Summary of CySEC's Circular C409

Memo #52-2020

CySEC Circular No: C409
Date: 22/10/2020
Subject: Common deficiencies and best practice standards identified through on-site inspections regarding certain aspects of the AIFM governance
Purpose: To inform AIFMs about common deficiencies and best practice standards identified through on-site inspections regarding certain aspects of the AIFM governance.

In Summary:

CySEC has issued the Circular C409 on 22/10/2020 in order to inform, the AIFM and Internally Managed AIF whose managed assets either exceed the limits laid down in section  4(2)(a) or 4(2)(b) of the Alternative Investment Fund Managers Law in force at any given time under number 54(I)/2013 (“the Law”), or have chosen to be regulated by the Law in accordance with section 4(6) of the Law and AIFM and Internally Managed AIF, whose assets under management fall below the thresholds of section 4(2)(a) or 4(2)(b), namely UCITS management companies, Investment Firms, a company whose sole purpose is managing a particular AIFLNP  of the Alternative Investment Funds Law 124(I)/2018), Internally Managed AIF and Internally Managed AIFLNP, that with this Circular C409 CySEC lists its findings following on-site inspections regarding the compliance with some operational aspects relating to the organizational requirements and the delegation of functions.

The purpose of the Inspections was to evaluate the level of compliance of the above mentioned entities with the requirements for organisation and operation arising from the legal framework. The Inspections covered requirements of Articles II and III of the Law, as well as the relevant supplementary provisions included in the “Commission Delegated Regulation (EU) no. 231/2013 supplementing Directive 2011/61/EU of the European Parliament and of the Council”.

The list of findings included in this Circular C409 refers to:

• Deficiencies found:
  - Risk Management Function
  - Valuation of the AIF’s Assets Function
  - Portfolio Management Function
  - Compliance Function 
  - Responsibility of the external AIFM regarding managed AIFs in the form of  a company/partnership
  - Organisational and operational matters of the AIFM and human resources’ professional expertise

• Best practice standards:
  - Control of the AIFM by the Board of Directors
  - Control from Senior Management
  - Organisation of the AIFM and human resources’ professional expertise

CySEC notes that the publication of best practices and common deficiencies and/or omissions established during the Inspections carried out by CySEC, was designed to help AIFMs enhance their compliance with the relevant Legislation.
 
CySEC also notes that  AIFMs, by taking into account the matters raised in the relevant legal framework and the relevant provisions thereof, are invited to re-examine and review, where necessary, their practices, policies and procedures and take immediate corrective action.

Read the CySEC Circular C409

Read more news at Regulatory News