Which managers fall under the AIFM Law, and how can CySEC change, suspend or withdraw an authorisation?

The AIFM Law applies in full unless the AIFs a manager runs hold no more than €100 million, counting assets acquired through leverage, or, where the funds use no leverage and give investors no right to redeem for five years after their first investment in each fund, no more than €500 million. It does not apply to a manager whose AIFs are held only by the manager itself or companies in its group, provided none of those investors is an AIF.

A manager below the thresholds still registers with its home supervisor, identifies itself and its funds, describes their strategies, reports their main instruments, principal exposures and largest concentrations, and says if it stops qualifying. Once above a threshold, it has 30 calendar days to apply for authorisation. It enjoys none of the law's rights unless it opts in, which the exam material calls affiliation; the whole law then applies. In Cyprus, since 3 July 2020, a sub-threshold manager needs a CySEC licence under the Small AIFM Law (Law 81(I)/2020). It must be a Cypriot company limited by shares. It must hold €50,000 initial capital plus 0.02% of portfolios above €125 million, and have a board of at least four, two of them executive. A CIF may do the same work with CySEC approval under the investment services law, without this licence.

An authorised AIFM notifies CySEC of any material change to the conditions of its authorisation before making it. No approval is needed: CySEC may reject or restrict the change within one month, extendable once by up to one month, and if it does not object in time the change takes effect automatically.

CySEC may suspend an authorisation in whole or in part where continued activity may endanger the funds, the manager's clients or investors, or the orderly functioning or integrity of the market. It may do so while a withdrawal decision is pending. It may also do so on a suspected breach, by decision of its Chairman or Vice-Chairman, who then informs the board at its next meeting. Suspending discretionary portfolio management automatically suspends the non-core services too, since they cannot be offered without it. In a suspension on a suspected breach, CySEC may set a deadline of at most one month from notification to fix the problem; failing an adequate remedy, the suspension is extended and withdrawal proceedings begin. Carrying on a suspended activity can cost up to €350,000.

For breaches of the AIFM Law, its directives or Delegated Regulation 231/2013, fines reach €350,000, or €700,000 for a repeated breach; where the breach produced a benefit, the fine may be up to twice that benefit. Responsible directors and officers can be fined too.

Withdrawal is mandatory where the AIFM has not used its authorisation within 12 months, has expressly given it up, has been inactive for the preceding six months, or obtained it through false statements or other irregular means. It is discretionary where the conditions of authorisation are no longer met, where an AIFM with discretionary portfolio management breaches the capital adequacy rules for investment firms, where breaches are serious or systematic, or where another law provides for it. An own-funds shortfall is handled in two steps: CySEC may set a deadline, and withdraws only if it passes without a remedy.