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FUND 1.4 AIFM business restrictions

Single AIFM

FUND 1.4.1R

A full-scope UK AIFM must ensure that for each AIF it is appointed to manage, it is the only AIFM of that AIF, and is responsible for ensuring compliance with FUND, other rules in the Handbook which, when made, implemented AIFMD, the AIFMD level 2 regulation, the AIFMD UK regulation, and the AIFMD BTS and any other binding technical standards made in connection with the UK AIFM regime.1

[Note: article 5(1) of AIFMD]

Internally managed AIFs

FUND 1.4.2R

An internally managed AIF which is a full-scope UK AIFM must not engage in any activities other than AIFM management functions in respect of that AIF.

[Note: article 6(3) of AIFMD]

External AIFMs

FUND 1.4.3R

An external AIFM that is a full-scope UK AIFM must not engage in any activities other than:

  1. (1)

    AIFM management functions;

  2. (2)

    the management of UCITS, for which it must have permission to carry on the regulated activity of managing a UK UCITS1;

  3. (3)

    the management of portfolios of investments in accordance with mandates given by investors on a discretionary client-by-client basis, including portfolios of investments for occupational pension schemes, within the meaning of section 1(1) of the Pension Schemes Act 19931;

  4. (4)

    investment advice;

  5. (5)

    safe-keeping and administration in relation to shares or units of collective investment undertakings; and

  6. (6)

    reception and transmission of orders in relation to financial instruments.

    [Note: article 6(2) and (4) of AIFMD]

FUND 1.4.4R

An external AIFM that is a full-scope UK AIFM must not provide:

  1. (1)

    only the services in FUND 1.4.3 R (3) to FUND 1.4.3 R (6); or

  2. (2)

    only the services in FUND 1.4.3 R (4) to FUND 1.4.3 R (6) without also having been authorised to provide the services in FUND 1.4.3 R (3); or

  3. (3)

    only the AIFM management functions in point 2 of Annex I of AIFMD; or

  4. (4)

    the AIFM investment management function in point 1(a) (portfolio management) of Annex I of AIFMD without also providing the AIFM investment management functions in point 1(b) (risk management) of Annex I of AIFMD or vice versa.

FUND 1.4.5G

Where a full-scope UK AIFM carries on the activities in FUND 1.4.3R (3) and (4) in relation to assets which are not financial instruments and it is not carrying on the activities of managing investments or advising on investments, the FCA will deem the firm as having been authorised to carry on such activities by virtue of its authorisation as an AIFM. However, for such an AIFM to be able to carry on the activity in FUND 1.4.3R (4) in relation to assets which are financial instruments or the activities in FUND 1.4.3R (5) and (6) it must have a Part 4A permission to manage investments.

FUND 1.4.6G

In the FCA's view an AIFM is permitted under FUND 1.4.3 R to carry out AIFM management functions for a collective investment undertaking which is neither an AIF nor a UCITS1.

AIFM management functions

FUND 1.4.7G

AIFM management functions are set out in Annex I of AIFMD as follows:

  1. (1)

    the AIFM investment management functions of:

    1. (a)

      portfolio management; and

    2. (b)

      risk management; and

  2. (2)

    other functions that an AIFM may additionally perform in the course of the collective management of an AIF:

    1. (a)

      administration:

      1. (i)

        legal and fund management accounting services;

      2. (ii)

        customer enquiries;

      3. (iii)

        valuation and pricing (including tax returns);

      4. (iv)

        regulatory compliance monitoring;

      5. (v)

        maintenance of unit/share holder register;

      6. (vi)

        distribution of income;

      7. (vii)

        unit issues and redemptions;

      8. (viii)

        contract settlements (including certificate dispatch); and

      9. (ix)

        record keeping;

    2. (b)

      marketing; and

    3. (c)

      activities related to the assets of AIFs, namely:

      1. (i)

        services necessary to meet the fiduciary duties of the AIFM;

      2. (ii)

        facilities management;

      3. (iii)

        real estate administration activities;

      4. (iv)

        advice to undertakings on capital structure, industrial strategy and related matters;

      5. (v)

        advice and services relating to mergers and the purchase of undertakings; and

      6. (vi)

        other services connected to the management of the AIF and the companies and other assets in which it has invested.

[Note: Annex I of AIFMD]