what the rules will contain.

The industry may have a further year to comply, but it still has no knowledge of what it must do; a longer lead-in period would avoid the possibility of having to make hurried decisions, and the consequences that might arise from incorrect ones.

More importantly, and this surely is the crux of the matter for all concerned, no-one can reliably estimate what the costs will be: whether it be those of the managers, the regulators, or the investors: and, hence, the impact on the industry as a whole. In an uncertain economic climate, this lack of crystallisation compounds uncertainty even further.

A swift resolution would be a welcome relief in the year ahead.

Andrew Caldwell is a partner at BDO LLP.