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Marketing to the EU by US Fund Managers and Third-Party Marketing Under AIFMD

The EU Alternative Investment Fund Managers Directive (“AIFMD”) goes into effect on July 22, 2013.  AIFMD regulates the marketing of alternative investment funds (“AIFs”) in the EU, directly or through third-party marketers.

Summary of AIFMD

Under AIFMD, EU alternative investment fund managers (“EU AIFMs”) may obtain a passport to market EU funds throughout Europe.  The pan-EU passport limits marketing to “professional investors” and, therefore, precludes EU AIFMs from marketing to retail investors.  (Retail investors may be able to purchase so-called “UCITS funds” which are not considered to be AIFs and are subject to a separate EU regulatory regime.)  EU AIFMs can, subject to certain equivalency requirements, begin marketing their non-EU funds in Europe under the passport beginning in 2015.  However, non-EU alternative investment fund managers (“non-EU AIFMs”) will not be eligible to use the pan-EU passport until at least July 2015.  Accordingly, from 2013 to 2015, European managers will enjoy a large competitive advantage because they alone will be able to market EU alternative investment funds to European investors under AIFMD.

ISDA DODD-FRANK PROTOCOL 2.0

DF Protocol 2.0 (or the March DF Protocol) is intended to address the requirements of three rules finalized in the latter half of 2012, too late to be covered by the August DF Protocol. More specifically, DF Protocol 2.0 addresses (a) the end-user exceptionto the clearing requirement for swaps; (b) the clearing requirement determinationthat mandates clearing for certain classes of interest rate swaps and credit default swaps; and (c) the rule entitled “Confirmation, Portfolio Reconciliation, Portfolio Compression, and Swap Trading Relationship Documentation Requirements for Swap Dealers and Major Swap Participants.”

The structure of, and adherence process for, DF Protocol 2.0 is similar to that of the August DF Protocol. Adhering parties must complete and deliver to each of their counterparties a Protocol Questionnaire, which, among other things, provides certain identifying and contact information, identifies whether the adhering party falls into certain regulatory categories established in the Commodity Exchange Act (CEA) and in Commodity and Futures Trading Commission (CFTC) regulations, and specifies whether the adhering party wishes to avail itself of certain exceptions or exemptions from the applicable CFTC rules. DF Protocol 2.0 is independent of the August DF Protocol. Adherence to the August DF Protocol does not imply or require adherence to DF Protocol 2.0 (and vice versa).