The markets of financial instruments face new changes with the entrance in force of MIFID II.
Although MiFID II has exemptions, as per article 2 of MiFID II states the directive shall not apply to “collective investment undertakings and pension funds whether coordinated at Union level or not and the depositaries and managers of such undertakings.”
The reason that this exemption applies is because the management of collective investment schemes falls under AIFMD (the EU directive for alternative investment fund managers). As such, MiFID managers have a choice. They can continue to undertake their investment business activity as a MiFID manager in accordance with MiFID II, or they can convert their business into a collective investment undertaking and fall within the AIFMD rules and avail themselves of MiFID II.
AIFMD also has exemptions; proprietary traders and family offices are exempt from AIFMD as they invest private wealth of investors without raising external capital; and ‘small’ managers, those that manage assets of less than €100 million open-ended and €500 million closed-ended, are also exempt from AIFMD save for the requirement of annual reporting based on 31 December reporting date.
It is appreciated that availing oneself of MiFID II to fall within AIFMD may not be practical in all instances and the solution to become an AIFMD fund manager may not suit all managers. However, if proprietary trader and/or family office manager finds themselves in the situation that they are required to comply with MiFID II, they may wish to consider operating within AIFMD, making use of the available AIFMD exemptions. Also, a manager with a client and/or client that have burdensome transaction reporting, may wish to operate within AIFMD as a small exempt manager to be outside of scope of MiFID II (in order to avail themselves of the respective transaction reporting).
There are options available to MiFID managers. Audentia Capital, can establish collective investment schemes and, thereafter, administer them for managers that chose AIFMD as an alternative to MiFID II. Please do not hesitate to contact us, should you wish to explore further options.