Sturgeon Ventures is building up a glossary of the well used terms within our industry. We have listed the top words and their meanings from AIF to Regulatory Umbrella.
An Alternative Investment Fund.
An alternative investment fund is a fund that contains investments that do not fall into the three main asset types. The three main types of asset are stocks, bonds and cash assets. An alternative investment fund is something that sits outside this group, with possibly the most common kind of alternative investment fund being the hedge fund. They are historically held by high net worth individuals or companies that have high levels of capital to invest with.
Alternative Investment Fund Managers Directive.
The AFMID was published in the Official Journal of the European Union on 1st July 2011 and was enveloped into UK law on 22nd July 2013.
The demands are quite extensive and include providing information to the FCA on the following issues:
- Information about the persons who are actually conducting the business of the alternative investment fund manager. This means identifying the personnel who carry out the work that manages the funds.
- A full program of activity that is connected to the fund management. This is an outline of all the processes and mid to long-term plans that the AIFM has. The information required here is extensive.
- The remuneration policies and practices of the fund managers also have to be outlined. The level of detail here is again extensive, and hints at the transparency that has resulted due to the directive being put into place.
- The fund managers also have to be quite clear on the details of any arrangements for the delegation of activities to third parties. This again illustrates just how transparent the process is in the wake of the global financial meltdown. The European Union is obviously aiming at finding out everything it can about the practices of alternative investment fund managers. This is an attempt to push towards the full transparency of financial processes.
- When it comes to the funds that they want to manage AIFMs also have to give full information on the investment strategies they intend to follow. This is different to what came before, and again illustrates just how much information is required until the European Union are satisfied that all dealings are transparent and have integrity.
Appointed Representative (AR)
An AR is a person or firm who conducts regulated activities under the umbrella of a firm directly authorised by the FCA. The directly authorised firm is known as the AR’s ‘principal’ and this is the role commonly undertaken by the host firm. The host firm takes full responsibility for ensuring that the AR complies with the FCA rules and the AR is therefore able to carry out advising and arranging services by being authorised under the umbrella of the host. The client firm cannot conduct any activity which does not fall within the scope of its host’s permission.
If the firm wishes to carry on regulated activities wider than the host firm’s scope, then it must obtain authorisation in its own right or enter into appropriate alternative arrangements with the host.
Asset Management Authorisation Hub (FCA AMAH)
The FCA launched its Asset Management Authorisation Hub to help and guide firms through the FCA authorisation application process and beyond. There is a dedicated portal and case workers to clarify, provide information, engage firms and provide support from beginning to the end of the process.
Further information: FCA Asset Management Authorisation Hub
Early Life Supervision Support (FCA ELSS)
This is an initiative from the FCA that can be found on their Asset Management Authorisation Hub (AMAH see above). The purpose of ELSS is to guide and support newly authorised asset management firms. Guidance includes such topics as return submission, system registration and support events.
Further information: FCA Early Life Supervision Support
Enterprise Investment Scheme (EIS)
The UK Government introduced the Enterprise Investment Scheme (EIS) in 1994 to encourage investment in small unquoted qualifying companies .The Scheme is designed to help smaller higher-risk trading companies to raise finance by offering a range of tax reliefs to investors who purchase new shares in those companies . The investor and the company must satisfy the rules of the scheme as laid out by HMRC in order to take part.
The European Securities and Markets Authority (ESMA) is a European Union financial regulatory institution and European Supervisory Authority, located in Paris. ESMA replaced the Committee of European Securities Regulators (CESR) on 1 January 2011.
A firm wishing to provide marketing and advisory services in the UK generally needs to be authorised by the FCA. The application process to become authorised can be costly and time-consuming (an application can take up to 6, or possibly 12, months) and the firm would need to put up regulatory capital, have a detailed business plan, have sufficient investment staff, appoint a compliance officer and a money laundering officer and set up its own offices. If there is no immediate intention to manage investments, then becoming an appointed representative (AR) may be a cost-effective solution – see definition of Appointed Representative above.
- authorised by FCA to do business
- registered by the FCA to undertake regulated activities
- approved by the FCA to provide products or services
National Private Placement Regime (NPPR)
The NPPR is a system that allows AIFMs to sell and promote AIF’s that are not permitted to be sold or promoted under the AIFMD domestic market or passport systems.
Market Abuse Directory
To read more on MAD – see Morgan Lewis’ article
Management Responsibilities Map
The Management Responsibility Map exists to help the firm and the FCA satisfy themselves that the firm has a clear organisational structure (as required by SYSC). It also helps the FCA to identify who it needs to speak to about particular issues and who is accountable if something goes wrong.
Market Abuse Regime
MAR will strengthen the existing UK market abuse framework by extending its scope to new markets, new platforms and new behaviours. It contains prohibitions for insider dealing and market manipulation, and provisions to prevent and detect these. It will apply from 3 July 2016.
The Markets in Financial Instruments Directive (MiFID) is the framework of European Union (EU) legislation for: investment intermediaries providing services to clients in relation to shares, bonds, units in collective investment schemes and derivatives (collectively ‘financial instruments’).
A passport allows an individual the right to move freely from one country to another after having registered and provided various personal details to the authorities of his country. Once he has a passport, he does not need to register in other countries.
Regulatory Umbrella Company
A company that has been authorised by the FCA (http://www.fca.org.uk/) to manage your UK market entry and introduce you to committed and established companies across a range of professional disciplines.
The FCA has created regulations that are rigorous and exacting and all Umbrella companies must adhere to.
Seed Enterprise Investment Scheme (SEIS)
The Seed Enterprise Investment Scheme (SEIS )was launched by the UK government on 6 April 2012 it complements the existing EIS. The SEIS is intended to recognise the particular difficulties which very early stage higher risk companies face in attracting investment by offering a range of tax reliefs to investors in return for investment in early stage start-up businesses in the UK who satisfy the qualification criteria.
Tel: 0203 167 4625
See our FCA listing at:
http://www.fca.org.uk/ and search register