AIFMD and MiFID Compatibility

Further to the implementation of the Alternative Investment Fund Managers Directive (AIFMD) in the UK, it has become apparent that some fund managers who have been granted authorisation as full scope UK AIFMs have encountered some difficulties in establishing the exact scope of permitted activities under the new permission profile.

This is mainly due to the broad scope of the new activity of ‘managing an AIF’, the limited scope of additional MiFID activities permitted to an AIFM and the introduction of new AIFMD passporting rights.

Article 6(4) AIFMD allows a full scope UK AIFM to carry out only certain MiFID activities in addition to the activity of ‘managing an AIF’, namely:

  • the management of portfolios of investments (including individual portfolios and accounts);

  • investment advice;

  • safe-keeping and administration of assets (including arranging the safeguarding);

  • reception and transmission of orders.


Subsequently, a full scope UK AIFM is unable to carry on any MiFID activities not included in article 6(4), such as:

  • placing of financial instruments without a firm commitment basis;

  • underwriting and/or placing of financial instruments on a firm commitment basis;

  • execution of orders on behalf of clients;

  • dealing on own account;

  • operating  Multilateral Trading Facilities.


Given the complexities of AIFMD it is perhaps understandable that some firms had not fully envisaged the effect of changes to their permission, and in some instances firms have been forced to terminate some activities or even set up a new regulated entity to ensure continuity.

The FCA puts the onus on firms to determine the appropriateness of a firm’s permission to their business model, therefore a review of a firm’s actual business in comparison with their scope of permission is necessary to ensure compliance.

This includes not only having a good understanding of which activities can be carried on within the permission of managing an AIF, but also making an assessment of the compatibility between MiFID and AIFMD business and a review of any passporting rights for cross-border activities.

Subsequently, once a firm becomes authorised as a full scope UK AIFM, any existing permissions that are included in the new activity of managing an AIF must be removed, any MiFID activities deemed to be incompatible must be removed and all MiFID passports must also be removed and where required replaced with the appropriate AIFMD passports.

It should be noted that the above applies exclusively to a full scope UK AIFM.  A small authorised or small registered UK AIFM will not be subject to the same restrictions in respect of MiFID activities and passports as it is not required to comply with the full requirements of AIFMD (including article 6(4)).

If you require any assistance with establishing the precise scope of your firm’s business and the appropriate FCA permissions required, either as a newly authorised AIFM or as a new applicant firm, please feel free to contact our Compliance Team.


Tim West

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