Material Change Notifications

Notification of changes to authorisation/registration arrangements

Full-scope UK AIFMs are required to notify the FCA of material changes to the conditions for their initial authorisation, in particular material changes to the information provided when applying for authorisation.

The FCA must be notified of a planned material change at least one month before the change takes effect, or immediately after an unplanned change has occurred. If the FCA decides to object to or impose restrictions on the proposed changes, it must inform the AIFM within one month of receiving the notification, but may prolong that period by one month upon prior notification to the AIFM. The AIFM may implement the changes if the FCA does not notify it of a decision to object to or impose restrictions on the proposed changes within the relevant period.

According to the Level 2 Regulations, any changes in information must be deemed material if there is a substantial likelihood that a reasonable investor, becoming aware of such information, would reconsider its investment in the AIF, including because such information could impact an investor’s ability to exercise its rights in relation to its investment, or otherwise prejudice the interests of one or more investors in the AIF.

The material change notification form issued by the FCA for this purpose provides illustrative examples of changes which should be notified – these include significant changes to the rules or instruments of incorporation of an AIF, or changes to the predominant investment strategy of an AIF. There is no exhaustive list of notifiable material changes and that AIFMs must therefore exercise their own judgement in determining whether a given change should be deemed material and therefore notified to the FCA. There is no formal requirement for the material change notification form to be accompanied by supplementary documentation, although in certain cases, it may be helpful for the form to be submitted together with an updated version of the AIFM’s Schedule of AIFs or an updated AIF prospectus.

Small AIFMs should notify the FCA of material changes to any AIF through GABRIEL (the FCA’s online reporting portal). Small registered UK AIFMs must notify the FCA when they cease to satisfy the conditions of registration using a Small Registered UK AIFM Change Form.

Notification of changes to marketing arrangements

Marketing with a passport

Full-scope UK AIFMs that market funds in the UK or another EU state and EU AIFMs that market funds in the UK to retail customers in accordance with Regulation 54 of the UK Regulation must notify the FCA of material changes to the information provided with their marketing application. The FCA must be notified of a planned material change at least one month before the change takes effect, or immediately after an unplanned change has occurred.

There is various commentary with respect to what constitutes a notifiable material change in the UK context, most notably:

  • Article 17A(3) of the Financial Services and Markets Act 2000 (EEA Passport Rights) Regulations 2001 lists certain types of change (e.g. changes to the AIF rules or instruments of incorporation or to the identification of the depositary of the AIF) which must be notified to the FCA as material changes.
  • According to the AIFMD Marketing Notification Form, a change in information must be deemed material if there is a substantial likelihood that a reasonable investor, becoming aware of such information, would reconsider its investment in the AIF, including because such information could impact an investor’s ability to exercise its rights in relation to its investment or otherwise prejudice the interests of one or more investors in the AIF.
  • The FCA website suggests that a material change includes “where there has been a change to the management of a fund or a change to the information provided to investors under Article 23(1) AIFMD” .

It is understood that there is no exhaustive list of notifiable material changes and that AIFMs must therefore exercise their own judgement in determining whether a given change should be deemed material and therefore notified to the FCA.

Full-scope UK AIFMs should make this notification using the AIFMD Marketing Notification Form and the relevant annexes indicating in the form that the submission is a notification of a material change. The annexes to be appended (as applicable and accessible here) are Annex 1: AIF details, Annex 2: schedule of cross-border marketing rights, and Annex 3: Article 23/FUND 3.2.2R disclosure checklist. The FCA has also issued a template letter to be submitted with any changes to EU marketing passport rights.

In our view, as a matter of practice, in most cases where firms are making material change notifications in a management or authorisation context, they are also making material change notifications with respect to their marketing passport.

Marketing without a passport

Firms are required to notify the FCA of any material changes to the information previously submitted to the FCA in respect of the marketing of AIFs under the UK National Private Placement Regime. There are three different material change forms for the UK National Private Placement Regime:

  • Article 36 form for authorised UK and EU AIFMs marketing non-EU AIF(s) (or feeder AIFs that are UK AIFs or EU AIFs where the master fund is managed by a non-EU AIFM or is a non-EU AIF).
  •  Article 42 form for above-threshold non-EU AIFMs marketing AIF(s), whether UK, EU or non-EU AIF(s). These AIFMs will also be required to complete notifications in respect of major holdings and control acquired after the date of their marketing notification (in accordance with Part 5 of the HMT regulations).
  •  Small Third Country form for sub-threshold non-EU AIFMs marketing AIF(s), whether UK, EU or non-EU AIF(s).

The FCA must be notified of a planned material change at least one month before the change takes effect, or immediately after an unplanned change has occurred. The nature of the information items required in the material change forms suggest that any changes to the information previously submitted to the FCA as part the initial National Private Placement Regime notification will need to be notified to the FCA and not just changes which would be deemed material in the exercise of a firm’s judgement.