Description: Entities that manage one or more AIFs.
Regulation: Governed by the EU AIFM Directive, which includes requirements for risk management, transparency, and investor protection.
Characteristics:
Can manage AIFs across the EU once authorized in one member state.
Subject to extensive regulatory requirements, including capital adequacy, reporting, and conduct of business rules.
AIFM Framework in Cyprus
Regulatory Framework:
AIFMD Compliance: Cyprus implements the Alternative Investment Fund Managers Directive (AIFMD), which harmonizes the regulation of AIFMs across the EU.
Cyprus Securities and Exchange Commission (CySEC): CySEC is the competent authority in Cyprus responsible for regulating and supervising AIFMs.
AIFM Requirements:
Authorization: AIFMs in Cyprus must be authorized by CySEC to manage AIFs and comply with regulatory obligations under AIFMD.
Regulatory Reporting: AIFMs are required to submit periodic reports to CySEC, including financial statements, risk management policies, and other relevant disclosures.
Operational Standards:
Risk Management: AIFMs must implement robust risk management frameworks to identify, measure, and mitigate risks associated with AIF operations.
Governance: AIFMs are required to have adequate governance structures and internal controls to ensure compliance with regulatory requirements and investor protection.
Investor Protection:
Transparency: AIFMs must provide transparent and comprehensive information to investors regarding the AIF’s investment strategy, risks, and performance.
Custody of Assets: AIFMs must appoint a custodian to safeguard the assets of the AIF and ensure compliance with regulatory requirements.
Cross-Border Operations:
EU Passporting: Once authorized by CySEC, AIFMs in Cyprus can manage AIFs and market them across EU member states under AIFMD passporting rights, facilitating cross-border operations.
Professional Requirements:
Qualifications: AIFMs must employ individuals with appropriate qualifications and experience to effectively manage AIFs and fulfill regulatory responsibilities.
Advantages for Cyprus-based AIFMs
Strategic Location: Cyprus is strategically located at the crossroads of Europe, the Middle East, and Africa, providing access to a diverse range of markets and investors.
EU Membership: As an EU member state, Cyprus offers AIFMs the benefits of operating within a regulated and harmonized market environment under AIFMD.
Regulatory Environment: Cyprus provides a stable regulatory framework compliant with EU standards, enhancing investor confidence and operational certainty.
Tax Benefits: Cyprus offers a competitive tax regime with advantages for fund management activities, including favorable tax treatment of carried interest and management fees.
Infrastructure and Support Services: Cyprus has a well-developed financial infrastructure, including banking, legal, and accounting services, supporting the operational needs of AIFMs.
Skilled Workforce: Cyprus boasts a skilled and multilingual workforce, facilitating the recruitment of professionals with expertise in fund management and financial services.
