CySEC’s Review concerning the compliance of the reporting obligation under the Alternative Investment Fund Managers Law (the ‘AIFM Law’) as further specified with the Commission Delegated Regulation (EU) No 231/2013 (‘the Regulation’).
The Cyprus Securities and Exchange Commission (‘CySEC’) recently carried out a review of the quality of information reported to CySEC by AIFMs (‘the Review’) having as a main purpose the assessment of the quality, accuracy and timeliness of information reported by AIFMs to CySEC.
Circular C404 ("the Circular") presents CySEC’s observations and conclusions of the above said assessment. All AIFMs should take note of the findings and ensure they comply with their reporting obligation under Articles 4(3)(d) and 31 of the AIFM Law.
Recommended immediate steps for AIFMs can be described in Section D of the relevant Circular.
Regulatory framework & Scope of the Review
ESMA Guidelines on reporting obligations under Articles 3(3)(d) and 24(1), (2) and (4) of the AIFMD and ESMA Questions and Answers on the application of the AIFMD (the ‘ESMA Q&As’), are also relevant.
The Review covered the following areas:
Timely submission of valid AIFMD reports;
Accuracy of information provided;
Consistency of information reported within the AIFMD reports and/or between the AIFMD reports submitted by an AIFM;
Completeness of information;
Double reporting.
Areas of concern/Observations identified
The following areas of concern should be read in conjunction with CySEC’s Circular C287, published in 2018, which notes in detail the reporting obligations for AIFMs.
Timely submission of valid AIFMD reports
CySEC observed that in certain cases, AIFMs did not submit valid AIFMD reports in a timely manner as outlined in the timeframe set under Article 110(1) of the Regulation.
Also, some AIFMs failed to submit valid AIFMD reports for 2019 despite the AIFM and/or the AIF being granted authorisation before 1st October 2019. There may be cases in which AIFMs do not have any information to report on AIFs, such as where there is a delay between the authorization or registration being granted to a new AIFM and the actual start of activity or between the creation of an AIF and the first investments. In such a scenario, AIFMs should still provide a report to their NCAs by indicating that no information is available by using a specific field.
Accuracy of information reported
In certain cases, it was observed that the sum of the values reported for the main instruments of certain AIFs was larger than reported AUM by a significant margin.
AIFs categorised as ‘Real Estate’ or ‘Private Equity’ reported portfolio liquidity for which the sum of percentages from 0 days to 90 days of financing in some cases exceeded the sum of percentages from 91 days to more than 365 days.
It was observed that in certain cases, the NAV reported for AIFs was not accurate given its level, its evolution and/ or other information, such as the information included in ECB-RIAD database.
It was observed that in certain cases there was significant difference between reported leverage and ratio of AUM to NAV.
The Review identified that certain AIFMs provided information on their LEIs and/ or the LEIs of AIFs, which was not consistent with GLEIF database.
Consistency of information reported within the AIFMD repots and/or between the AIFMD reports submitted by an AIFM
Consistency of percentages of financing: some AIFs the percentage reported for days of financing did not always equal to 100%.
Investor concentration vs investor group type (i.e. retail and professional): in certain cases the reported percentages of investor concentration did not match the investor group type reported.
Reporting code consistency: In some cases, the reporting code was not reported consistently between the DATAMAN and the DATAAIF reports. The reporting code of the AIFM was not in line with that of the AIF.
No reporting flag consistency: In certain cases, AIFMs did not report the ‘no reporting flag’ consistently
Completeness of information reported
Reporting of legal entity identifiers (‘LEIs’) for AIFMs and AIFs: The Review identified that certain AIFMs did not provide information on their LEIs and/ or the LEIs of the AIFs despite the fact that they had obtained LEIs (i.e. for the purposes of Article 9 of EMIR or Article 26 of MIFIR).
Double reporting
File cancellation: In certain cases, AIFMs submitted a file using an incorrect AIF national code and later submitted a second file using the correct AIF national code without cancelling the file with the incorrect national code thus leading to double reporting.
Immediate next steps
AIFMs are advised to nominate a person within their firm who will be responsible for the regular monitoring of AIFMD reporting requirements and dealing promptly with all
issues/failures that might arise. In addition, AIFMs are requested to inform CySEC accordingly about the above nomination through the Funds Digital Record.
If you have questions, do not hesitate to contact me.
Written by Angeliki Georgiou, Independent Legal Consultant