Application of FUND 3.2, 3.3 and 3.4
The investor and regulatory duties cover different funds. Disclosure and the annual report reach each UK AIF the AIFM manages and each AIF it markets in the UK. Reporting to the FCA reaches each UK AIF and EEA AIF it manages, and each AIF it markets in the UK. An EEA AIF managed by a UK firm but not marketed here is inside the regulatory population and outside the investor one.
Pre-investment disclosure and material change
FUND 3.2.2R requires seventeen numbered items to be made available to investors before they invest, together with any material changes to them. Nothing in force defines a material change. Handbook guidance points to articles 108 and 109 of the AIFMD level 2 regulation, not read at source for this course.
FUND 3.2.4R, in force 19 January 2026, provides that where the AIF must publish a prospectus under PRM 1.4.1R only information additional to the prospectus need be disclosed.
Proposed, not law
CP26/28 would define materiality, and its two published versions differ. The narrative at 9.14 says a change is material if, were a reasonable investor to become aware of it, it is highly likely they would reconsider their investment. Draft ALTS 10.5.2R(2) says material means a substantial likelihood that a reasonable investor, on becoming aware of it, would reconsider. The instrument is the text that would become law.
Periodic disclosure to investors
FUND 3.2.6R requires an AIFM, for each AIF that employs leverage, to disclose on a regular basis any changes to the maximum level of leverage it may employ and to any right of reuse of collateral or guarantee granted under the leveraging arrangement, and the total amount of leverage employed by that AIF. Neither rule states a frequency, so the firm fixes one in its pre-investment disclosure.
The annual report
FUND 3.3.5R requires a balance sheet or statement of assets and liabilities, an income and expenditure account, a report on the year's activities, any material changes in the pre-investment disclosure during the year, the total remuneration paid by the AIFM to its staff split into fixed and variable including any carried interest paid by the AIF with the number of beneficiaries, and the aggregate broken down by senior management and by staff whose actions have a material impact on the risk profile of the AIF. The accounting information must be audited and the auditor's report reproduced in full, including any qualifications.
Reporting to the FCA
FUND 3.4.3R sets the content. The frequency sits in SUP 16.18.4UK (article 110 of the level 2 regulation), in four bands:
- half-yearly, for portfolios above the EUR 100 million or EUR 500 million threshold in regulation 9(1) but not above EUR 1 billion;
- quarterly, above EUR 1 billion;
- quarterly for any single AIF above EUR 500 million including assets acquired through leverage, where the firm is in the half-yearly band;
- annually, for each unleveraged AIF that invests, per its core investment policy, in non-listed companies and issuers to acquire control.
Filing is due as soon as possible and no later than one month after the period end, extended by 15 days for a fund of funds.
The period ends are fixed by calendar: 31 December for annual filers, 30 June and 31 December for half-yearly, the four quarter ends for quarterly. Those dates are unrelated to the firm's accounting reference date.
Leverage on a substantial basis is assessed by the manager: exposure on the commitment method under article 8, exceeding three times net asset value. Where it is crossed, FUND 3.4.5R requires further leverage information, including the five largest sources of borrowed cash or securities, at the same time. Under FUND 3.4.6AR, Value at Risk and portfolio sensitivity to foreign exchange and commodity prices are reportable only if the firm already calculates them for another purpose.
Proposed UK rules and AIFMD II
Proposed, not law
The Treasury will revoke the AIFMD reporting requirements and the FCA will replace them with simplified reporting for all asset managers, consulted on separately in CP26/26, which was not read at source (CP26/28 1.20). CP26/28 10.16 would replace the seventeen-item list with a high-level rule to disclose what investors need to assess the merits, risks and costs of investing, retaining mandatory disclosures for market integrity including how assets are valued and how liquidity risk is managed. It would apply to AIFMs of all sizes (10.15).
EU law
Directive (EU) 2024/927 commences the two duties a year apart. The Article 23 disclosure changes apply from 16 April 2026: the name of the AIF joins limb (a); a new limb (ia) requires a list of the fees, charges and expenses borne by the AIFM in connection with the operation of the AIF and allocated to it; and Article 23(4) gains the composition of the originated loan portfolio plus two annual items, all fees, charges and expenses directly or indirectly borne by investors, and any parent undertaking, subsidiary or special purpose vehicle used in relation to the AIF's investments. The Article 24 reporting changes, including the delegation data set, apply from 16 April 2027.
Alongside this module
Where this subject is covered elsewhere in the course.