AIFMD: How to raise capital and market AIFs in Germany September 2013 – Marketing Key Points Every non-EU manager seeking to market its funds to German investors must become AIFMD compliant and go through a notification procedure with the German Federal Financial Services Supervisory Authority (BaFin) per fund. Additionally, strategic and organizational aspects of marketing in Germany should not be overlooked by non-EU AIFMs. Key dates • 22 July 2013: • 22 July 2014: • In 2015: Effective date of implementation of the AIFMD by EU member states. Start of transition period and best effort compliance. Private placement rules are abolished in Germany. Grandfathering regime may apply. End of transition period. All Non-EU AIFMs must generally be AIFMD compliant and go through the notification process in every EU member country where they want to market or manage their AIFs. Passport available for Non-EU AIFMs. Managers can now passport their AIFs without being registered in every targeted EU member country. I. Strategic Considerations A non-EU manager should assess the marketing and implementation impact of AIFMD as a whole, including third country considerations. The following are some initial considerations: • Does my investor expect or require me to be AIFMD compliant? • Germany vs. other EU Member State as State of Reference? • Where do I have most AuM, investors or domiciled AIFs? • Determination of AIFM? • Domicile of the AIF? • Fundraising potential and marketing requirements? • Choice of depositary? • Costs of AIFMD compliance? II. Prerequisites for marketing in Germany There are conditions to be met when marketing as a non-EU AIFM in Germany, including: • There is a cooperation agreement between BaFin and the foreign supervisory authorities seeing to the cooperation, the efficient information exchange and the monitoring of systemic risks; • The state of origin of the non-EU AIFM or AIF does not appear on the Financial Action Task Force’s blacklist of the non-cooperative countries; • Effective tax agreements have been concluded with the state of origin of the AIF regarding an efficient information exchange in tax matters. PwC AIFMD Services • Germany III. Notification A fund manager must either register in an EU Member State of Reference (MSR) and obtain authorization or provide sufficient evidence of compliance with the AIFMD when applying for permission to market in Germany. To market an AIF in Germany (“ingoing marketing”), every AIFM needs to go through a notification procedure with BaFin. With the introduction of the AIFMD, the KAGB no longer discerns between private placement and public offering, but has different requirements based on the type of investor being marketed to. Key elements of the notification letter are: • Business plan including information on and specified domicile of AIF • Contractual terms and legal documents of AIF • Name of depositary • Description of AIF and all information disclosed to investors • Proof of preventive mechanisms against marketing to retail investors • Further information stated in §307 (1) KAGB IV. Classification of clients The German Investment Capital Code (KAGB) takes reference to the regulatory classifications used in MiFID with respect to its definitions of retail and professional investor. There is also overlap with the definitions used in the US Investment Company Act regarding professional investors. To allow for investors who do not qualify as a professional investor to invest in less regulated funds, the semi-professional investor (similar to Luxembourg’s well informed investor under the Specialized Investment Fund Law) has been introduced in Germany via the KAGB. A semi-professional investor is a retail investor who must commit to invest at least EUR 200.000 and sign a special declaration confirming that it is aware of the lower investor protection and risks. The AIFM/distribution partner must evaluate his expertise, experience and knowledge. V. Special requirements when marketing to retail investors When marketing to German retail investors, the fund must be compliant with the KAGB regarding e.g. eligible assets, structure, investment restrictions and valuation. The non-EU AIFM must appoint a legal representative in Germany, who will - together with the AIFM - have the role of a contact person for investors and EU authorities. It shall also jointly perform with the AIFM the compliance function relating to the AIFMD compliant fund management and national marketing activities. In addition, a paying agent in Germany must be designated. High level overview of notification procedure – if Germany is Member State of Reference *) Depending on whether the AIF is a feeder-AIF, 2-4 months when marketing to professional investors, and 4-8 months when marketing to semi-professional investors. For retail investors, 6 months will apply before the passporting rules have been establisheed, thereafter 3 months. VI. Outline of key requirements for marketing in Germany PwC Germany Contacts: Uwe Stoschek Partner Phone: +49 30 2636 5286 Mobile: +49 160 582 0641 Email: [email protected] Michael Rinas Senior Manager Phone: +49 30 2636 3090 Mobile: +49 175 4362350 Email: [email protected] Felix v.d. Planitz Partner Phone: +49 69 9585 6885 Mobile: +49 170 795 9111 Email: [email protected] Sandra Horst Manager Phone: +49 69 9585 2757 Mobile: +49 151 1677 0960 Email: [email protected]