On 22 July 2013, the directive-based Act on Alternative Investment Funds Managers came into force in Denmark. The Act paves the way for cross-border management and marketing of alternative investment funds - the so-called non-UCITS - and thus intensifies competition on the European market.

The Act contains a number of conditions and requirements for management activities, including that Danish managers of e.g. hedge funds, special funds, professional funds and other collective investment funds - now all entitled alternative investment funds - must obtain a licence from or be registered with the Danish FSA to the extent that the managed funds meet the requirements for being alternative investment funds. As a new element, also property funds, infrastructure funds, forest funds, etc., which have not been subject to supervision previously, will be covered by the Act, unless after an assessment on a case-by-case basis they may be exempted with reference to their status as ordinary, commercial enterprises. Managers wishing to market alternative investment funds from third countries to professional investors in Denmark must also obtain a licence from the Danish FSA. The Act furthermore amends terms for marketing aimed at retail investors. According to the Act, alternative investment funds are considered products intended for professional investors, which means that marketing aimed at retail investors requires a special licence from the Danish FSA.

In addition, the Act lays down a number of obligations for managers of alternative investment funds, e.g. in relation to the set-up and operation of the alternative investment funds, including organisational requirements, requirements for risk management, portfolio management and cash management, reporting requirements, requirements for remuneration and pay policy as well as requirements for appointment of a custodian for each alternative investment fund.

The new regime introduces comprehensive and complicated regulation, which is still pending delegated legislative acts on both a national and international level. Consequently, there are currently many uncertainties with regard to the construction of the Act and its scope. Since the presentation of the bill, Horten has been in dialogue with the Danish FSA regarding the new regime and closely follows the development of the complex legislation on a national and international level. Horten advises several foreign fund managers on the directive implementation in Denmark, including the options and restrictions which the Act imposes on marketing activities in Denmark.

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Claus Bennetsen

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