CIRCULARS CIF: C404 - Publication of CySEC’s Review of compliance with the reporting obligations
The Cyprus Securities and Exchange Commission (the "CySEC") released a publication on 15th September 2020 of Circular C404 regarding the Publication of CySEC’s Review of compliance with the reporting obligation under the Alternative Investment Fund Managers Law (the ‘AIFM Law’) as further specified with the Commission Delegated Regulation (EU) No 231/2013 with regard to exemptions, general operating conditions, depositaries, leverage, transparency and supervision (‘the Regulation’). Via the Circular, CySEC wishes to inform all regulated entities that a review was carried out on the quality of data reported to CySEC under Article 4(3)(d) and 31 of the AIFM Law as further specified under Article 110 of the Regulation. The purpose of the Review was to assess the quality, accuracy and timeliness of the information reported by AIFMs to CySEC for the year ending 31 December 2019 and has identified some areas of concerns. CySEC shares its observations and conclusions through this circular and the findings of this review should be noted by all AIFMs and ensure they comply with their reporting obligation under Articles 4(3)(d) and 31 of the AIFM Law as further specified under Article 110 of the Regulation. Areas of concern / Observations identified The following areas of concern should be read in conjunction with CySEC’s Circular C287, published in 2018, which notes in detail the reporting obligations for AIFMs. 1. Timely submission of valid AIFMD reports:
A number of AIFMs did not submit valid AIFMD reports in a timely manner or failed to submit valid AIFMD reports for 2019 despite the AIFM and/or the AIF being granted authorization before 1st October 2019. AIMs should provide a report even if there is nothing to report using the specific field. 2. Accuracy of information reported:
In certain cases, the sum of the values reported for the main instruments of AIFs was significantly larger than the reported AUM.
The average liquidity reported for AIFs did not match the type of AIF. More specifically, AIFs categorised as ‘Real Estate’ or ‘Private Equity’ reported portfolio liquidity for which the sum of percentages from 0 days to 90 days of financing in some cases exceeded the sum of percentages from 91 days to more than 365 days.
The NAV reported for AIFs was not accurate given its level, its evolution and/or other information.
In certain cases there was significant difference between reported leverage and ratio of AUM to NAV.
A number of AIFMs provided information on their LEIs and/or the LEIs of AIFs, which was not consistent with GLEIF database.
3. Consistency of information reported within the AIFMD reports and/or between the AIFMD reports submitted by an AIFM:
For some AIFs the percentage reported for days of financing did not always equal to 100% and in certain cases the reported percentages of investor concentration did not match the investor group type reported. In some cases, the reporting code was not reported consistently between the DATAMAN and the DATAAIF reports whilst in a number of cases, AIFMs did not report the ‘no reporting flag’ consistently. 4. Completeness of information reported:
Certain AIFMs did not provide information on their LEIs and / or the LEIs of the AIFs despite the fact that they had obtained LEIs. 5. Double Reporting:
A number of AIFMs submitted a file using an incorrect AIF national code and later submitted a second file using the correct AIF national code without cancelling the file with the incorrect national code thus leading to double reporting. CySEC advises AIFMs to nominate a person within their firm who will be responsible for the regular monitoring of AIFMD reporting requirements and dealing promptly with all issues/failures that might arise. In addition, AIFMs are requested to inform CySEC accordingly about the above nomination through the Funds Digital Record. CySEC also strongly recommends AIFMs to review the ESMA Guidelines and ESMA Q&As. AIFMs not complying with their AIFMD reporting obligation will face enforcement action.
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Written by Angeliki Georgiou, Independent Legal Consultant