The Alternative Investment Fund Managers Directive II (AIFMD II) brings significant updates to the regulatory framework governing AIFMs. With a focus on delegation, authorisation, and reporting, the directive aims to enhance investor protection, ensure operational substance within the EU, and improve transparency across the fund management industry. For Malta-based AIFMs, these changes require strategic adjustments to governance and compliance practices.
Why These Reforms Matter
Delegation and reporting practices have long been under scrutiny, particularly in light of cross-border fund structures. AIFMD II addresses concerns around regulatory arbitrage and insufficient oversight by tightening rules and clarifying expectations for AIFMs operating in or marketing to the EU.
Key Challenges Introduced
- Increased documentation and disclosure requirements.
- Stricter substance rules for EU-based operations.
- Expanded reporting obligations for both AIFMs and UCITS managers.
Key Regulatory Enhancements
- Delegation Oversight: AIFMs may delegate core and non-core functions but remain fully accountable. They must disclose:
- Delegate identity and jurisdiction.
- Nature of delegated functions.
- Due diligence and monitoring procedures.
- Substance Requirements: AIFMs must now have:
- At least two full-time employees based in the EU.
- Adequate resources to support business operations.
- Demonstrable compliance with conflict-of-interest rules.
- Expanded Reporting Duties:
- Report leverage levels, marketing jurisdictions, and trading venues.
- Disclose detailed delegation arrangements.
- UCITS managers must comply with Article 24 reporting using Annex IV templates.
Regulatory Objectives
These changes aim to:
- Strengthen investor protection.
- Ensure sound governance.
- Increase transparency and accountability across the AIFM ecosystem.
Application
A Malta-based AIFM managing multiple cross-border funds restructured its delegation model to comply with AIFMD II. By enhancing internal oversight and onboarding two EU-based compliance officers, the firm:
- Met MFSA’s substance requirements.
- Streamlined its reporting process using Annex IV templates.
- Improved transparency with investors and regulators.
Key Outcomes
- 100% compliance with new delegation disclosures.
- Reduced regulatory risk exposure.
- Strengthened operational credibility with institutional investors.
How ARQ Group Can Help
At ARQ Group, we understand the regulatory demands introduced by AIFMD II. Our team of experts is dedicated to helping you navigate these changes with tailored strategies and practical solutions. Whether it’s reviewing your delegation framework, enhancing your EU substance, or preparing for expanded reporting obligations, we are here to support your compliance and operational resilience.
For more information, please speak to Denia Ellul – Director – ARQ Advisory Ltd, ARQ Corporate Ltd and ARQ Fiduciaries Ltd.
Denia Ellul
Director of ARQ Advisory Ltd, ARQ Corporate Ltd and ARQ Fiduciaries Ltd.
A lawyer by profession, Denia attended the University of Malta and successfully completed a Bachelor of Laws degree, followed by a Doctor of Laws degree in 2014. Following her graduation from the University of Malta, Denia commenced her employment with a local law firm which helped her gain the necessary knowledge in various fields of law, including corporate and commercial law, cross-border tax planning and financial-legal matters.
