FUND 1 Introduction

A full-scope UK AIFM of an authorised AIF is subject to the requirements in FUND and COLL. The effect of FUND 1.1.2 R is that if a rule in COLL which applies to a UK AIFM, an ICVC that is an AIF, or a UK depositary of an AIF conflicts with either a rule in FUND transposing AIFMD or the AIFMD level 2 regulation, the COLL rule is modified to the extent necessary to be compatible with the FUND rule or the AIFMD level 2 regulation.

FUND is structured as follows:

1. (1)

   FUND 1 sets out the broad application of FUND and describes the types of fund manager to whom FUND applies.

2. (2)

   [deleted]

3. (3)

   FUND 3 sets out the baseline requirements that apply to all full-scope UK AIFM.

4. (4)

   [deleted]

5. (10)

   FUND 10 sets out the requirements that apply to an AIFM that operates on a cross-border basis.

The UK regulatory regime provides that an undertaking which manages an AIF or a UCITS scheme in the UK must fall into one or both of the following categories:

1. (1)

   an AIFM; or

2. (2)

   a UCITS management company.

An authorised person that operates a collective investment scheme in the UK and falls entirely outside the scope of the UK AIFM or UCITS regimes will be a residual CIS operator.

An AIFM with a Part 4A permission of managing an AIF will be a UK AIFM and must fall into at least one of the following categories:

1. (1)

   a full-scope UK AIFM;

2. (2)

   a small authorised UK AIFM of an authorised AIF; and

3. (3)

   a small authorised UK AIFM of an unauthorised AIF.

1. (1)

   A full-scope UK AIFM is a UK AIFM which is authorised in accordance with the UK AIFM regime and, therefore, subject to its full requirements.

2. (2)

   A full-scope UK AIFM must be either:

   1. (a)

      an external AIFM; or

   2. (b)

      an internally managed AIF.

3. (3)

   PERG 16, question 3.6 provides guidance on where an AIFM is acting as an external AIFM or an internally managed AIF.

4. (4)

   A full-scope UK AIFM is permitted under FUND 1.4.3 R (3) to FUND 1.4.3 R (6) to provide certain additional services. Where it carries on those services it is also an AIFM investment firm and subject to additional requirements for those services.

1. (1)

   [deleted]

2. (2)

   In the UK, the regulatory regime provides that an AIFM which has assets under management below certain thresholds (“a small AIFM”), with a registered office in the UK may be either:

   1. (a)

      a small authorised UK AIFM; or

   2. (b)

      a small registered UK AIFM.

1. (1)

   A small authorised UK AIFM will be carrying on the regulated activity of managing an AIF and will be subject to FCA rules in respect of that activity. The application of FCA rules to a small authorised UK AIFM will depend on whether it manages an authorised AIF or an unauthorised AIF. A small authorised UK AIFM which manages an authorised AIF will be subject to the requirements in COLL, but a small authorised UK AIFM of an unauthorised AIF will not be subject to COLL.

2. (2)

   A small authorised UK AIFM may also opt in to the full requirements of the UK AIFM regime, in which case it will become a full-scope UK AIFM.

A small registered UK AIFM will not be carrying on a regulated activity in respect of its activities as an AIFM for an AIF for which it is entitled to be registered. Regulation 10 of the AIFMD UK regulation provides for three categories of small registered UK AIFM:

1. (1)

   to fall within the first category the AIFM must:

   1. (a)

      have a registered office in the UK;

   2. (b)

      be a small AIFM;

   3. (c)

      be an internally managed AIF of an AIF which is a body corporate and is not a collective investment scheme; and

   4. (d)

      not be an external AIFM.

2. (2)

   to fall within the second category the AIFM must:

   1. (a)

      have a registered office in the UK;

   2. (b)

      be a small AIFM; and

   3. (c)

      only manage AIFs which:

      1. (i)

         are collective investment schemes;

      2. (ii)

         are not authorised AIFs;

      3. (iii)

         holds the majority of their assets as land, directly or indirectly, through an entity which also meets the conditions in (ii) to (iv) of this sub-paragraph (but this condition does not apply during the first 180 days and the last 180 days of the period during which the undertaking is an AIF);

      4. (iv)

         do not hold any specified investments other than:

         1. (aa)

            contracts of insurance which relate to land held by the AIF; and

         2. (bb)

            shares through which the AIF holds land; and

      5. (v)

         are operated, or will be established and operated, by a person with a Part 4A permission to carry on the regulated activity of establishing, operating or winding up a collective investment scheme.

3. (3)

   to fall within the third category the AIFM must:

   1. (a)

      have a registered office in the UK;

   2. (b)

      be a small AIFM; and

   3. (c)

      have applied for registration as a SEF manager or RVECA manager and meet the conditions for such registration.

Under regulation 16 of the AIFMD UK regulation a small registered UK AIFM may apply to the FCA for a Part 4A permission to manage an AIF. In its application a small registered UK AIFM may apply to become:

1. (1)

   a small authorised UK AIFM; or

2. (2)

   a full-scope UK AIFM.

In the FCA's view an AIFM is permitted under FUND 1.4.3 R to carry out AIFM management functions for a collective investment undertaking which is neither an AIF nor a UCITS.

AIFM management functions are set out in Annex I of AIFMD as follows:

1. (1)

   the AIFM investment management functions of:

   1. (a)

      portfolio management; and

   2. (b)

      risk management; and

2. (2)

   other functions that an AIFM may additionally perform in the course of the collective management of an AIF:

   1. (a)

      administration:

      1. (i)

         legal and fund management accounting services;

      2. (ii)

         customer enquiries;

      3. (iii)

         valuation and pricing (including tax returns);

      4. (iv)

         regulatory compliance monitoring;

      5. (v)

         maintenance of unit/share holder register;

      6. (vi)

         distribution of income;

      7. (vii)

         unit issues and redemptions;

      8. (viii)

         contract settlements (including certificate dispatch); and

      9. (ix)

         record keeping;

   2. (b)

      marketing; and

   3. (c)

      activities related to the assets of AIFs, namely:

      1. (i)

         services necessary to meet the fiduciary duties of the AIFM;

      2. (ii)

         facilities management;

      3. (iii)

         real estate administration activities;

      4. (iv)

         advice to undertakings on capital structure, industrial strategy and related matters;

      5. (v)

         advice and services relating to mergers and the purchase of undertakings; and

      6. (vi)

         other services connected to the management of the AIF and the companies and other assets in which it has invested.

[Note: Annex I of AIFMD]