The Registered Alternative Investment Fund, or RAIF, as introduced by the Alternative Investment Fund Law of 2018, late this summer, has been marketed ever since with an emphasis placed on the fact that it need not be authorized by CySEC in order to operate, and is, in general not regulated.
Since this statement, although attractive, is largely misleading, CySEC clarifies the status of this investment vehicle in an announcement dated 29 November 2018. Specifically, the announcement sets out that although indeed RAIFs don’t require authorization for their operations, they are under requirements both for their registration and during their operation.
To begin with, there is a Register where RAIFs need to be listed in order to operate. A structured registration process does exist, which is set out in Directive 124-01, issued on the 12 of October 2018. In accordance to this, the applicant needs to submit an application to the Commission, which must be accompanied by mandatory documentation as this is set out in Art. 138(2) of the AIF Law. These documents include:
- Information in regards to the investment strategies of the Fund;
- The Memorandum of the Fund;
- Information in regards to the appointment of an external fund manager, and their license where applicable;
- The Fund Prospectus.
Following successful registration, the RAIF remains under the auspices of CySEC, despite indirectly, through the requirements imposed on the Alternative Investment Fund Manager, or AIFM, which is appointed, according to AIF Law, in order to manage these types of Funds.
The AIFM is under a legal obligation imposed by the Alternative Investment Fund Managers Law to communicate to CySEC any material changes in regards to the conditions on which the initial authorization for registration was given, especially the information contained in the submitted documents as per Art. 138(2).
He is also under an obligation to submit to CySEC the annual financial statements of the Fund, to keep the investors informed in regards to the changes in the Fund, and to carry out all necessary risk management, liquidity management and due diligence in ensuring that the investors are protected.