On 15 April 2021, the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten, the AFM) sent a sector letter to alternative investment fund managers (AIFMs) falling under the so-called ‘light’ regime. ‘Light’ AIFMs are exempted from the EU Alternative Investment Fund Managers Directive’s license obligation as laid down in Article 2:65 of the Act on the Financial Supervision (Wet op het financieel toezicht, the AFS), but are required to register themselves with the AFM. The AFM also published the sector letter on its website.
Through this sector letter the AFM wants to emphasise the ongoing requirements that apply to light AIFMs. In short, the light regime requires light AIFMs to continuously comply with the requirements listed below.
- The total assets under management (AUM) of the light AIFM may not exceed: (1) € 100 million; or (2) € 500 million, provided that the portfolio(s) under management are not leveraged and that investors have no redemption rights for a period of five years following the date of the initial investment in each alternative investment fund (AIF). If the AUM of a light AIFM exceed these thresholds, and this is expected not to be of a temporary nature, the light AIFM is required to immediately notify the AFM and apply for a licence within 30 days. Temporarily exceeding the thresholds also triggers a notification obligation towards the AFM.
- Participation rights in AIFs may exclusively be offered to professional investors. If an offer is also made to retail investors, it needs to be ensured that: (1) the offer is addresses to fewer than 150 persons; (2) the offer is at least EUR 100,000 per investor; or (3) the nominal value of each participation right offered is at least EUR 100,000. Additional disclosure requirements apply if participation rights are offered to retail investors. At the time of registration a light AIFM is required to indicate which exemption condition(s) it wishes to rely on. After the initial registration it is no longer possible to change the (combination of) exemption condition(s). If the relevant exemption conditions are no longer met, the light AIFM will in principle be required to apply for a licence.
- If a light AIFM which is already registered with the AFM wishes to manage an additional AIF, this will need to be notified to the AFM.
- Light AIFMs are required to annually report certain financial data to the Dutch Central Bank (De Nederlandsche Bank).
The AFM also points out that other rules and regulations may be relevant to light AIFMs, such as the EU Market Abuse Regulation, the EU Regulation on packaged retail and insurance-based investment products (PRIIPs), the Unfair Commercial Practices Act (Wet oneerlijke handelspraktijken), anti-money laundering and terrorist financing rules and regulations, and sanctions legislation.
The AFM expects light AIFMs to set up their operations in such a way that compliance with the requirements resulting from these rules and regulations, as well the light regime requirements, is safeguarded. In 2021, the AFM will be conducting a risk-based investigation into compliance with these requirements by light AIFMs.