Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 Text with EEA relevance

CHAPTER I GENERAL PROVISIONS

Article 1

Subject matter

This Directive lays down the rules for the authorisation, ongoing operation and transparency of the managers of alternative investment funds (AIFMs) which manage and/or market alternative investment funds (AIFs) in the Union.

Article 2

Scope

• (a) EU AIFMs which manage one or more AIFs irrespective of whether such AIFs are EU AIFs or non-EU AIFs;

• (b) non-EU AIFMs which manage one or more EU AIFs; and

• (c) non-EU AIFMs which market one or more AIFs in the Union irrespective of whether such AIFs are EU AIFs or non-EU AIFs.

• (a) whether the AIF belongs to the open-ended or closed-ended type;

• (b) whether the AIF is constituted under the law of contract, under trust law, under statute, or has any other legal form;

• (c) the legal structure of the AIFM.

• (a) holding companies;

• (b) institutions for occupational retirement provision which are covered by Directive 2003/41/EC, including, where applicable, the authorised entities responsible for managing such institutions and acting on their behalf referred to in Article 2(1) of that Directive or the investment managers appointed pursuant to Article 19(1) of that Directive, in so far as they do not manage AIFs;

• (c) supranational institutions, such as the European Central Bank, the European Investment Bank, the European Investment Fund, the European Development Finance Institutions and bilateral development banks, the World Bank, the International Monetary Fund, and other supranational institutions and similar international organisations, in the event that such institutions or organisations manage AIFs and in so far as those AIFs act in the public interest;

• (d) national central banks;

• (e) national, regional and local governments and bodies or other institutions which manage funds supporting social security and pension systems;

• (f) employee participation schemes or employee savings schemes;

• (g) securitisation special purpose entities.

Article 3

Exemptions

• (a) AIFMs which either directly or indirectly, through a company with which the AIFM is linked by common management or control, or by a substantive direct or indirect holding, manage portfolios of AIFs whose assets under management, including any assets acquired through use of leverage, in total do not exceed a threshold of EUR 100 million; or

• (b) AIFMs which either directly or indirectly, through a company with which the AIFM is linked by common management or control, or by a substantive direct or indirect holding, manage portfolios of AIFs whose assets under management in total do not exceed a threshold of EUR 500 million when the portfolios of AIFs consist of AIFs that are unleveraged and have no redemption rights exercisable during a period of 5 years following the date of initial investment in each AIF.

• (a) are subject to registration with the competent authorities of their home Member State;

• (b) identify themselves and the AIFs that they manage to the competent authorities of their home Member State at the time of registration;

• (c) provide information on the investment strategies of the AIFs that they manage to the competent authorities of their home Member State at the time of registration;

• (d) regularly provide the competent authorities of their home Member State with information on the main instruments in which they are trading and on the principal exposures and most important concentrations of the AIFs that they manage in order to enable the competent authorities to monitor systemic risk effectively; and

• (e) notify the competent authorities of their home Member State in the event that they no longer meet the conditions referred to in paragraph 2.

This paragraph and paragraph 2 shall apply without prejudice to any stricter rules adopted by Member States with respect to AIFMs referred to in paragraph 2.

Member States shall take the necessary steps to ensure that where the conditions set out in paragraph 2 are no longer met, the AIFM concerned applies for authorisation within 30 calendar days in accordance with the relevant procedures laid down in this Directive.

• (a) how the thresholds referred to in paragraph 2 are to be calculated and the treatment of AIFMs which manage AIFs whose assets under management, including any assets acquired through the use of leverage, occasionally exceed and/or fall below the relevant threshold in the same calendar year;

• (b) the obligation to register and to provide information in order to allow effective monitoring of systemic risk as set out in paragraph 3; and

• (c) the obligation to notify competent authorities as set out in paragraph 3.

Article 4

Definitions

• (a) ‘AIFs’ means collective investment undertakings, including investment compartments thereof, which:
• (i) raise capital from a number of investors, with a view to investing it in accordance with a defined investment policy for the benefit of those investors; and
• (ii) do not require authorisation pursuant to Article 5 of Directive 2009/65/EC;

• (b) ‘AIFMs’ means legal persons whose regular business is managing one or more AIFs;

• (c) ‘branch’ when relating to an AIFM means a place of business which is a part of an AIFM, which has no legal personality and which provides the services for which the AIFM has been authorised; all the places of business established in the same Member State by an AIFM with its registered office in another Member State or in a third country shall be regarded as a single branch;

• (d) ‘carried interest’ means a share in the profits of the AIF accrued to the AIFM as compensation for the management of the AIF and excluding any share in the profits of the AIF accrued to the AIFM as a return on any investment by the AIFM into the AIF;

• (e) ‘close links’ means a situation in which two or more natural or legal persons are linked by:
• (i) participation, namely ownership, directly or by way of control, of 20 % or more of the voting rights or capital of an undertaking;
• (ii) control, namely the relationship between a parent undertaking and a subsidiary, as referred to in Article 1 of the Seventh Council Directive 83/349/EEC of 13 June 1983 on consolidated accounts ([^E0001]), or a similar relationship between a natural or legal person and an undertaking; for the purposes of this point a subsidiary undertaking of a subsidiary undertaking shall also be considered to be a subsidiary of the parent undertaking of those subsidiaries. A situation in which two or more natural or legal persons are permanently linked to the same person by a control relationship shall also be regarded as constituting a ‘close link’ between such persons;

• (f) ‘competent authorities’ means the national authorities of Member States which are empowered by law or regulation to supervise AIFMs;

• (g) ‘competent authorities’ in relation to a depositary means:
• (i) if the depositary is a credit institution authorised under Directive 2006/48/EC, the competent authorities as defined in point (4) of Article 4 thereof;
• (ii) if the depositary is an investment firm authorised under Directive 2004/39/EC, the competent authorities as defined in point (22) of Article 4(1) thereof;
• (iii) if the depositary falls within a category of institution referred to in point (c) of the first subparagraph of Article 21(3) of this Directive, the national authorities of its home Member State which are empowered by law or regulation to supervise such categories of institution;
• (iv) if the depositary is an entity referred to in the third subparagraph of Article 21(3) of this Directive, the national authorities of the Member State in which that entity has its registered office and which are empowered by law or regulation to supervise such entity or the official body competent to register or supervise such entity pursuant to the rules of professional conduct applicable thereto;
• (v) if the depositary is appointed as depositary for a non-EU AIF in accordance with point (b) of Article 21(5) of this Directive and does not fall within the scope of points (i) to (iv) of this point, the relevant national authorities of the third country where the depositary has its registered office;

• (h) ‘competent authorities of the EU AIF’ means the national authorities of a Member State which are empowered by law or regulation to supervise AIFs;

• (i) ‘control’ means control as defined in Article 1 of Directive 83/349/EEC;

• (j) ‘established’ means:
• (i) for AIFMs, ‘having its registered office in’;
• (ii) for AIFs, ‘being authorised or registered in’, or, if the AIF is not authorised or registered, ‘having its registered office in’;
• (iii) for depositaries, ‘having its registered office or branch in’;
• (iv) for legal representatives that are legal persons, ‘having its registered office or branch in’;
• (v) for legal representatives that are natural persons, ‘domiciled in’;

• (k) ‘EU AIF’ means:
• (i) an AIF which is authorised or registered in a Member State under the applicable national law; or
• (ii) an AIF which is not authorised or registered in a Member State, but has its registered office and/or head office in a Member State;

• (l) ‘EU AIFM’ means an AIFM which has its registered office in a Member State;

• (m) ‘feeder AIF’ means an AIF which:
• (i) invests at least 85 % of its assets in units or shares of another AIF (the ‘master AIF’);
• (ii) invests at least 85 % of its assets in more than one master AIFs where those master AIFs have identical investment strategies; or
• (iii) has otherwise an exposure of at least 85 % of its assets to such a master AIF;

• (n) ‘financial instrument’ means an instrument as specified in Section C of Annex I to Directive 2004/39/EC;

• (o) ‘holding company’ means a company with shareholdings in one or more other companies, the commercial purpose of which is to carry out a business strategy or strategies through its subsidiaries, associated companies or participations in order to contribute to their long-term value, and which is either a company:
• (i) operating on its own account and whose shares are admitted to trading on a regulated market in the Union; or
• (ii) not established for the main purpose of generating returns for its investors by means of divestment of its subsidiaries or associated companies, as evidenced in its annual report or other official documents;

• (p) ‘home Member State of the AIF’ means:
• (i) the Member State in which the AIF is authorised or registered under applicable national law, or in case of multiple authorisations or registrations, the Member State in which the AIF has been authorised or registered for the first time; or
• (ii) if the AIF is neither authorised nor registered in a Member State, the Member State in which the AIF has its registered office and/or head office;

• (q) ‘home Member State of the AIFM’ means the Member State in which the AIFM has its registered office; for non-EU AIFMs, all references to ‘home Member State of the AIFM’ in this Directive shall be read as the ‘Member State of reference’, as provided for in Chapter VII;

• (r) ‘host Member State of the AIFM’ means any of the following:
• (i) a Member State, other than the home Member State, in which an EU AIFM manages EU AIFs;
• (ii) a Member State, other than the home Member State, in which an EU AIFM markets units or shares of an EU AIF;
• (iii) a Member State, other than the home Member State, in which an EU AIFM markets units or shares of a non-EU AIF;
• (iv) a Member State, other than the Member State of reference, in which a non-EU AIFM manages EU AIFs;
• (v) a Member State, other than the Member State of reference, in which a non-EU AIFM markets units or shares of an EU AIF; or
• (vi) a Member State, other than the Member State of reference, in which a non-EU AIFM markets units or shares of a non-EU AIF; or
• (vii) a Member State, other than the home Member State, in which an EU AIFM provides the services referred to in Article 6(4);

• (s) ‘initial capital’ means funds as referred to in points (a) and (b) of the first paragraph of Article 57 of Directive 2006/48/EC;

• (t) ‘issuer’ means an issuer within the meaning of point (d) of Article 2(1) of Directive 2004/109/EC where that issuer has its registered office in the Union, and where its shares are admitted to trading on a regulated market within the meaning of point (14) of Article 4(1) of Directive 2004/39/EC;

• (u) ‘legal representative’ means a natural person domiciled in the Union or a legal person with its registered office in the Union, and which, expressly designated by a non-EU AIFM, acts on behalf of such non-EU AIFM vis-à-vis the authorities, clients, bodies and counterparties to the non-EU AIFM in the Union with regard to the non-EU AIFM’s obligations under this Directive;

• (v) ‘leverage’ means any method by which the AIFM increases the exposure of an AIF it manages whether through borrowing of cash or securities, or leverage embedded in derivative positions or by any other means;

• (w) ‘managing AIFs’ means performing at least investment management functions referred to in point 1(a) or (b) of Annex I for one or more AIFs;

• (x) ‘marketing’ means a direct or indirect offering or placement at the initiative of the AIFM or on behalf of the AIFM of units or shares of an AIF it manages to or with investors domiciled or with a registered office in the Union;

• (y) ‘master AIF’ means an AIF in which another AIF invests or has an exposure in accordance with point (m);

• (z) ‘Member State of reference’ means the Member State determined in accordance with Article 37(4);

• (aa) ‘non-EU AIF’ means an AIF which is not an EU AIF;

• (ab) ‘non-EU AIFM’ means an AIFM which is not an EU AIFM;

• (ac) ‘non-listed company’ means a company which has its registered office in the Union and the shares of which are not admitted to trading on a regulated market within the meaning of point (14) of Article 4(1) of Directive 2004/39/EC;

• (ad) ‘own funds’ means own funds as referred to in Articles 56 to 67 of Directive 2006/48/EC;

• (ae) ‘parent undertaking’ means a parent undertaking within the meaning of Articles 1 and 2 of Directive 83/349/EEC;

• (aea) ‘pre-marketing’ means provision of information or communication, direct or indirect, on investment strategies or investment ideas by an EU AIFM or on its behalf, to potential professional investors domiciled or with a registered office in the Union in order to test their interest in an AIF or a compartment which is not yet established, or which is established, but not yet notified for marketing in accordance with Article 31 or 32, in that Member State where the potential investors are domiciled or have their registered office, and which in each case does not amount to an offer or placement to the potential investor to invest in the units or shares of that AIF or compartment;

• (af) ‘prime broker’ means a credit institution, a regulated investment firm or another entity subject to prudential regulation and ongoing supervision, offering services to professional investors primarily to finance or execute transactions in financial instruments as counterparty and which may also provide other services such as clearing and settlement of trades, custodial services, securities lending, customised technology and operational support facilities;

• (ag) ‘professional investor’ means an investor which is considered to be a professional client or may, on request, be treated as a professional client within the meaning of Annex II to Directive 2014/65/EU of the European Parliament and of the Council ([^E0002]);

• (ah) ‘qualifying holding’ means a direct or indirect holding in an AIFM which represents 10 % or more of the capital or of the voting rights, in accordance with Articles 9 and 10 of Directive 2004/109/EC, taking into account the conditions regarding aggregation of the holding laid down in Article 12(4) and (5) thereof, or which makes it possible to exercise a significant influence over the management of the AIFM in which that holding subsists;

• (ai) ‘employees’ representatives’ means employees’ representatives as defined in point (e) of Article 2 of Directive 2002/14/EC;

• (aj) ‘retail investor’ means an investor who is not a professional investor;

• (ak) ‘subsidiary’ means a subsidiary undertaking as defined in Articles 1 and 2 of Directive 83/349/EEC;

• (al) ‘supervisory authorities’ in relation to non-EU AIFs means the national authorities of a third country which are empowered by law or regulation to supervise AIFs;

• (am) ‘supervisory authorities’ in relation to non-EU AIFMs means the national authorities of a third country which are empowered by law or regulation to supervise AIFMs;

• (an) ‘securitisation special purpose entities’ means entities whose sole purpose is to carry on a securitisation or securitisations within the meaning of Article 1(2) of Regulation (EC) No 24/2009 of the European Central Bank of 19 December 2008 concerning statistics on the assets and liabilities of financial vehicle corporations engaged in securitisation transactions ([^E0003]) and other activities which are appropriate to accomplish that purpose;

• (ao) ‘UCITS’ means an undertaking for collective investment in transferable securities authorised in accordance with Article 5 of Directive 2009/65/EC;

• (ap) ‘central securities depository’ means a central securities depository as defined in Article 2(1), point (1), of Regulation (EU) No 909/2014 of the European Parliament and of the Council ([^E0004]);

• (aq) ‘capital of the AIF’ means aggregate capital contributions and uncalled capital committed to an AIF, calculated on the basis of amounts investible after the deduction of all fees, charges and expenses that are directly or indirectly borne by investors;

• (ar) ‘loan origination’ or ‘originating a loan’ means the granting of a loan:
• (i) directly by an AIF as the original lender; or
• (ii) indirectly through a third party or special purpose vehicle which originates a loan for or on behalf of the AIF, or for or on behalf of an AIFM in respect of the AIF, where the AIFM or AIF is involved in structuring the loan, or defining or pre-agreeing its characteristics, prior to gaining exposure to the loan;

• (as) ‘shareholder loan’ means a loan which is granted by an AIF to an undertaking in which it holds directly or indirectly at least 5 % of the capital or voting rights, and which cannot be sold to third parties independently of the capital instruments held by the AIF in the same undertaking;

• (at) ‘loan-originating AIF’ means an AIF:
• (i) whose investment strategy is mainly to originate loans; or
• (ii) whose originated loans have a notional value that represents at least 50 % of its net asset value;

• (au) ‘leveraged AIF’ means an AIF whose exposures are increased by the AIFM that manages it, whether through borrowing of cash or securities, leverage embedded in derivative positions or any other means.

• (a) the methods of leverage, as defined in point (v) of paragraph 1, including any financial and/or legal structures involving third parties controlled by the relevant AIF; and

• (b) how leverage is to be calculated.

Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.

Article 5

Determination of the AIFM

• (a) an external manager, which is the legal person appointed by the AIF or on behalf of the AIF and which through this appointment is responsible for managing the AIF (external AIFM); or

• (b) where the legal form of the AIF permits an internal management and where the AIF’s governing body chooses not to appoint an external AIFM, the AIF itself, which shall then be authorised as AIFM.

CHAPTER II AUTHORISATION OF AIFMs

Article 6

Conditions for taking up activities as AIFM

AIFMs authorised in accordance with this Directive shall meet the conditions for authorisation established in this Directive at all times.

• (a) management of portfolios of investments, including those owned by pension funds and institutions for occupational retirement provision in accordance with Article 19(1) of Directive 2003/41/EC, in accordance with mandates given by investors on a discretionary, client-by-client basis;

• (b) non-core services comprising:
• (i) investment advice;
• (ii) safe-keeping and administration in relation to shares or units of collective investment undertakings;
• (iii) reception and transmission of orders in relation to financial instruments;
• (iv) any other function or activity which is already provided by the AIFM in relation to an AIF that it manages in accordance with this Article, or in relation to services that it provides in accordance with this paragraph, provided that any potential conflict of interest created by the provision of that function or activity to other parties is appropriately managed.

• (c) administration of benchmarks in accordance with Regulation (EU) 2016/1011;

• (d) credit servicing activities in accordance with Directive (EU) 2021/2167 of the European Parliament and of the Council ([^E0006]).

• (a) only the services referred to in paragraph 4;

• (c) only the activities referred to in point 2 of Annex I; or

• (d) the services referred to in point 1(a) of Annex I without also providing the services referred to in point 1(b) of Annex I or vice versa; or

• (e) administration of benchmarks in accordance with Regulation (EU) 2016/1011 which are used in the AIFs that they manage.

Article 7

Application for authorisation

• (a) information about the persons effectively conducting the business of the AIFM, in particular with regard to the functions referred to in Annex I, including:
• (i) a description of the role, title and level of seniority of those persons;
• (ii) a description of the reporting lines and responsibilities of those persons within and outside the AIFM;
• (iii) an overview of the amount of time that each of those persons allocates to each responsibility;
• (iv) a description of the human and technical resources that support the activities of those persons;

• (aa) the legal name and relevant identifier of the AIFM;

• (b) information on the identities of the AIFM’s shareholders or members, whether direct or indirect, natural or legal persons, that have qualifying holdings and on the amounts of those holdings;

• (c) a programme of activity setting out the organisational structure of the AIFM, including information on how the AIFM intends to comply with its obligations under Chapters II, III, IV, and, where applicable, Chapters V to VIII of this Directive, and with its obligations under Article 3(1), Article 6(1), point (a), and Article 13 of Regulation (EU) 2019/2088 of the European Parliament and of the Council ([^E0007]), and a detailed description of the appropriate human and technical resources to be used by the AIFM to that effect;

• (d) information on the AIFM’s remuneration policies and practices pursuant to Article 13;

• (e) information on arrangements made for the delegation and sub-delegation to third parties of functions in accordance with Article 20, comprising at least the following:
• (i) for each delegate:
• — its legal name and relevant identifier,
• — its jurisdiction of establishment, and
• — where relevant, its supervisory authority;
• (ii) a detailed description of the human and technical resources employed by the AIFM for:
• — performing day-to-day portfolio management or risk management tasks within the AIFM, and
• — monitoring the delegated activity;
• (iii) in respect of each of the AIFs that the AIFM manages or intends to manage:
• — a brief description of the delegated portfolio management function, including whether such delegation amounts to a partial or full delegation, and
• — a brief description of the delegated risk management function, including whether such delegation amounts to a partial or full delegation;
• iv) a description of the periodic due diligence measures to be carried out by the AIFM to monitor the delegated activity.

• (a) information about the investment strategies including the types of underlying funds if the AIF is a fund of funds, and the AIFM’s policy as regards the use of leverage, and the risk profiles and other characteristics of the AIFs it manages or intends to manage, including information about the Member States or third countries in which such AIFs are established or are expected to be established;

• (b) information on where the master AIF is established if the AIF is a feeder AIF;

• (c) the rules or instruments of incorporation of each AIF the AIFM intends to manage;

• (d) information on the arrangements made for the appointment of the depositary in accordance with Article 21 for each AIF the AIFM intends to manage;

• (e) any additional information referred to in Article 23(1) for each AIF the AIFM manages or intends to manage.

ESMA shall keep a central public register identifying each AIFM authorised under this Directive, the competent authorities of each such AIFM and a list of the AIFs managed or marketed in the Union by such AIFMs. The register shall be made publicly available in an electronic format.

Article 8

Conditions for granting authorisation

• (a) they are satisfied that the AIFM will be able to meet the conditions of this Directive;

• (b) the AIFM has sufficient initial capital and own funds in accordance with Article 9;

• (c) the persons who effectively conduct the business of the AIFM are of sufficiently good repute and are sufficiently experienced also in relation to the investment strategies pursued by the AIF managed by the AIFM, the names of those persons and of every person succeeding them in the office are communicated forthwith to the competent authorities of the home Member States of the AIFM and the conduct of the business of the AIFM is decided by at least two natural persons meeting such conditions who either are employed full-time by that AIFM or are executive members or members of the governing body of the AIFM committed full-time to conducting the business of that AIFM, and who are domiciled in the Union;

• (d) the shareholders or members of the AIFM that have qualifying holdings are suitable taking into account the need to ensure the sound and prudent management of the AIFM; and

• (e) the head office and the registered office of the AIFM are located in the same Member State.

Authorisation shall be valid for all Member States.

• (a) a subsidiary of another AIFM, of a UCITS management company, of an investment firm, of a credit institution or of an insurance undertaking authorised in another Member State;

• (b) a subsidiary of the parent undertaking of another AIFM, of a UCITS management company, of an investment firm, of a credit institution or of an insurance undertaking authorised in another Member State; and

• (c) a company controlled by the same natural or legal persons as those that control another AIFM, a UCITS management company, an investment firm, a credit institution or an insurance undertaking authorised in another Member State.

• (a) close links between the AIFM and other natural or legal persons;

• (b) the laws, regulations or administrative provisions of a third country governing natural or legal persons with which the AIFM has close links;

• (c) difficulties involved in the enforcement of those laws, regulations and administrative provisions.

For the purpose of this paragraph an application is deemed complete if the AIFM has at least submitted the information referred to in points (a) to (d) of Article 7(2) and points (a) and (b) of Article 7(3).

AIFMs may start managing AIFs with investment strategies described in the application in accordance with point (a) of Article 7(3) in their home Member State as soon as the authorisation is granted, but not earlier than 1 month after having submitted any missing information referred to in point (e) of Article 7(2) and points (c), (d) and (e) of Article 7(3).

• (a) requirements applicable to the AIFMs under paragraph 3;

• (b) requirements applicable to shareholders and members with qualifying holdings referred to in point (d) of paragraph 1;

• (c) obstacles which may prevent effective exercise of the supervisory functions of the competent authorities.

Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.

Article 9

Initial capital and own funds

• (a) have additional own funds which are appropriate to cover potential liability risks arising from professional negligence; or

• (b) hold a professional indemnity insurance against liability arising from professional negligence which is appropriate to the risks covered.

• (a) the risks the additional own funds or the professional indemnity insurance must cover;

• (b) the conditions for determining the appropriateness of additional own funds or the coverage of the professional indemnity insurance; and

• (c) the manner of determining ongoing adjustments of the additional own funds or of the coverage of the professional indemnity insurance.

Article 10

Changes in the scope of the authorisation

Article 11

Withdrawal of the authorisation

The competent authorities of the home Member State of the AIFM may withdraw the authorisation issued to an AIFM where that AIFM:

• (a) does not make use of the authorisation within 12 months, expressly renounces the authorisation or has ceased the activity covered by this Directive for the preceding 6 months, unless the Member State concerned has provided for authorisation to lapse in such cases;

• (b) obtained the authorisation by making false statements or by any other irregular means;

• (c) no longer meets the conditions under which authorisation was granted;

• (d) no longer complies with Directive 2006/49/EC if its authorisation also covers the discretionary portfolio management service referred to in point (a) of Article 6(4) of this Directive;

• (e) has seriously or systematically infringed the provisions adopted pursuant to this Directive; or

• (f) falls within any of the cases where national law, in respect of matters outside the scope of this Directive, provides for withdrawal.

CHAPTER III OPERATING CONDITIONS FOR AIFMs

SECTION 1 General requirements

Article 12

General principles

• (a) act honestly, with due skill, care and diligence and fairly in conducting their activities;

• (b) act in the best interests of the AIFs or the investors of the AIFs they manage and the integrity of the market;

• (c) have and employ effectively the resources and procedures that are necessary for the proper performance of their business activities;

• (d) take all reasonable steps to avoid conflicts of interest and, when they cannot be avoided, to identify, manage and monitor and, where applicable, disclose, those conflicts of interest in order to prevent them from adversely affecting the interests of the AIFs and their investors and to ensure that the AIFs they manage are fairly treated;

• (e) comply with all regulatory requirements applicable to the conduct of their business activities so as to promote the best interests of the AIFs or the investors of the AIFs they manage and the integrity of the market;

• (f) treat all AIF investors fairly.

No investor in an AIF shall obtain preferential treatment, unless such preferential treatment is disclosed in the relevant AIF’s rules or instruments of incorporation.

• (a) not be permitted to invest all or part of the client’s portfolio in units or shares of the AIFs it manages, unless it receives prior general approval from the client;

• (b) with regard to the services referred to in Article 6(4), be subject to Directive 97/9/EC of the European Parliament and of the Council of 3 March 1997 on investor-compensation schemes ([^E0009]).

For the purposes of that report, and in accordance with Article 35 of Regulation (EU) No 1095/2010, the competent authorities shall provide ESMA on a one-time basis with data on costs including all fees, charges and expenses which are directly or indirectly borne by the investors, or by the AIFM in connection with the operations of the AIF, and that are to be directly or indirectly allocated to the AIF. The competent authorities shall make those data available to ESMA within their powers, which include the power to require AIFMs to provide information as laid down in Article 46(2) of this Directive.

Article 13

Remuneration

The AIFMs shall determine the remuneration policies and practices in accordance with Annex II.

Article 14

Conflicts of interest

• (a) the AIFM, including its managers, employees or any person directly or indirectly linked to the AIFM by control, and the AIF managed by the AIFM or the investors in that AIF;

• (b) the AIF or the investors in that AIF, and another AIF or the investors in that AIF;

• (c) the AIF or the investors in that AIF, and another client of the AIFM;

• (d) the AIF or the investors in that AIF, and a UCITS managed by the AIFM or the investors in that UCITS; or

• (e) two clients of the AIFM.

AIFMs shall maintain and operate effective organisational and administrative arrangements with a view to taking all reasonable steps designed to identify, prevent, manage and monitor conflicts of interest in order to prevent them from adversely affecting the interests of the AIFs and their investors.

AIFMs shall segregate, within their own operating environment, tasks and responsibilities which may be regarded as incompatible with each other or which may potentially generate systematic conflicts of interest. AIFMs shall assess whether their operating conditions may involve any other material conflicts of interest and disclose them to the investors of the AIFs.

2a. Where an AIFM manages or intends to manage an AIF at the initiative of a third party, including cases where that AIF uses the name of a third-party initiator or where an AIFM appoints a third-party initiator as a delegate pursuant to Article 20, the AIFM shall, taking account of any conflicts of interest, submit detailed explanations and evidence of its compliance with paragraphs 1 and 2 of this Article to the competent authorities of its home Member State. In particular, the AIFM shall specify the reasonable steps it has taken to prevent conflicts of interest arising from the relationship with the third party or, where those conflicts of interest cannot be prevented, how it identifies, manages, monitors and, where applicable, discloses those conflicts of interest in order to prevent them from adversely affecting the interests of the AIF and its investors.

AIFMs shall exercise due skill, care and diligence in the selection and appointment of prime brokers with whom a contract is to be concluded.

• (a) the types of conflicts of interest as referred to in paragraph 1;

• (b) the reasonable steps AIFMs are expected to take in terms of structures and organisational and administrative procedures in order to identify, prevent, manage, monitor and disclose conflicts of interest.

Article 15

Risk management

The functional and hierarchical separation of the functions of risk management in accordance with the first subparagraph shall be reviewed by the competent authorities of the home Member State of the AIFM in accordance with the principle of proportionality, on the understanding that the AIFM shall, in any event, be able to demonstrate that specific safeguards against conflicts of interest allow for the independent performance of risk management activities and that the risk management process satisfies the requirements of this Article and is consistently effective.

AIFMs shall review the risk management systems with appropriate frequency at least once a year and adapt them whenever necessary.

• (a) implement an appropriate, documented and regularly updated due diligence process when investing on behalf of the AIF, according to the investment strategy, the objectives and risk profile of the AIF;

• (b) ensure that the risks associated with each investment position of the AIF and their overall effect on the AIF’s portfolio can be properly identified, measured, managed and monitored on an ongoing basis, including through the use of appropriate stress testing procedures;

• (c) ensure that the risk profile of the AIF shall correspond to the size, portfolio structure and investment strategies and objectives of the AIF as laid down in the AIF rules or instruments of incorporation, prospectus and offering documents;

• (d) for loan-originating activities, implement effective policies, procedures and processes for the granting of loans.

For the purposes of the first subparagraph, point (d), where AIFMs manage AIFs that engage in loan origination, including when those AIFs gain exposure to loans through third parties, they shall also implement effective policies, procedures and processes for assessing the credit risk and for administering and monitoring their credit portfolio, keep those policies, procedures and processes up to date and effective, and review them regularly and at least once a year.

Without prejudice to Article 12(1), point (b), the requirements set out in the first subparagraph, point (d), and in the second subparagraph of this paragraph shall not apply to the origination of shareholder loans where the notional value of such loans does not exceed in aggregate 150 % of the capital of the AIF.

3a. Taking into account the nature, scale and complexity of the AIFs’ activities, the competent authorities shall monitor the adequacy of the credit assessment processes of AIFMs, assess the use of references to credit ratings, as referred to in the first subparagraph of paragraph 2, in the AIFs’ investment policies and, where appropriate, encourage mitigation of the impact of such references, with a view to reducing sole and mechanistic reliance on such credit ratings.

• (a) the type of the AIF;

• (b) the investment strategy of the AIF;

• (c) the sources of leverage of the AIF;

• (d) any other interlinkage or relevant relationships with other financial services institutions, which could pose systemic risk;

• (e) the need to limit the exposure to any single counterparty;

• (f) the extent to which the leverage is collateralised;

• (g) the asset-liability ratio;

• (h) the scale, nature and extent of the activity of the AIFM on the markets concerned.

4a. An AIFM shall ensure that, where an AIF it manages originates loans, the notional value of the loans originated to any single borrower by that AIF does not exceed in aggregate 20 % of the capital of the AIF where the borrower is one of the following:

• (a) a financial undertaking as defined in Article 13, point (25), of Directive 2009/138/EC of the European Parliament and of the Council ([^E0011]);

• (b) an AIF; or

• (c) a UCITS.

The restriction set out in the first subparagraph of this paragraph shall be without prejudice to the thresholds, restrictions and conditions set out in Regulations (EU) No 345/2013 ([^E0012]), (EU) No 346/2013 ([^E0013]) and (EU) 2015/760 ([^E0014]) of the European Parliament and of the Council.

4b. An AIFM shall ensure that the leverage of a loan-originating AIF it manages represents no more than:

• (a) 175 %, where that AIF is open-ended;

• (b) 300 %, where that AIF is closed-ended.

The leverage of a loan-originating AIF shall be expressed as the ratio between the exposure of that AIF, calculated according to the commitment method as defined in the delegated acts adopted pursuant to Article 4(3), and its net asset value.

Borrowing arrangements which are fully covered by contractual capital commitments from investors in the loan-originating AIF shall not be considered to constitute exposure for the purpose of calculating the ratio referred to in the second subparagraph.

In the event that a loan-originating AIF infringes the requirements laid down in this paragraph and the infringement is beyond the control of the AIFM that manages it, the AIFM shall, within an appropriate period, take such measures as are necessary to rectify the position, taking due account of the interests of the investors in the loan-originating AIF.

Without prejudice to the powers of the competent authorities referred to in Article 25(3), the requirements set out in the first subparagraph of this paragraph shall not apply to a loan-originating AIF whose lending activities consist solely of originating shareholder loans, provided that the notional value of those loans does not exceed in aggregate 150 % of the capital of the AIF.

4c. The investment limit of 20 % laid down in paragraph 4a shall:

• (a) apply by the date specified in the AIF rules, instruments of incorporation or prospectus, which shall be no later than 24 months from the date of the first subscription for units or shares of the AIF;

• (b) cease to apply once the AIFM starts to sell assets of the AIF in order to redeem units or shares as part of the liquidation of the AIF; and

• (c) be temporarily suspended where the capital of the AIF is increased or reduced.

The suspension referred to in the first subparagraph, point (c), shall be limited in time to the period that is strictly necessary, taking due account of the interests of the investors in the AIF, and, in any case, shall last no longer than 12 months.

4d. The application date referred to in paragraph 4c, first subparagraph, point (a), shall take account of the particular features and characteristics of the assets to be invested by the AIF. In exceptional circumstances, the competent authorities of the AIFM, upon submission of a duly justified investment plan, may approve an extension of that time limit of no more than 12 additional months.

4e. The AIFM shall ensure that an AIF it manages does not grant loans to the following entities:

• (a) the AIFM or the staff of that AIFM;

• (b) the AIF’s depositary or the entities to which the depositary has delegated functions in respect of the AIF in accordance with Article 21;

• (c) an entity to which the AIFM has delegated functions in accordance with Article 20 or the staff of that entity;

• (d) an entity within the same group, as defined in Article 2, point (11), of Directive 2013/34/EU of the European Parliament and the Council ([^E0015]), as the AIFM, except where that entity is a financial undertaking that exclusively finances borrowers that are not referred to in points (a), (b) and (c) of this paragraph.

4f. Where an AIF originates loans, the proceeds of the loans, minus any allowable fees for their administration, shall be attributed to that AIF in full. All costs and expenses linked to the administration of the loans shall be disclosed in accordance with Article 23.

4g. Without prejudice to other instruments of Union law, a Member State may prohibit AIFs that originate loans from granting loans to consumers as defined in Article 3, point (a), of Directive 2008/48/EC of the European Parliament and of the Council ([^E0016]) in its territory, and may prohibit AIFs from servicing credits granted to such consumers in its territory. Such prohibition shall not affect the marketing in the Union of AIFs granting loans to consumers or servicing credits granted to consumers.

4h. Member States shall prohibit AIFMs from managing AIFs that engage in loan origination where the whole or part of the investment strategy of those AIFs is to originate loans with the sole purpose of transferring those loans or exposures to third parties.

4i. An AIFM shall ensure that the AIF it manages retains 5 % of the notional value of each loan that the AIF has originated and subsequently transferred to third parties. That percentage of each loan shall be retained:

• (a) until maturity, for loans whose maturity is a period of up to eight years, or for loans granted to consumers regardless of their maturity; and

• (b) for a period of at least eight years for other loans.

By way of derogation from the first subparagraph, the requirement set out therein shall not apply where:

• (a) the AIFM starts to sell assets of the AIF in order to redeem units or shares as part of the liquidation of the AIF;

• (b) the disposal is necessary for the purposes of compliance with restrictive measures adopted under Article 215 TFEU, or with product requirements;

• (c) the sale of the loan is necessary to enable the AIFM to implement the investment strategy of the AIF it manages in the best interests of the AIF’s investors; or

• (d) the sale of the loan is due to a deterioration in the risk associated with the loan, detected by the AIFM as part of its due diligence and risk management process referred to in Article 15(3), and the purchaser is informed of that deterioration when buying the loan.

Upon the request of the competent authorities of its home Member State, the AIFM shall demonstrate that it meets the conditions for the application of the relevant derogation set out in the second subparagraph.

• (a) the risk management systems to be employed by AIFMs in relation to the risks which they incur on behalf of the AIFs that they manage;

• (b) the appropriate frequency of review of the risk management system;

• (c) how the risk management function is to be functionally and hierarchically separated from the operating units, including the portfolio management function;

• (d) specific safeguards against conflicts of interest referred to in the second subparagraph of paragraph 1;

• (e) the requirements referred to in paragraph 3.

The measures specifying the risk-management systems referred to in point (a) of the first subparagraph shall ensure that the AIFMs are prevented from relying solely or mechanistically on credit ratings, as referred to in the first subparagraph of paragraph 2, for assessing the creditworthiness of the AIFs’ assets.

Article 16

Liquidity management

AIFMs shall regularly conduct stress tests, under normal and exceptional liquidity conditions, which enable them to assess the liquidity risk of the AIFs and monitor the liquidity risk of the AIFs accordingly.

2a. An AIFM shall ensure that the loan-originating AIF it manages is closed-ended.

By way of derogation from the first subparagraph, a loan-originating AIF may be open-ended provided that the AIFM that manages it is able to demonstrate to the competent authorities of the home Member State of the AIFM that the AIF’s liquidity risk management system is compatible with its investment strategy and redemption policy.

The requirement set out in the first subparagraph of this paragraph shall be without prejudice to the thresholds, restrictions and conditions set out in Regulations (EU) No 345/2013, (EU) No 346/2013 and (EU) 2015/760.

2b. With a view to ensuring that it complies with paragraphs 1 and 2 of this Article, an AIFM that manages an open-ended AIF shall select at least two appropriate liquidity management tools from those referred to in Annex V, points 2 to 8, after assessing the suitability of those tools in relation to the pursued investment strategy, the liquidity profile and the redemption policy of the AIF. The AIFM shall include those tools in the AIF rules or instruments of incorporation for possible use in the interest of the AIF’s investors. It shall not be possible for that selection to include only the tools referred to in Annex V, points 5 and 6.

By way of derogation from the first subparagraph, an AIFM may decide to select only one liquidity management tool from those referred to in Annex V, points 2 to 8, for an AIF it manages if that AIF is authorised as a money market fund in accordance with Regulation (EU) 2017/1131 of the European Parliament and of the Council ([^E0017]).

The AIFM shall implement detailed policies and procedures for the activation and deactivation of any selected liquidity management tool and the operational and administrative arrangements for the use of such tool. The selection referred to in the first and second subparagraphs and the detailed policies and procedures for the activation and deactivation shall be communicated to the competent authorities of the home Member State of the AIFM.

Redemption in kind as referred to in Annex V, point 8, shall only be activated to meet redemptions requested by professional investors and if the redemption in kind corresponds to a pro rata share of the assets held by the AIF.

By way of derogation from the fourth subparagraph of this paragraph, the redemption in kind need not correspond to a pro rata share of the assets held by the AIF if that AIF is solely marketed to professional investors, or if the aim of that AIF’s investment policy is to replicate the composition of a certain stock or debt securities index and that AIF is an exchange-traded fund as defined in Article 4(1), point (46), of Directive 2014/65/EU.

2c. An AIFM that manages an open-ended AIF may, in the interest of AIF investors, temporarily suspend the subscription, repurchase and redemption of the AIF units or shares as referred to in Annex V, point 1, or, where those tools are included in the AIF rules or instruments of incorporation, activate or deactivate other liquidity management tools selected from Annex V, points 2 to 8, in accordance with paragraph 2b of this Article. The AIFM may also, in the interest of the AIF investors, activate side pockets as referred to in Annex V, point 9.

An AIFM shall only use a suspension of subscriptions, repurchases and redemptions or side pockets as referred to in the first subparagraph in exceptional cases where circumstances so require and where justified having regard to the interests of the AIF investors.

2d. An AIFM shall, without delay, notify the competent authorities of its home Member State of the following:

• (a) where the AIFM activates or deactivates the liquidity management tool referred to in Annex V, point 1;

• (b) where the AIFM activates or deactivates any of the liquidity management tools referred to in Annex V, points 2 to 8, in a manner that is not in the ordinary course of business as envisaged in the AIF rules or instruments of incorporation.

An AIFM shall, within a reasonable timeframe before it activates or deactivates the liquidity management tool referred to in Annex V, point 9, notify the competent authorities of its home Member State of such activation or deactivation.

The competent authorities of the home Member State of the AIFM shall inform, without delay, the competent authorities of a host Member State of the AIFM, ESMA and, if there are potential risks to the stability and integrity of the financial system, the European Systemic Risk Board (ESRB) established by Regulation (EU) No 1092/2010 of the European Parliament and of the Council ([^E0018]) of any notifications received in accordance with this paragraph. ESMA shall have the power to share the information received pursuant to this paragraph with the competent authorities.

2e. Member States shall ensure that at least the liquidity management tools set out in Annex V are available to AIFMs managing open-ended AIFs.

2f. ESMA shall develop draft regulatory technical standards to determine the requirements with which loan-originating AIFs are to comply in order to maintain an open-ended structure. Those requirements shall include a sound liquidity management system, the availability of liquid assets and stress testing, as well as an appropriate redemption policy having regard to the liquidity profile of loan-originating AIFs. Those requirements shall also take due account of the underlying loan exposures, the average repayment time of the loans and the overall granularity and composition of the portfolios of loan-originating AIFs.

2g. ESMA shall develop draft regulatory technical standards to specify the characteristics of the liquidity management tools set out in Annex V.

When developing those draft regulatory technical standards, ESMA shall take account of the diversity of investment strategies and underlying assets of AIFs. Those standards shall not restrict the ability of AIFMs to use any appropriate liquidity management tool for all asset classes, jurisdictions and market conditions.

2h. By 16 April 2025, ESMA shall develop guidelines on the selection and calibration of liquidity management tools by AIFMs for liquidity risk management and for mitigating financial stability risks. Those guidelines shall recognise that the primary responsibility for liquidity risk management remains with AIFMs. They shall include indications as to the circumstances in which side pockets, as referred to in Annex V, point 9, can be activated. They shall allow adequate time for adaptation before they apply, in particular for existing AIFs.

2i. ESMA shall submit the draft regulatory technical standards referred to in paragraphs 2f and 2g of this Article to the Commission by 16 April 2025.

Power is delegated to the Commission to supplement this Directive by adopting the regulatory technical standards referred to in paragraphs 2f and 2g in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.

• (a) the liquidity management systems and procedures; and

• (b) the alignment of the investment strategy, liquidity profile and redemption policy set out in paragraph 2.

Article 17