Compliance consultancy Cordium’s latest AIFMD seminar on Annex IV reporting has revealed a woeful lack of preparation - and indeed morale - among reporting firms.

Compliance consultancy Cordium’s latest AIFMD seminar on Annex IV reporting has revealed a woeful lack of preparation among reporting firms. Annex IV is the periodic systemic risk reporting obligation that firms have under article 24 of the European Union's Alternative Investment Fund Managers Directive.

Both pairs of trousers at the cleaners

With most fund management firms facing a deadline of 15 January for their first batch of Annex IV reporting, the majority of the ones that Cordium interrogaged during the seminar (57%) had not yet begun to prepare and only 30% of firms in its 'survey' were doing 'dry runs' on their reporting software before this date.

Meanwhile, a staggering 92 per cent of fund managers in the hall were ‘concerned’ about the deadline. When asked about their main concerns, they focused on two factors: 48% said that staff resources and time were the biggest concern, whereas 36% felt that the location of data would prove the biggest stumbling-block for them.

All for nothing?

This could all be for nothing as, interestingly, a thin majority (51%) of managers who answered the surveyed did not think that the Annex IV reporting regime would be useful in helping regulators to assess systemic risk - the whole raison d’etre of the AIFMD in the first place.

The scale of the problem

The AIFMD dictates that alternative investment fund managers (AIFMs) must make reports in respect of themselves and also of the alternative investment funds (AIFs) that they manage or market into the European Economic Area (the EU plus Norway, Iceland and Croatia). Each has to make a comprehensive report which asks 38 questions of the AIFM and more than 300 questions for each AIF.

Any AIFM that manages and/or markets an AIF in the EU/EEA must make (the EU for some reason has caught the American habit of using the word 'file') reports. Article 24(1),(2),(4) includes every 'full-scope' British AIFM with EU-managed AIFs and EU/non-EU-marketed AIFs and every non-EU AIFM without a passport for each EU-marketed AIF. Articles 3(3)(d), and 24(2),(4) include each small authorised AIFM, while Article 3(3)(d) includes each registered AIFM.

When and how often to report?

An Annex IV report has to be made within 30 calendar days of the reporting date; funds-of-funds have a further 15 days. The reporting dates are 31 March, 30 June, 30 September and 31 December. Reporting can be quarterly, half yearly or annually. Frequency depends on:

• the size of assets under management (AuM) of the AIFM and AIF
• the use of debt; and
• the types of investment that the funds make.