Out-Law Analysis | 20 Aug 2020 | 8:57 am | 2 min. read
The webinar took place on 24 June. Topics covered included QIAIF property funds and loan-originating QIAIFs, as well as director time commitments.
The CBI has authorised 2,673 QIAIFs that remain currently active since 2007, with the fund type now accounting for almost 50% of funds authorised each year. QIAIFs are marketed to institutional investors, making investor protection less of a concern for the CBI than is the case for retail funds. However, the CBI took care to stress that the QIAIF label is "a form of recognition" that it approves of the quality of the application for authorisation, and that integrity of the regulatory regime is crucial to its continued operation.
The CBI is now requiring pre-submission for funds that invest in "unusual" asset classes, including property. Information required by the CBI at pre-submission stage includes:
Funds which are not property funds should not include a general disclosure on property in fund documents, as this causes confusion for the regulator.
It is the CBI's view that a property fund should not be established as an open-ended fund. The CBI's review of this area suggests that there are not currently any open-ended daily dealing property funds, and only a small number of open-ended property funds with limited liquidity which provide for dealing once in the fund's life or, in limited circumstances, annually.
Given current market conditions, there is no evidence that would persuade the CBI that an open-ended property fund is a viable property fund. Property funds submitted for QIAIF authorisation must therefore be established as closed-ended, or open-ended with limited liquidity.
All loan originating QIAIFs (LO-QIAIFs) should be clearly identified in the relevant fund documentation.
The CBI's policy position is that QIAIFs receiving loans which originated elsewhere – for example, another fund or a special purpose vehicle (SPV) - should be treated as originated by the QIAIF, albeit indirectly.
Again, pre-submission is required for LO-QIAIFs. The CBI has no particular concerns about this form of fund, but is seeking to understand them better. Pre-submission information should include the nature of the proposed loans, the number of investors and the profile of the intended borrowers.
The CBI expects proposed fund directors to comply with the time commitments set out in Part III of its 2016 guidance for fund management companies.
The guidance establishes a risk indicator for individual directors who:
Where either of these risk indicators is triggered, the individual is deemed to be 'high risk' and additional supervisory attention is appropriate under the CBI's risk-based approach to supervision.
Where concerns arise in relation to compliance with these requirements, the CBI will engage with the individual to request additional information on their expertise and capacity. All queries should be addressed in full, providing as much detail as possible.
Co-written by Ruth Hennessy of Pinsent Masons, the law firm behind Out-Law.
31 Jan 2020