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Germany's Capital Investment Act Implements AIFMD

by Ulrika Lomas,, Brussels

17 December 2012

The German finance ministry has recently unveiled details of the coalition government’s draft law implementing the Alternative Investment Fund Managers Directive (AIFMD), representing a further building block in the new regulatory framework for the financial markets in Germany.

According to the finance ministry, the bill establishes a new capital investment act, subjecting all types of investment funds and their managers to financial supervision. For the investment fund sector, the bill therefore anchors in German law the decisions taken by heads of state and government at the G20 summit meeting in Pittsburgh and London in 2009, namely that no financial market, financial actor or financial product should remain unregulated.

In addition to open-ended real estate funds and hedge funds, private equity funds will for example also be subject to financial supervision, as alternative investment funds. The law concerns both funds for private investors as well as funds for professional and semi-professional investors.

Managers of alternative investment funds will be subject to an authorization requirement and to continuous supervision. Managers will be required to set up an appropriate risk and liquidity management model, have specific expertise, experience and reliability, and meet the extensive reporting requirements of the financial regulator.

Furthermore, managers of hedge funds will be subject to specific transparency requirements, to enable the supervisory authorities to gain a better view of potential systemic risks and to prevent possible threats.

To protect investors, the bill provides for additional requirements for investment funds and their managers marketed to retail investors. For "specialized funds," that is open-ended funds marketed to professional or to semi-professional investors, the existing product regulations will apply, taken from the investment act.

The existing provisions provided for in the investment act pertaining to UCITS funds will also be integrated into the new capital investment act and the investment act repealed.

Fund managers registered under AIFMD will then receive a European Union (EU) passport, allowing EU-wide marketing to professional investors.

The AIFMD is to be transposed into national law by July 22, 2013.

TAGS: investment | private equity | law | financial services | investment funds | hedge funds | legislation | Germany | regulation | alternative investment | European Union (EU) | services | Europe

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