CP12/32: Implementation of the Alternative ... - BVCA admin

CP12/32
Implementation of the Alternative Investment Fund Managers Directive
Annex X
potential policy exclusions so we propose that a firm should maintain adequate own funds
to cover any exclusions in the insurance policy.
Liquid assets requirement
5.32 Article 9(8) requires own funds to be invested in liquid assets or assets readily convertible
to cash in the short term and not in speculative positions. It is clear from AIFMD’s wording
that the requirement must apply to the own funds required by Articles 9(3), 9(5) and 9(7).
We propose not to apply it to any own funds requirement in relation to Articles 9(1) and
9(2) as AIFMD only refers here to initial capital.
5.33 We propose that a proportionate interpretation of the term ‘assets readily convertible to
cash in the short term’ is those that could be realised for cash within one month. We have
suggested, as guidance, that acceptable assets include cash, readily realisable investments
that are not held for short-term resale and debtors. The firm could also include any other
assets that fall within the definition, but would need to be able to demonstrate that it could
practically realise the relevant asset within one month.
5.34 Article 9(10) states that a UCITS management company that manages at least one AIF must
also comply with the liquid assets requirement and this will be in respect of its own funds
based not only on its AIFs but also on the UCITS that its manages. Although AIFMD does
not apply to a UCITS management company that does not manage any AIFs, we propose to
apply a liquid assets requirement to such a firm. In our view this is an appropriate and
proportionate approach in the circumstances, as the requirement applied to a UCITS
management company that manages at least one AIF should be the same as that applied to
such a company that manages no AIFs, because the risks addressed by the requirement are
the same.
5.35 Currently, a UCITS firm is subject to a similar requirement, as Table 2.2.1 in UPRU
requires it to deduct illiquid assets in computing its financial resources. As this provision is
not required by the UCITS Directive, we propose to remove it. A UCITS investment firm
which is subject to GENPRU and BIPRU is currently required either to deduct illiquid
assets or material holdings when computing its Pillar 1 capital requirement.
Q4: Do you agree with our proposed approach to professional
negligence risks and the liquid assets requirement?
Q5: Do you agree with our intention to apply the liquid assets
requirement also to UCITS management companies that do
not manage any AIFs?
38 Financial Services Authority November 2012