Annexes to COM(2009)207 - Alternative Investment Fund Managers and amending Directives 2004/39/EC and 2009/…/EC

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dossier COM(2009)207 - Alternative Investment Fund Managers and amending Directives 2004/39/EC and 2009/…/EC.
document COM(2009)207 EN
date June  8, 2011
ANNEX I

1. Investment management functions which an AIFM shall at least perform when managing an AIF:

(a)    portfolio management;

(b)    risk management.

2. Other functions that an AIFM may additionally perform in the course of the collective management of an AIF:

(a)    Administration:

(i)    legal and fund management accounting services;

(ii)    customer inquiries;

(iii)    valuation and pricing, including tax returns;

(iv)    regulatory compliance monitoring;

(v)    maintenance of unit-/shareholder register;

(vi)    distribution of income;

(vii)    unit/shares issues and redemptions;

(viii) contract settlements, including certificate dispatch;

(ix) record keeping;

(b)    Marketing;

(c)    Activities related to the assets of AIFs, namely 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 in which it has invested.

ANNEX II

REMUNERATION POLICY

1. When establishing and applying the total remuneration policies, inclusive of salaries and discretionary pension benefits, 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 the AIFMs or of AIFs they manage, AIFMs shall comply with the following principles in a way and to the extent that is appropriate to their size, internal organisation and the nature, scope and complexity of their activities:

(a)    the remuneration policy is consistent with and promotes sound and effective risk management and does not encourage risk-taking which is inconsistent with the risk profiles, rules or instruments of incorporation of the AIFs they manage;

(b)    the remuneration policy is in line with the business strategy, objectives, values and interests of the AIFM and the AIFs it manages or the investors of such AIFs, and includes measures to avoid conflicts of interest;

(c)    the management body of the AIFM, in its supervisory function, adopts and periodically reviews the general principles of the remuneration policy and is responsible for its implementation;

(d)    the implementation of the remuneration policy is, at least annually, subject to central and independent internal review for compliance with policies and procedures for remuneration adopted by the management body in its supervisory function;

(e)    staff engaged in control functions are compensated in accordance with the achievement of the objectives linked to their functions, independent of the performance of the business areas they control;

(f)    the remuneration of the senior officers in the risk management and compliance functions is directly overseen by the remuneration committee;

(g)    where remuneration is performance related, the total amount of remuneration is based on a combination of the assessment of the performance of the individual and of the business unit or AIF concerned and of the overall results of the AIFM, and when assessing individual performance, financial as well as non-financial criteria are taken into account;

(h)    the assessment of performance is set in a multi-year framework appropriate to the life-cycle of the AIFs managed by the AIFM in order to ensure that the assessment process is based on longer term performance and that the actual payment of performance-based components of remuneration is spread over a period which takes account of the redemption policy of the AIFs it manages and their investment risks;

(i)    guaranteed variable remuneration is exceptional, occurs only in the context of hiring new staff and is limited to the first year;

(j)    fixed and variable components of total remuneration are appropriately balanced and the fixed component represents a sufficiently high proportion of the total remuneration to allow the operation of a fully flexible policy, on variable remuneration components, including the possibility to pay no variable remuneration component;

(k)    payments related to the early termination of a contract reflect performance achieved over time and are designed in a way that does not reward failure;

(l)    the measurement of performance used to calculate variable remuneration components or pools of variable remuneration components includes a comprehensive adjustment mechanism to integrate all relevant types of current and future risks;

(m) subject to the legal structure of the AIF and its rules or instruments of incorporation, a substantial portion, and in any event at least 50 % of any variable remuneration consists of units or shares of the AIF concerned, or equivalent ownership interests, or share-linked instruments or equivalent non-cash instruments, unless the management of AIFs accounts for less than 50 % of the total portfolio managed by the AIFM, in which case the minimum of 50 % does not apply.

The instruments referred to in this point shall be subject to an appropriate retention policy designed to align incentives with the interests of the AIFM and the AIFs it manages and the investors of such AIFs. Member States or their competent authorities may place restrictions on the types and designs of those instruments or ban certain instruments as appropriate. This point shall be applied to both the portion of the variable remuneration component deferred in line with point (n) and the portion of the variable remuneration component not deferred;

(n)    a substantial portion, and in any event at least 40 %, of the variable remuneration component, is deferred over a period which is appropriate in view of the life cycle and redemption policy of the AIF concerned and is correctly aligned with the nature of the risks of the AIF in question.

The period referred to in this point shall be at least three to 5 years unless the life cycle of the AIF concerned is shorter; remuneration payable under deferral arrangements vests no faster than on a pro-rata basis; in the case of a variable remuneration component of a particularly high amount, at least 60 % of the amount is deferred;

(o)    the variable remuneration, including the deferred portion, is paid or vests only if it is sustainable according to the financial situation of the AIFM as a whole, and justified according to the performance of the business unit, the AIF and the individual concerned.

The total variable remuneration shall generally be considerably contracted where subdued or negative financial performance of the AIFM or of the AIF concerned occurs, taking into account both current compensation and reductions in payouts of amounts previously earned, including through malus or clawback arrangements;

(p)    the pension policy is in line with the business strategy, objectives, values and long-term interests of the AIFM and the AIFs it manages.

If the employee leaves the AIFM before retirement, discretionary pension benefits shall be held by the AIFM for a period of 5 years in the form of instruments defined in point (m). In the case of an employee reaching retirement, discretionary pension benefits shall be paid to the employee in the form of instruments defined in point (m), subject to a 5 year retention period;

(q)    staff are required to undertake not to use personal hedging strategies or remuneration- and liability-related insurance to undermine the risk alignment effects embedded in their remuneration arrangements;

(r)    variable remuneration is not paid through vehicles or methods that facilitate the avoidance of the requirements of this Directive.

2. The principles set out in paragraph 1 shall apply to remuneration of any type paid by the AIFM, to any amount paid directly by the AIF itself, including carried interest, and to any transfer of units or shares of the AIF, made to the benefits of 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 their risk profile or the risk profiles of the AIF that they manage.

3. AIFMs that are significant in terms of their size or the size of the AIFs they manage, their internal organisation and the nature, the scope and the complexity of their activities shall establish a remuneration committee. The remuneration committee shall be constituted in a way that enables it to exercise competent and independent judgment on remuneration policies and practices and the incentives created for managing risk.

The remuneration committee shall be responsible for the preparation of decisions regarding remuneration, including those which have implications for the risk and risk management of the AIFM or the AIF concerned and which are to be taken by the management body in its supervisory function. The remuneration committee shall be chaired by a member of the management body who does not perform any executive functions in the AIFM concerned. The members of the remuneration committee shall be members of the management body who do not perform any executive functions in the AIFM concerned.

ANNEX HI

DOCUMENTATION AND INFORMATION TO BE PROVIDED IN CASE OF INTENDED MARKETING IN THE

HOME MEMBER STATE OF THE AIFM

(a)    A notification letter, including a programme of operations identifying the AIFs the AIFM intends to market and information on where the AIFs are established;

(b)    the AIF rules or instruments of incorporation;

(c)    identification of the depositary of the AIF;

(d)    a description of, or any information on, the AIF available to investors;

(e)    information on where the master AIF is established if the AIF is a feeder AIF;

(f)    any additional information referred to in Article 23(1) for each AIF the AIFM intends to market;

(g)    where relevant, information on the arrangements established to prevent units or shares of the AIF from being marketed to retail investors, including in the case where the AIFM relies on activities of independent entities to provide investment services in respect of the AIF.

ANNEX IV

DOCUMENTATION AND INFORMATION TO BE PROVIDED IN THE CASE OF INTENDED MARKETING IN MEMBER STATES OTHER THAN THE HOME MEMBER STATE OF THE AIFM

(a)    A notification letter, including a programme of operations identifying the AIFs the AIFM intends to market and information on where the AIFs are established;

(b)    the AIF rules or instruments of incorporation;

(c)    identification of the depositary of the AIF;

(d)    a description of, or any information on, the AIF available to investors;

(e)    information on where the master AIF is established if the AIF is a feeder AIF;

(f)    any additional information referred to in Article 23(1) for each AIF the AIFM intends to market;

(g)    the indication of the Member State in which it intends to market the units or shares of the AIF to professional investors;

(h)    information about arrangements made for the marketing of AIFs and, where relevant, information on the arrangements established to prevent units or shares of the AIF from being marketed to retail investors, including in the case where the AIFM relies on activities of independent entities to provide investment services in respect of the AIF.

1

The European Supervisory Authority (European Securities and Markets Authority) (ESMA) shall develop draft regulatory technical standards to determine types of AIFMs, where relevant in the application of this Directive, and to ensure uniform conditions of application of this Directive.

2

The additional information to be included in the annual report of the company or the AIF, in accordance with paragraph 1, shall include at least a fair review of the development of the

3

3) OJ L 331, 15.12.2010, p. 48.

4

If either the European Parliament or the Council objects to the adopted delegated act within the period referred to in paragraph 1, it shall not enter into force. In accordance with Article 296 TFEU, the institution which objects shall state the reasons for objecting to the delegated act.

5

First Council Directive 73/239/EEC of 24 July 1973 on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance (OJ L 228, 16.8.1973, p. 3).

6

Council Directive 8 5/611/EEC of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (OJ L 375, 31.12.1985, p. 3).

7

Council Directive 93/22/EEC of 10 May 1993 on investment services in the securities field (OJ L 141, 11.6.1993, p. 27).

8

Directive 2000/12/EC of the European Parliament and of the Council of 20 March 2000 relating to the taking-up and pursuit of the business of credit institutions (OJ L 126, 26.5.2000, p. 1).

9

Directive 2002/83/EC of the European Parliament and of the Council of 5 November 2002 concerning life assurance (OJ L 345, 19.12.2002,

p. 1).

(******) Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers (OJ L 174, 1.7.2011, p. 1).’;

(2) Article 19(1) is replaced by the following:

‘1. Member States shall not restrict institutions from appointing, for the management of the investment portfolio, investment managers established in another Member State and duly authorised for this activity, in accordance with Directives 85/611/EEC,    93/22/EEC,

2000/12/EC, 2002/83/EC and 2011/61/EU, as well as those referred to in Article 2(1) of this Directive.’.

Article 63

Amendments to Directive 2009/65/EC

Directive 2009/65/EC is amended as follows:

(1) the following Article is inserted:

‘Article 50a

In order to ensure cross-sectoral consistency and to remove misalignment between the interest of firms that repackage loans into tradable securities and other financial instruments (originators) and UCITS that invest in those securities or other financial instruments, the Commission shall adopt, by means of delegated acts in accordance with Article 112a and subject to conditions of Articles 112b and 112c, measures laying down the requirements in the following areas:

10

OJ L 228, 16.8.1973, p. 3.

11

OJ L 345, 19.12.2002, P. 1.

12

OJ L 323, 9.12.2005, p. 1.

13

OJ L 302, 17.11.2009, P. 32.

14

OJ L 174, 1.7.2011, P. 1.’.