Circular C538 (“the Circular”) dated 13/12/2022 provides further guidance on actions to be taken in relation to the requirement to raise capital from investors within a specified time period
Through Circular C538, CySEC wishes to remind AIMFs of Circular C321, issued on June 2019, regarding the raising of capital from investors within a specified time period. CySEC aims with this circular to provide, Funds (i.e., AIFs, AIFLNPs and RAIFs) and AIFMs, guidance in relation to the requirement to raise capital from investors within 12 months from the date of their authorization/registration.
The key takeaways from CySEC’s C538 circular can be found below:
Demonstrating compliance with articles 14, 129 and 136 of the AIF Law
- AIFMs should keep records that can demonstrate to CySEC the compliance of the Funds under their management with the provisions of articles 14, 129 and 136 of the AIF Law, when required.
- Such records shall, at least, include the following documents:
- A Shareholder/Unitholder/Limited Partners Registry of the Fund;
- Audited financial statements of the Fund for the year ending when capital was raised, clearly showing the amount of minimum capital raised in exchange for issued and fully paid redeemable shares (if available);
- In case the amount raised is in cash, a bank statement of the Subscriptions account in the name of the Fund, clearly showing the deposit(s)/transfer(s) made by the investors;
4. In case the amount raised is in assets:
- A confirmation letter issued by a competent party (e.g., the depository) that the assets are owned by the Fund. It is noted that the directors of the Fund or of the AIFM, are not considered competent parties for this purpose.
- A valuation report of the assets contributed to the Fund prepared by an independent valuer who meets the requirements of Article 73 of Regulation (EU) No. 231/2013. The date of the valuation report should be prior to the date of, but reasonably close to, the contribution of the assets to the Fund.
- A confirmation letter issued by a relevant party (e.g., the Fund’s Risk Manager) that the assets are in line with the investment policy of the Fund.
- A confirmation letter issued by a competent party (e.g., the depositary) that the assets are free of any liens at the time of the contribution to the fund. It is noted that the directors of the Fund or of the AIFM, are not considered competent parties for this purpose.
- Reporting to CySEC
- AIFMs (and internally managed Funds) are expected to complete and submit to CySEC Form 124-00-02 (the “Form”) for each Fund under their management when the minimum amount of capital is raised.
- The attention of AIFMs is drawn to the following:
- For the Form to be considered as valid must be: (i) completed in full and contain accurate information; and (ii) duly signed by an executive director of the AIFM;
- The Form must be accompanied by all the supporting documents laid down in Part I above, as the case may be [i.e., payments in cash or non-cash payments (in kind)].
- A separate Form, along with corresponding support documents must be submitted for each investment compartment. Therefore, in case of an Umbrella Fund, any documents submitted should be clearly marked as belonging to the said investment compartment, irrespective of whether there is, at the time, only one investment compartment under the Umbrella Fund.
- Information contained in the various documents submitted must be consistent.
- The subject matter of the email sent to CySEC should be clearly marked as such on the subject line of the email, as per the instructions provided in the Form.
- Final remarks
- AIFMs must make every possible effort to raise the minimum amount of capital for each Fund under their management, within the timeframe and/or deadline provided he AIF Law.
- In the event where a Fund does not raise the minimum amount of capital within the specified time period as provided the AIF Law, AIFMs should request a revocation of the Funds authorization.
- CySEC may decide to initiate a revocation process, involving a call for representations to the External Manager of the fund, in the case of externally managed funds, or to the Fund itself, in the case of Self-managed Funds, in case the minimum assets are not raised within the timeframe provided in the AIF Law.
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