Upcoming changes to the alternative investment fund law

Further to the issuance of the relevant consultation paper on 22 April, 2016 (CP 2016-03) and to the respective press conference arranged by the Cyprus Securities and Exchange Commission, (CySec) in early May, the proposed changes to the AIF Law are well under way and should be enacted in the near future.

The proposed amendments will mainly introduce a new type of AIF, (the Registered AIF or “RAIF”) and a new type of management company, (the “Mini Manager”).

Registered AIFs

Registered AIFs will not be subject to authorisation or licensing by CySec but to a mere registration with CySec. RAIFs will only be able to be managed by an Alternative Investment Fund Manager, licensed by the Alternative Investment Fund Managers Law and must appoint a Depositary.

RAIFs will in essence be supervised through its Manager who will also undertake to issue the relevant prospectus. They will be available exclusively to professional and well-informed investors, and will be subject to minimum capital requirements.

A RAIF may operate as open or closed-ended and take the legal form of an investment company, a limited partnership or a common fund.

Mini manager

The mini manager concept takes advantage of the flexibility offered by the European Directive 2011/61/EU, which allows Member States to apply a lighter regime for AIFMs where the total assets of the AIFM under management fall below a threshold of EUR 100 million, or AIFMs that manage only unleveraged AIFs that do not grant investors redemption rights during a period of 5 years, and where the total assets of the AIF under management fall below a threshold of EUR 500 million.

To this respect, the establishment of the Mini Manager is proposed, which will manage AIFs falling below the AIFM threshold.

The Mini Manager will be a limited liability company with shares and registered office in the Republic of Cyprus, whose sole purpose is to manage AIFs. It will be subject to authorisation by CySEC and to minimum capital requirements. Once authorised, it will be registered in the relevant registry maintained by CySEC and will have to fulfil minimum regulatory requirements with regards to fund management, risk management, disclosure to investors, compliance, internal audit, and other operational areas.

Apart from the above, there are many other minor proposed amendments to the AIF Law, which once enacted will modernise the AIF regime, putting it on par with those in other EU jurisdictions.

Savva & Associates is one of only a handful of providers in Cyprus with significant experience servicing regulated and non-regulated investment funds.  We are a leading provider of regulated investment fund services, and by far the most cost efficient. Our funds professionals are well positioned to assist throughout the investment fund set up and licensing process, as well as ongoing administration.

Our Investment Funds Department can assist with:

• Licensing and administration of Alternative Investment Funds (AIFs).
• Licensing and administration of UCITS.
• Formation and administration of non-licensed investment funds.

Irrespective of the type of regulated investment fund required, we will make certain that all requirements are clearly communicated, thus ensuring a successful application to the regulator, being the Cyprus Securities and Exchange Commission.  Our leadership in this regards has not gone unnoticed, as we are regularly engaged by other providers on the island to assist with the formation and administration of investment funds on behalf of their own clients.

Further to the issuance of the relevant consultation paper on 22 April, 2016 (CP 2016-03) and to the respective press conference arranged by the Cyprus Securities and Exchange Commission, (CySec) in early May, the proposed changes to the AIF Law are well under way and should be enacted in the near future.

The proposed amendments will mainly introduce a new type of AIF, (the Registered AIF or “RAIF”) and a new type of management company, (the “Mini Manager”).

Registered AIFs

Registered AIFs will not be subject to authorisation or licensing by CySec but to a mere registration with CySec. RAIFs will only be able to be managed by an Alternative Investment Fund Manager, licensed by the Alternative Investment Fund Managers Law and must appoint a Depositary.

RAIFs will in essence be supervised through its Manager who will also undertake to issue the relevant prospectus. They will be available exclusively to professional and well-informed investors, and will be subject to minimum capital requirements.

A RAIF may operate as open or closed-ended and take the legal form of an investment company, a limited partnership or a common fund.

Mini manager

The mini manager concept takes advantage of the flexibility offered by the European Directive 2011/61/EU, which allows Member States to apply a lighter regime for AIFMs where the total assets of the AIFM under management fall below a threshold of EUR 100 million, or AIFMs that manage only unleveraged AIFs that do not grant investors redemption rights during a period of 5 years, and where the total assets of the AIF under management fall below a threshold of EUR 500 million.

To this respect, the establishment of the Mini Manager is proposed, which will manage AIFs falling below the AIFM threshold.

The Mini Manager will be a limited liability company with shares and registered office in the Republic of Cyprus, whose sole purpose is to manage AIFs. It will be subject to authorisation by CySEC and to minimum capital requirements. Once authorised, it will be registered in the relevant registry maintained by CySEC and will have to fulfil minimum regulatory requirements with regards to fund management, risk management, disclosure to investors, compliance, internal audit, and other operational areas.

Apart from the above, there are many other minor proposed amendments to the AIF Law, which once enacted will modernise the AIF regime, putting it on par with those in other EU jurisdictions.

Savva & Associates is one of only a handful of providers in Cyprus with significant experience servicing regulated and non-regulated investment funds.  We are a leading provider of regulated investment fund services, and by far the most cost efficient. Our funds professionals are well positioned to assist throughout the investment fund set up and licensing process, as well as ongoing administration.

Our Investment Funds Department can assist with:

• Licensing and administration of Alternative Investment Funds (AIFs).
• Licensing and administration of UCITS.
• Formation and administration of non-licensed investment funds.

Irrespective of the type of regulated investment fund required, we will make certain that all requirements are clearly communicated, thus ensuring a successful application to the regulator, being the Cyprus Securities and Exchange Commission.  Our leadership in this regards has not gone unnoticed, as we are regularly engaged by other providers on the island to assist with the formation and administration of investment funds on behalf of their own clients.