Report on Hanfa's public consultation on the regulatory relief of alternative investment funds

Published: 28 June 2021

At its 63rd session held on 18 June 2021, the Government of the Republic of Croatia adopted the Draft Proposal of the Act amending the Alternative Investment Funds Act and the Draft Proposal of the Act amending the Act on Open-Ended Investment Funds with Public Offering.

These draft acts ensure further legal alignment of the Croatian regulatory framework for open-ended investment funds with public offering and for alternative investment funds with the acquis communautaire and European standards. Both acts aim at removing obstacles to cross-border marketing of investment funds and at harmonising different practices in Member States with regard to cross-border marketing of investment funds. In addition to the administrative and regulatory relief of alternative investment funds, a framework is also provided to increase transparency of national trade requirements, as well as to increase investor protection.

It should be noted that in the period from 24 February to 12 March this year, the Croatian Financial Services Supervisory Agency (HANFA) conducted a public consultation on the regulatory relief of investment funds, for the purpose of amending the Alternative Investment Funds Act. On this occasion, HANFA collected opinions from market participants on the efficiency and proportionality of the existing legal and by-law framework applicable to alternative investment funds (AIFs) and their managers (AIFMs). 

The public consultation was conducted at HANFA's initiative and is not part of the public consultation in the legislative procedure. The comments submitted by stakeholders in HANFA's public consultation are contained in the document created by HANFA and entitled “Report on the conducted public consultation – Alternative Investment Funds Act - consultation on the efficiency and proportionality of the current legislative framework” (Report).
 
The aim of the public consultation was to determine whether there were legal and regulatory barriers to the operation of alternative investment fund management companies and to open up additional scope for investment in AIFs. This objective is also consistent with the broader objective of developing the capital market as a driving force for the economic recovery of the European Union and this initiative was triggered, among other things, by the Report from the European Commission (EC) assessing Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 (Text with EEA relevance) (OJ L 174, 08.06.2011) (AIFM Directive). Moreover, another specific objective was to create a clear overview of market participants' opinions regarding parts of the Alternative Investment Funds Act where that contain a certain specificity in the national regulation with respect to the AIFM Directive.

The most important amendments proposed by HANFA, explained in more detail in the Report itself and taken into account when drafting the Act amending the Alternative Investment Funds Act, are:

  • prescribing new thresholds for small and medium-sized AIFMs;
  • additional regulatory relief for small and medium-sized AIFMs - reducing the minimum share capital for small AIFMs and relief with respect to the appointment of management board members;
  • change in the concept of authorisation for the establishment of AIFs with private offering;
  • a unique definition of qualified investors and enabling AIFM management board members and employees to invest in the AIF with private offering managed by that AIFM;
  • changes regarding the depositary - enabling investment firms to be the depositaries of AIFs with private offering while fulfilling certain conditions and revoking the authorisation for the selection of the depositary (obligation to inform HANFA is introduced);
  • regulatory relief with respect to reporting; and
  • prescribing that for AIFS offered to professional and/or qualified investors, the AIF costs and fees are governed by the rules of the AIF.

In addition to the above-mentioned amendments, in the Report HANFA also listed additional recommendations and proposals that can significantly contribute to the development of the alternative investment funds market in the Republic of Croatia.
 
Full text of HANFA's Report (in Croatian) is available here.