01 July 2013

BVI's response to ESMA consultation concerning guidelines on reporting obligations under Article 3 and Article 24 of the AIFMD

The German Investment Funds Association says it is necessary that AIFMs are provided with practical guidance for establishing and handling of reporting systems in accordance with the Level 2 requirements.

BVI believes that the transitional arrangements are drafted too narrowly and do not sufficiently take into account the national approaches to the general transitional period. Already existing AIFMs are granted a transitional period of one year for submitting the application for authorisation. A number of Member States, including Germany, have implemented or will implement this standard by requiring full application of the AIFMD requirements by the date of submitting the application and by 22 July 2014 at the latest.

The suggestions in terms of reporting on the AIF’s market risk profile go well beyond the  requirements of the Delegated Regulation. This extension of scope runs counter to the  declared purpose of the Guidelines which is ensuring “common, uniform and consistent  application of the reporting obligations” stemming from Level 1 and Level 2 provisions.

The reporting template included in Annex IV to the Delegated Regulation 231/2013 is part of directly applicable EU law which takes precedence over national provisions let alone administrative standards without binding effect. Therefore, it is compelling that the ESMA Guidelines observe the reporting limits defined in the Level 2 template which requires solely the reporting of Net Equity Delta, Net DV01 and Net CS01 for the measurement of market risk.

Consequently, the proposed reporting of figures concerning Net FX Delta, Net  Commodity Delta and the Vega exposure at different market levels has no foundation in  the Level 2 text and should thus be waived. For the same reason, AIFMs must not be  required to report on the VaR of the managed AIFs. It must be pointed out that ESMA itself  had rejected the industry’s suggestions to report market risk profile on the basis of VaR figures  when preparing its technical advice and instead had recommended different risk measures  which were then endorsed by the Level 2 template.

In addition, it should be acknowledged that the suggested calculations of additional risk measures would place a significant burden upon the AIFM who anyway need to commit considerable resources to the implementation of the reporting duties. This pertains also to the calculation of VaR which according to the consultation paper shall be based on parameters different from those applicable under the UCITS Directive. Hence, should ESMA insist on maintaining the VaR reporting in spite of our legal arguments presented above, we believe that it should abstain from specification of the applicable parameters in order to reduce the administrative burden for the industry.

The reporting template included in Annex II to the Level 2 Regulation is  part of directly applicable EU law which takes precedence over national provisions let alone administrative standards without binding effect. Therefore, it should be considered a general principle that the ESMA Guidelines observe the reporting limits specified in the Level 2 template. A further example of excessive requirements is the suggestion to report on the use of high frequency trading in AIF management. Such reporting is not foreseen by the Delegated Regulation and hence should not be incumbent on AIFMs.

Full response

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