With the accession to the European Union, Poland faced many challenges. With them, however, many opportunities arose. The country was enabled to be part of the European financial market, including the investment fund market. Within the Union, work is constantly being carried out to unify the regulations so that it is possible to conduct business successfully in every member state.

The cons iderations on an AIFM passport should begin with explaining what AIFM is, setting out the background, specificities of the European fund market and the regulations on which the passport is based.

All about AIFM

What is AIFM? The AIFM acronym stands for the Alternative Investment Fund Manager. That is a legal person legal that conduct business activity in the area of the professional management of investment funds.

What are the alternative investment funds (AIFs)? They, unlike conventional investments that focus on stocks or cash, deal with other categories of investments such as private equity, hedge funds, art, commodities. Sometimes real estate investing is included. The way of the operating of the alternative investment funds is to collect assets from investors to locate them in the funds in the interest of investors in accordance with the agreed common policy. With such capital, it is possible to achieve greater profits. What is important, AIFs do not require authorization mentioned in the UCITS Directive 2009/65.

Due to this crucial element of trading, the investment fund market in the EU is regulated at the European level. The goal is to enable the efficient cross-border operation of assets. However, some regulations must be explicitly implemented at the national level. One of the reasons for regulating this market may have been the world financial crisis of 2008.

The general overview of the regulations

In Poland, the funds are regulated by the Investment Funds and Management of Alternative Investment Funds Act of 27 May 2004. The purpose of the act is to adapt Polish legislation to EU regulations and implement the EU Directive 2019/1160, Regulation 2019/1156 and Directive 2020/1504. The cornerstone of the whole system is the UCITS Directive 2009/65/EC and the AIFM Directive 2011/61/EU. The AIFM Directive introduces the passport provisions that would allow operators to operate in the member states.
The Directive also specifies the regulations on managing such funds, but the constructing and investment policy of them has been left to the countries.

In short, according to the AIFM Directive, AIFM must submit notification documents to the authorities of the home Member State to obtain an operating passport. The authority must consent to the operation of such fund manager in the territory of the European Union. The notification letter should contain the action plan, risk management system, fund details and its description. If fund management equities meet the requirements of the directive, they can be operating in the member states, non-EU funds can only be marked under private placement regimes. This system is intended to control the marketing of financial services.

One of the freedoms guaranteed by the Treaty on the Functioning of the European Union (TFEU) is the free movement of capital. After fulfilling certain obligations contained in the directives, financial institutions such as funds can freely provide services in the territory of other EU member states. But this flow must be regulated.

It should also be noted that entities whose home countries belong to the EEA can also benefit from the European passport.

The Polish current rules

The Polish Financial Supervision Authority (KNF) exercises authority over the investment fund market in Poland pursuant to the Investment Funds and Management of Alternative Investment Funds Act of 27 May 2004. The PFSA was established as a financial regulatory authority in 2006.

The amendment of March 31, 2013, to the above-mentioned act introduced the European passport institute, which gives the possibility of operating throughout the EU to an entity that already has the authorization to manage AIF. The act also introduces new information obligations.

In accordance with Polish law, there are 3 types of investment funds – open-end investment fund, closed-end investment fund and alternative investment company.

The funds may be used by a natural person, legal person and entities without legal personality. There are forms of collective investment.

The requirements

In Poland, to start operating a fund, an entity must obtain an entry in the register of the funds. The entry should contain the name and type of the fund, the investment objectives, the duration, the contact details, a list of management board members and plenipotentiaries.

The fund should also have and submit statutes. Among the most important obligatory elements of the statute: the most important is the name, which consists of two elements – proper name and the type of fund. It should also contain information about the governing bodies and ways of its representation. The statute should also contain information about the depositary. It is a key institution for investment funds. The depositary is responsible for the assets ensuring that they in compliance with the regulations and with the statute. The Polish Financial Supervision Authority issues the permit. There is a 4,500 EUR fee for being registered by the PFSA in the register. The entry in the register is constitutive.

The Act puts an obligation on the managing entities to inform the PSFA about planned significant changes to the conditions for the performance of activities of the AIFs which could result in revocation of the permit. The funds are subject to constant control of the PSFA.

Union AIFM

What about AIFM already registered in another EU country? An EU manager can enter Poland with AIF provided that the PFSA obtains a notification from the competent supervisory authorities of the home member state of the AIFM. However, that notification have to meet two guidelines, mentioned in the Act of May 2004. The notification should contain: a notification letter indicating the AIFM and the business name of the EU AIF which is intended to be marketed. It should also contain the business name, contact details, the description of the EU AIF, information about the state where AIF is marketed and information for the potential investors. They should also contain information on internal procedures, technical and organizational solutions – in short, give an accurate picture of the entity. The information may be transmitted by means of distance communication.

Potential of the harmonization

European passport regulations for AIFMS should be assessed positively. They aim to improve cross-border managing of the funds. Current legislative efforts are aimed at harmonizing regulations with EU standards, they should be followed carefully.

This process is in the interests of both investors and consumers of financial services and sustainability of the whole European Union funds market.