BACKGROUND
On 4 December 2019, ESMA published updated Questions and Answers ("Q&A") on the application of the Alternative Investment Fund Managers Directive ("AIFMD"). The updated Q&A incorporate a new question and answer into Section III on reporting to national competent authorities under Articles 3, 24 and 42 of the AIFMD, clarifying how Alternative Investment Fund Managers ("AIFM(s)") should report the results of liquidity stress tests for closed-ended unleveraged funds that they manage.
CLARIFICATIONS ON REPORTING LIQUIDITY STRESS TESTS
The Q&A reiterate the obligation imposed on AIFMs to report results of liquidity stress tests for all the AIFs under their management as part of their reporting duties to competent authorities. Such obligation stems from Article 24(2) of the AIFMD and supplemented by Article 110(2)(f) of Regulation (EU) No 231/2013 with regard to exemptions, general operating conditions, depositaries, leverage, transparency and supervision. The results of the stress tests performed by the AIFMs in accordance with the second subparagraph of Article 16(1) of the AIFMD need to be disclosed in the field 280 of the AIFMD reporting template (2013-1359_consolidated_aifmd_reporting_template).
However, Article 16(1) of the AIFMD exempts closed-ended unleveraged AIFs from implementing liquidity risk management systems and from "conducting stress tests, under normal and exceptional liquidity conditions, which enable AIFMs to assess the liquidity risk of the AIFs and monitor the liquidity risk of the AIFs accordingly". Hence, for closed-ended unleveraged AIFs, AIFMs can indicate in the field 280 of the AIFMD reporting template that the question is "Not Applicable" and report in this field the fact that the relevant fund is a closed-ended unleveraged AIF.
Should an AIFM decide to conduct liquidity stress tests for unleveraged closed-ended AIFs despite the applicable exemption, it should report the results of the liquidity stress tests accordingly.
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