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AIFs are defined as collective investment undertakings with the intention to raise external capital from a number of investors, with a defined investment policy and without being authorised as a UCITS.
The adoption of the EU Alternative Investment Fund Managers Directive (the “AIFMD”) in 2011 has led to the modernisation of the legal framework governing investment funds in Cyprus. The AIFMD has been transposed into Cypriot Law by means of Law 56 of 2013 on Alternative Investment Fund Managers Law (the “AIFM Law”), as amended, while a year later the Alternative Investment Funds Law of 2014 (the “AIF Law”), as amended, repealed the International Collective Investment Schemes Law, being the former legislative framework for investment funds in Cyprus.
AIFs are authorised and regulated by the Cyprus Securities and Exchange Commission (the “CySEC”).
AIFS LEGAL FORM
An AIF can be set up under the following legal structures:
CLASSES OF AIFS
AIFs are categorised into:
Units of all AIFs are transferable, unless otherwise provided in the constitutional documents of the AIF. As to Limited Investor AIFs, the AIF Law requires that the management of such AIF ensures that the number of 75 professional and/or well-informed investors is not exceeded.
The AIF Law allows umbrella funds with multiple investment compartments, which allow the management of different pools of assets with different investment policies, the assets and liabilities of each such pool of assets being ring-fenced.
As per Section 6 of the AIF Law, an AIF may be either:
Each self-managed AIF and each external manager of an AIF, where they are not authorised AIFMs, are subject to registration in accordance with the provisions of section 4(3) of the AIFM Law, in the Special Register of sub-threshold AIFMs which is maintained by the CySEC.
Does not require a licence to act as an outsourced administrator of a fund. The administrator is responsible for keeping the fund’s books and records, accounting, reporting filling, share issue and other services.
As per the provisions of the AIF Law, the assets of the AIF shall be entrusted for safe-keeping to a depositary which (a) has its registered office in Cyprus or in another EU country or in a third country, provided that the CySEC has signed a Memorandum of Understanding and Exchange of Information with the competent authorities of the third country, and (b) is either a credit institution or investment firm or another category of institution which is subject to prudential regulation and ongoing supervision and which falls within the categories of institution which have been defined by their home state as eligible to be a depositary.
REDEMPTION & REPURCHASE RIGHTS
An AIF can be established as:
AUTHORISATION OF AN AIF
The commencement of operations of the AIF requires the prior authorisation of the CySEC.
The CySEC shall grant authorisation to the AIF once it is satisfied that the application – including the information on the fund manager, or board of directors in the case that there is no external manager of the fund, the custodian, the prospectus and all necessary incorporation documentation – has been submitted as per the requirements of the AIF Law.
The CySEC shall inform the external manager of the AIF, or the AIF itself in the case that it is selfmanaged, within three months of the submission of the filing of the complete application whether or not the authorisation has been granted.
In the case that the CySEC refuses to grant the authorisation, the reasons for such a decision must be justified.
Pursuant to the AIF Law, the external manager of the AIF or the self-managed investment company are required to prepare and submit to the CySEC the following:
Posted on Jul 21, 2017
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