Act on the Management of Alternative Investment Funds

Transcription

1 FINANSTILSYNET Norway Translation March 2015 This translation is for information purposes only. Legal authenticity remains with the official Norwegian version as published in Norsk Lovtidend. Act on the Management of Alternative Investment Funds Chapter overview: Chapter 1 Chapter 2 Chapter 3 Chapter 4 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9 Chapter 10 Chapter 11 Chapter 12 Chapter 1 Introductory provisions Managers of alternative investment funds (AIFMs) AIFM's activities Transparency requirements Depositary Marketing to professional investors Marketing of AIFs that are not domestic AIFs to non-professional investors Cross border management Supervision Supervision of foreign AIFMs' activities in Norway Penalties Commencement and transitional rules. Amendments to other Acts Introductory provisions Section 1-1 Scope (1) This Act regulates the management of alternative investment funds and other activities engaged in by an alternative investment fund manager under this Act. (2) The King may make further provision concerning the application of the Act in Svalbard and the continental shelf and may make special provision taking into account the local conditions. (3) The ministry may by regulations make further provision concerning the application of the Act to foreign entities' activities in Norway and Norwegian entities' activities abroad. Section 1-2 Definitions The following definitions apply in this Act: (a) alternative investment fund (AIF): a collective investment undertaking that is not a UCITS, see the Securities Funds Act subsection (1) no. 4, and which raises capital from a number of investors with a view to investing that capital for the benefit of those investors in accordance with a defined investment policy; (b) alternative investment fund manager (AIFM): an undertaking that operates an AIF on a commercial basis;

2 (c) management: portfolio management and risk management for alternative investment funds; (d) carried interest: the share of an AIF's net profit that accrues to the manager as compensation for the management, except the share of the net profit that accrues to the manager as a result of direct or indirect investment in the fund; (e) leverage: increase of exposure of an AIF through borrowing of cash, securities, derivative positions or by any other means; (f) feeder AIF: an AIF that invests at least 85 per cent of its assets in another AIF (the master AIF ), in more than one master AIFs where those AIFs have identical investment strategies or otherwise has an exposure of at least 85 per cent of its assets to such a master AIF; (g) master AIF: an AIF in which a feeder fund has an exposure; (h) marketing: a direct or indirect offering or placement of units or shares at the initiative of the AIFM or on behalf of the AIFM; (i) close links: 1. a company in which the person concerned has or controls at least 20 per cent of the voting rights or capital, 2. a company in which the person concerned has such influence as mentioned in the Private Limited Liability Companies Act or the Public Limited Liability Companies Act 1-3 subsection (2) or the General and Limited Partnerships Act section 1-2 subsection (2), 3. two or more natural or legal persons that are permanently connected to same person through control as mentioned in no. 2; (j) prime broker: a credit institution, investment firm or other regulated entity subject to supervision, offering services to professional investors to finance or execute transactions in financial instruments as counterparty and which may also provide other services such as clearing and settlement of trades, custodial services and securities lending; (k) professional investor: a professional client as mentioned in the Securities Trading Regulations section 10-2, or a client who is treated as a professional client under the Securities Trading Regulations sections 10-4 and 10-5, (l) non-professional investor: an investor other than a professional investor. Section 1-3 Exemption of some entities from the area of application of the Act (1) This Act does not apply to pension institutions, national central banks, employee savings schemes, securitisation special purpose entities and public authorities which manage public social security and pension systems. (2) The Act does not apply to supranational institutions such as the European Central Bank, the European Investment Bank, the European Investment Fund, European Development Finance Institutions and bilateral development banks, the World Bank and the International Monetary Fund.

3 (3) The Act does not apply to AIFMs in so far as they manage one or more AIFs whose only investors are the AIFM or companies in the same group as the AIFM, provided that none of those investors is itself an AIF. (4) The ministry may by regulations make further provision concerning the Act s application to holding companies. Section 1-4 Exemption from parts of the act for AIFMs that manage AIFs whose assets under management do not in total exceed certain thresholds (1) For AIFMs that manage AIFs whose assets under management in total do not exceed an amount equivalent in Norwegian kroner to: (a) EUR 500 million when the portfolios consist of AIFs that are unleveraged and have no redemption rights exercisable during a period of 5 years following the date of initial investment in each AIF, or (b) EUR 100 million; for types of AIFs other than those mentioned in (a) only chapter 9 applies together with the provisions of this section. (2) AIFMs as mentioned in subsection (1) shall be registered in a register maintained by Finanstilsynet. They shall identify to Finanstilsynet the AIFs under management, and shall provide information on the AIFs investment strategies. (3) AIFMs as mentioned in subsection (1) shall regularly provide Finanstilsynet with information regarding their investment strategies, the main categories of instruments in which they are trading, and on the largest exposures and concentrations of the AIFs they manage. (4) AIFMs shall provide Finanstilsynet with information on significant changes in the information provided under subsection (2). (5) An AIFM that no longer meets the conditions of subsection (1) shall promptly notify Finanstilsynet thereof. The AIFM shall apply for authorisation under section 2-2 within 30 days of the date on which the conditions for exemption under subsection (1) were no longer met. (6) The exemption of subsection (1) does not apply to AIFMs that manage AIFs other than domestic funds that are not to be marketed to non-professional clients. (7) AIFMs that are exempt from the authorisation requirement under subsection (1) may apply for authorisation under section 2-2 in order to acquire full rights and obligations under this Act. (8) The ministry may by regulations make further provision concerning the calculation of total assets, registration, reporting, information and applying for authorisation. Section 1-5 Enabling regulations (1) The ministry may by regulations make further provision concerning AIFMs right to invest in securitised positions. (2) The ministry may by regulations make further provision, including exemptions from this Act and the Securities Funds Act, as well as further requirements to those set out in these Acts, for AIFMs that manage special AIFs, including venture capital funds and social entrepreneurship funds.

4 Section 1-6 Treatment of personal data in connection with employee authorisation schemes A trade organisation or associated legal entity which provides training to and authorises persons who are employed by the AIFM of an AIF authorised under section 2-2, or is subject to a registration obligation under section 1-4, may handle such information as mentioned in the Personal Data Act section 2 subsection 8(b) as part of the assessment of whether an employee shall be granted authorisation, stripped of authorisation or given a warning. Chapter 2 Managers of alternative investment funds (AIFMs) Section 2-1 Designation of AIFMs (1) AIFs shall be managed by an external AIFM designated by the AIF or on behalf of the AIF, or be managed internally. (2) The ministry may by regulations make further provision concerning the designation of AIFMs. Section 2-2 Authorisation to manage AIFs and other services (1) The management of AIFs may only be carried on subject to Finanstilsynet s authorisation. Authorisation shall only be granted provided Finanstilsynet is satisfied that the AIFM will meet the requirements of this Act. The authorisation shall cover both portfolio management and risk management. (2) An external AIFM may in addition to activity as mentioned in subsection (1) third sentence engage in the activities of administration and marketing of an AIF that it manages, as well as services related to the assets of the AIF. An external AIFM that is authorised under the Securities Trading Act section 2-1 may in addition carry on the management of securities funds. (3) Finanstilsynet may authorise an external AIFM to provide the service of management of portfolios of investments on an individual basis and in accordance with mandates given by investors. (4) An external AIFM that has been granted authorisation under subsection (3) may also be granted authorisation by Finanstilsynet to provide the following non-core services: (a) reception and transmission of orders on behalf of clients in relation to one or more financial instruments, (b) investment advice, (c) safe-keeping and administration in relation to shares or units. (5) An external manager may not engage in activities other than those stated in subsections (1) to (4). Internally managed IAFs may not engage in activities other than those mentioned in subsection (1) third sentence and subsection (2) first sentence for the AIF concerned. (6) An AIFM with authorisation under subsection (3) and subsection (4) shall be a member of the Norwegian Mutual Fund Association insofar as those services are concerned. (7) The ministry may by regulations make further provision concerning AIFMs right to provide services and perform functions under subsections (1) to (6), including prescribing that the Securities Trading Act with regulations shall apply to activity as mentioned in subsections (3) and (4).

5 Section 2-3 Applications for authorisation (1) An application for authorisation to manage AIFs shall contain information showing that the statutory requirements on AIFMs are met, including information on remuneration schemes, information on the persons effectively conducting the business of the AIFM, information on shareholders with qualifying holdings, and the sizes of these holdings and details of any delegation. (2) The application shall contain a programme of operations with a description of the AIFM's organisational set-up. (3) The application shall contain information on the AIFs to be managed, including information as mentioned in section 4-2. A copy of the agreement with the depositary shall be enclosed with the application. (4) An AIFM which at the time of application is authorised as a management company under the Securities Trading Act section 2-1 need not supply information that was presented in connection with an application for authorisation under the Securities Trading Act, provided that the information is still correct. (5) The ministry may by regulations make further provision concerning requirements on and the processing of applications. Section 2-4 Conditions for authorisation (1) Authorisation as an external AIFM may only be granted to a private limited liability company or public limited liability company that has its registered office and head office in Norway. (2) Board members and senior employees shall meet the requirements of good repute and experience as mentioned in section 2-5 subsection (1). (3) The AIFM shall meet the capital requirements of sections 2-6 and 2-7. (4) An application for authorisation shall be rejected if an owner with a qualifying holding in the AIFM is not deemed fit to ensure sound and sensible management of the AIFM. A qualifying holding means a direct or indirect holding in an AIFM which represents at least 10 per cent of the capital or of the voting rights, or which otherwise makes it possible to exercise a significant influence over the management of the AIFM. (5) Finanstilsynet may impose conditions for authorisation, including setting restrictions on the scope of the AIFM's authorisation. (6) The ministry may by regulations make further provision concerning conditions for authorisation Section 2-5 Management of the entity (1) Board members, the general manager and others who effectively conduct the business of an AIFMshall have relevant qualifications and professional experience, be of good repute, and otherwise not have displayed improper conduct giving reason to presume that the position or office will not be discharged in a satisfactory manner, also with regard to the investment strategies pursued by the AIFs to be managed. The conduct of the business of the AIFM shall be decided by at least two persons.

6 (2) The AIFM shall inform Finanstilsynet of any replacement of persons as mentioned in subsection (1), and shall provide information relevant to assessing whether the replacements meet the conditions of subsection (1). Section 2-6 Initial capital (1) An external AIFM shall have an initial capital in Norwegian kroner that is equivalent to at least EUR 125,000. An internally managed AIF shall have an initial capital in Norwegian kroner that is equivalent to at least EUR 300,000. Initial capital means own funds as mentioned in Regulations of 1 June 1990 no. 435 on Calculation of Own Funds of Financial Institutions, Clearing Houses and Investment Firms section 3 subsections 1, 2, 3, 5, 9 and 12. (2) The ministry may by regulations make further provision concerning requirements for initial capital, including requirements for higher capital. Section 2-7 Own funds (1) An AIFM shall have own funds in an amount in Norwegian kroner that: (a) is equivalent to at least the sum of the requirement on initial capital as mentioned in section 2-6 subsection (1) and an amount that is equivalent to 0.02 per cent of the AIFM's total assets above EUR 250 million, limited to a maximum amount in Norwegian kroner equivalent to EUR 10 million, and (b) such that the own funds are at all times at least equivalent to one quarter of the AIFM's fixed costs in the preceding year. (2) Up to one half of the own funds requirement under subsection (1)(a) that exceeds the initial capital requirement may be met by a guarantee from a bank or insurance company. (3) An AIFM shall have additional own funds or professional indemnity insurance to cover potential liability risks arising from professional negligence. (4) Own funds shall be invested in liquid assets or assets readily convertible to cash and shall in no event include speculative positions. (5) The provisions of section 2-6 on initial capital and of subsections (1) and (2) above on own funds do not apply to AIFMs that are also authorised to manage UCITS under the Securities Trading Act section 2-1. (6) The ministry may by regulations make further provision concerning own funds requirements, including requirements for higher capital. Section 2-8 Notification requirement and changes in the conditions for authorisation (1) An AIFM shall notify Finanstilsynet before implementing any material changes to the conditions for initial authorisation. (2) An AIFM may implement changes under subsection (1) unless Finanstilsynet has within one month opposed the changes or set conditions for the changes. Finanstilsynet may prolong the period in the first sentence by up to one month if it considers this to be necessary because of the specific circumstances of the case. Finanstilsynet shall inform the AIFM that the said period has been prolonged.

7 (3) If an external AIFM is unable to ensure that an AIF or someone acting on the AIF's behalf complies with the statutory requirements, the AIFM shall promptly inform Finanstilsynet and if necessary the AIF s supervisory authority. Chapter 3 AIFMs activities Section 3-1 Organisational requirements (1) An AIFM shall organise its activities so that it has: (a) adequate and appropriate resources for the proper management of AIFs, (b) sound administrative and accounting procedures, control and safeguard arrangements and rules for personal transactions by its employees, (c) sound internal control mechanisms including procedures for ensuring that each transaction involving AIFs can be reconstructed and its origin documented, and that documentation is available showing that the assets of the AIFs are managed in accordance with the AIF rules and the legal provisions in force. (2) The board of directors and the CEO shall draw up internal procedures for ensuring that the requirements of subsection (1) are complied with. (3) The ministry may by regulations make further provision regarding requirements on the organisation of the activities. Section 3-2 Conduct of business rules (1) An AIFM shall conduct its activities in accordance with the conduct of business rules. (2) The AIFM shall promote the best interests of the investors and the AIFs and the integrity of the market by (a) acting in an orderly and correct manner in conducting their activities (b) displaying the necessary competence, care and interest in its conduct, (c) having in place and effectively utilising the resources and procedures needed in order to conduct their activities in a sound manner, (d) ensuring orderly and correct treatment of unit holders and shareholders. (3) All units or shares of an AIF carry an equal right to the fund assets, except as otherwise provided in articles of association, instruments of incorporation or other available fund documentation. (4) An AIFM authorised to provide the portfolio management service under section 2-2 subsection (3) may not invest the client s assets in any AIF it manages unless it receives prior general approval from the client. (5) Employees, officers and persons with determinative influence over the management of an AIFM shall treat as confidential any information about the affairs of others which may come to their knowledge in the course of their work, except as otherwise prescribed in law or regulations. The duty of confidentiality also applies to anyone who carries out assignments for the AIFM.

8 (6) The ministry may by regulations make further provision concerning the requirement of good business practices. Section 3-3 Conflicts of interest (1) An AIFM shall seek to prevent conflicts of interest from arising in connection with the business. The AIFM shall take all reasonable steps to identify, manage and monitor conflicts of interest arising in connection with the management of AIFs. This includes conflicts of interest between the AIFM, including employees and officers, AIFs under management, the AIFs' investors, the AIFM's other clients, UCITS under management, see the Securities Trading Act section 1-2 subsection (1) no. 4, and unit holders in such UCITS, (2) The AIFM shall have in place organisational divides between areas of the business that may potentially generate systematic conflicts of interest. (3) Where the steps as mentioned in subsections (1) and (2) are not sufficient to safeguard investors interests in a satisfactory manner, the AIFM shall inform the investors of possible conflicts of interest. The AIFM may not undertake business for an investor's account before the investor has received such information. (4) The ministry may by regulations make further provision concerning conflicts of interest. Section 3-4 Prime broker (1) An AIFM shall exercise due care and diligence in the selection of a prime broker. The contract for use of the services of a prime broker shall be in writing, and the depositary shall be informed of the contract. The right to use assets belonging to AIFs shall be stated in the contract and shall be in accordance with the particular AIF's articles of association and instruments of incorporation. (2) The ministry may by regulations make further provision concerning use of the services of prime brokers. Section 3-5 Delegation (1) An AIFM may delegate to a third party the operation of parts of its business, unless such delegation is on a scale or in a manner not considered prudent or it makes the supervision of the delegated business or of the AIFM's overall business difficult. The AIFM shall notify Finanstilsynet before any contract for the delegation of functions that covers the services mentioned in section 2-2 subsection (1) and subsection (2) first sentence is given effect. (2) The delegation of discretionary portfolio management or risk management services to a depositary or delegates of a depositary is not permitted. (3) The delegate may only sub-delegate provided that the AIFM has consented thereto and the requirements of this section are met, and that Finanstilsynet has been notified of the delegation of functions under subsection (1). (4) The delegation of functions has no implications for the AIFM's obligations and responsibilities towards the AIF, unit- or shareholders, public authorities or others. (5) The ministry may by regulations make further provision concerning delegation and use of the services of delegates.

9 Section 3-6 Remuneration policy (1) An AIFM shall establish and practise a remuneration policy that promotes sound management and control of the entity s risk, and does not encourage excessive risk-taking. The remuneration policy shall include senior management, employees whose tasks are of material significance for the risk exposure of the AIFM or AIFs it manages, employees with control functions and other employees with the same remuneration as senior management. The remuneration policy shall be appropriate to nature, scope and complexity of the AIFM's activities. (2) The ministry may by regulations make further provision concerning remuneration schemes. Section 3-7 Risk management (1) AIFMs shall separate their risk management function from their operating units. (2) An AIFM shall have in place risk management systems that identify, measure, manage and monitor on an ongoing basis all risks relevant to the investment strategy of each of the AIFs it manages, and to which each AIF may become exposed. This shall include procedures for assessing investments on behalf of the AIFs in accordance with the investment strategy, the objectives and risk profile of the AIF concerned. The AIFM shall ensure that the risk profile of each AIF it manages corresponds to the size, portfolio structure, investment strategy and investment goals of the AIF as laid down in the AIF rules or other instruments of incorporation, prospectus and offering documents, including through the use of stress tests. (3) The AIFM shall review the risk management systems regularly, and at least once a year. (4) The ministry may by regulations make further provision concerning risk management. Section 3-8 Leverage (1) For AIFs that are permitted to employ leverage, the AIFM shall set a maximum level of leverage as well as the extent of the right to reuse collateral or guarantee that could be granted under the leveraging arrangement. The AIFM shall in that connection take into account inter alia: the type of the AIF, the investment strategy of the AIF, the sources of leverage of the AIF, any other interlinkage with other financial services providers which could pose systemic risk, the need to limit the exposure to any single counterparty, the extent to which the leverage is collateralised, the assetliability ratio, and the impact of the activity of the AIFM on the markets concerned. (2) The AIFM shall demonstrate that the leverage limits set by it for each AIF it manages are reasonable and that it complies with those limits at all times. Finanstilsynet shall assess the risks entailed by the use of leverage. Where the stability and integrity of the financial system may be threatened, Finanstilsynet may impose restrictions on the management of AIFs, including limits to the level of leverage that an AIFM can employ with respect to the AIFs it manages. (3) The ministry may by regulations make further provision concerning leverage. Section 3-9 Liquidity management (1) AIFMs shall employ an appropriate liquidity management system for each AIF they manage. AIFMs shall also have in place procedures enabling them to monitor the liquidity risk of the AIF and to ensure that the liquidity profile of the investments of the AIF complies with its underlying obligations. AIFMs shall regularly conduct stress tests, under normal and exceptional liquidity

10 conditions, which enable them to assess and monitor the liquidity risk of the AIFs. AIFMs shall ensure that, for each AIF that they manage, the investment strategy, the liquidity profile and the redemption policy are consistent. (2) The requirements of subsection (1) do not apply to closed-ended AIFs that are not able to employ leveraging. (3) The ministry may by regulations make further provision concerning liquidity management. Section 3-10 Valuation (1) AIFMs shall have in place procedures for correct and independent valuation of assets of funds they manage. (2) AIFMs shall value AIFs' assets and calculate the net asset value per unit or share at least once a year. For open-ended AIFs such valuations and calculations shall be carried out more frequently if called for by the assets of the AIF or by the AIF rules on issuance and redemption. For closedended AIFs such valuations and calculations shall also be carried out in case of an increase or decrease of capital by the relevant AIF. (3) The AIFM shall inform the investors of the valuations and calculations as set out in the relevant AIF rules or instruments of incorporation. (4) The ministry may by regulations make further provision concerning valuation. Chapter 4 Transparency requirements Section 4-1 Annual report (1) An AIFM shall, for each of the AIFs it manages and or markets in the EEA area, prepare an annual report in accordance with the rules of the AIF's home state. The annual report shall be sent to Finanstilsynet and the supervisory authorities of the AIF's home state and provided to investors on request and free of charge. The annual report shall be made public no later than six months following the end of the financial year, and, in the case of AIFs coming under the Securities Trading Act section 5-5, no later than four months following the end of the financial year. (2) The annual report shall contain: (a) annual financial statements and management report, (b) any material changes in the information mentioned in section 4-2, (c) the total amount of unpaid fixed and variable remuneration to the AIFM's staff, including performance-based remuneration, (d) the total amount of remuneration to, respectively, the AIFM's senior staff and staff whose tasks are of material significance for the risk profile of the AIFs. (3) An AIFM that manages AIFs that have acquired control as mentioned in section 4-4 subsection (1)(b) shall ensure that the following information is included in the AIF's or target company's annual report. (a) a description of the target company's activity in the financial year,

11 (b) a description of the target company's likely future development, (c) an indication of important events since the end of the financial year, (d) information on the target company's acquisition of own shares. (4) The annual report under subsection (1) shall be audited by a registered or state authorised auditor or approved audit firm; see the Auditors Act. (5) The ministry may by regulations make further provision concerning annual reports, including on the obligation to inform investors et al. Section 4-2 Disclosure requirement prior to investment (1) AIFMs shall for each of the AIFs that they manage or market in the EEA make available to potential investors the following information before they invest in the AIF: (a) the AIF's articles of association and other instruments of incorporation, objectives and investment strategy, what types of assets the AIF may invest in, investment techniques, risk profile, any applicable investment restrictions, information on the use of leverage, (b) a description of the procedure for changing the investment strategy, (c) whether the AIF is a feeder fund and, if so, where the master fund is established, together with information on where the underlying funds are established if the AIF is a fund of funds, (d) the main legal implications of investing in the AIF, including information on legal venue, choice of law and on the existence or not of any treaty providing for the recognition and enforcement of judgments in the home state of the AIF, (e) the identity of the AIFM, the AIF's depositary, auditor and any other service providers and a description of their duties and the investors' rights, (f) the AIFM's professional indemnity insurance or additional own funds pursuant to section 2-7 subsection (3), (g) a description of any delegated portfolio management, risk management, functions as mentioned in section 2-2 subsection (2) first sentence, depositary functions as mentioned in chapter 5, the identification of the delegates and any conflicts of interest that may arise from such delegations, (h) valuation procedures pursuant to section 3-10 and associated regulations, (i) liquidity management procedures pursuant to section 3-9, (j) expenses, and maximum amounts thereof, which are directly or indirectly borne by investors, (k) principles for equal treatment of investors and a description of any preferential treatment, including the type of investors who obtain such preferential treatment and, where relevant, their legal or economic links with the AIF or AIFM, (l) the latest annual report, (m) the procedure and conditions for the issue, redemption and sale of units or shares, and any redemption agreements with investors, (n) the net asset value of the AIF or the latest market price of the unit or share of the AIF, in accordance with section 3-10, (o) the historical return of the AIF, (p) the identity of the prime broker and a description of any agreements of the AIF with its prime brokers and the way the conflicts of interest in relation thereto are managed, (q) how and when the information required under section 4-3 will be disclosed. (2) The AIFM shall inform the investors of significant changes in any items listed in subsection (1).

12 (3) The AIFM shall inform the investors before they invest in the AIF of any arrangement made by the depositary to contractually discharge itself of liability under regulations made pursuant to section 5-4, and shall also inform investors of any changes with respect to depositary liability without undue delay. (4) Where the AIF is required to publish a prospectus in accordance with the Securities Trading Act chapter 7, the AIFM may restrict the information disclosed under subsection (1) to information which is addition to that contained in the prospectus. The information may be disclosed separately or as additional information in the prospectus. (5) The ministry may by regulations make further provision concerning disclosure requirements. Section 4-3 Periodic disclosure requirement (1) The AIFM shall regularly provide investors with the following information on AIFs that are managed or marketed in the EEA: (a) the percentage of the AIF's assets which are subject to special arrangements arising from their illiquid nature, (b) any changes in systems for managing the AIF's liquidity (c) the AIF's current risk profile and the risk management systems used by the AIFM. (2) For AIFs able to employ leverage the AIFM shall in addition provide the investors information on any changes in maximum level of leverage, as well as any right to reuse collateral or any guarantee granted under the leveraging arrangement and the total amount of leverage employed by that AIF. (3) The ministry may by regulations make further provision concerning periodic disclosure requirements. Section 4-4 Notification requirement upon acquisition of control of non-listed companies and issuers (1) An AIFM shall notify Finanstilsynet, the target company and the target company's shareholders if an AIF which the AIFM manages alone or in collaboration with other AIFs acquires control of: (a) an issuer of shares admitted to trading on a regulated market, or (b) an issuer of shares not admitted to trading on a regulated market, with the exception of issuers with fewer than 250 employees and whose turnover does not exceed an amount in Norwegian kroner equivalent to EUR 50 million, or balance sheet assets not exceeding an amount in Norwegian kroner equivalent to EUR 43 million, and with the exception of special purpose vehicles whose sole purpose is to loan, acquire or administrate real property. By control of an issuer as mentioned in (a) is meant the percentage stated in the Securities Trading Act section 6-1. By control of an issuer as mentioned in (b) is meant shares representing directly or indirectly more than 50 per cent of the votes of the company. (2) Notification under subsection (1) shall state the identity of the AIFM, the AIFM's policy for preventing and managing conflicts of interest, and the external and internal communication strategy. If the notification concerns a company as mentioned in subsection (1)(b), notification shall be made

13 no later than 10 working days after the AIF's acquisition of control and in addition state the resulting situation in terms of voting rights, the date on which and the conditions subject to which control was acquired, the identity of the shareholders involved and of the persons entitled to exercise voting rights on their behalf. (3) Upon acquisition of control as mentioned in subsection (1)(b), the AIFM shall inform the target company and the target company's shareholders of strategic plans for the target company and of possible consequences for the employees. The AIFM shall ask the target company's board of directors to inform the employees. (4) The ministry may by regulations make further provision concerning pay-out restrictions for AIFs under management which acquire control of non-listed companies and issuers. Section 4-5 Notification of the acquisition of major holdings in non-listed companies Where an AIF's share of the votes of a company as stated in section 4-4 subsection (1)(b) reaches, exceeds or falls below the thresholds of 10%, 20%, 30%, 50% and 75% of the voting rights of the company, the AIF's AIFM as soon as possible and at the latest within 10 working days notify Finanstilsynet accordingly. Section 4-6 Periodic reporting obligation (1) An AIFM shall regularly report to Finantilsynet on the principal markets and instruments in which it trades on behalf of the AIFs it manages. (2) An AIFM shall, for each of the EEA AIFs it manages and for each of the AIFs it markets in the EEA, provide the following information to Finanstilsynet: (a) information as listed in section 4-3 subsection (1), (b) information on the main categories of assets in which the AIF invested, and (c) the results of the stress tests performed in accordance with section 3-7 subsection (2) and section 3-9 subsection (1). (3) The ministry may by regulations make further provision concerning periodic reporting; this may include prescribing special rules for reporting on AIFs that employ leveraging. Chapter 5 Depositary Section 5-1 Obligation to have a depositary The AIFM shall ensure that a single depositary is appointed for each AIF it manages. The appointment of the depositary shall be by written contract. Section 5-2 Requirements on the depositary (1) The depositary shall be: (a) a credit institution established in an EEA member state, (b) an investment firm established in an EEA member state, authorised to provide the ancillary service mentioned in the Securities Trading Act section 2-1 subsection (1) and having own funds not less than an amount in Norwegian kroner corresponding EUR 730,000, or

14 (c) for AIFs established in another EEA member state, other categories of institutions that are eligible to be a depositary for UCITS in the AIF's home state. (2) An AIFM may not be appointed as depositary; (3) A prime broker acting as counterparty to an AIF shall not act as depositary for that AIF, unless its function as depositary is performed on an independent basis. (4) For AIFs established in an EEA member state, the depositary shall be established in the AIF's home state or in the AIFM's home state. For AIFs established outside the EEA, the depositary may be established in the AIF's home state or in the AIFM's home state. (5) The ministry may by regulations permit the appointment of entities other than those mentioned in subsection (1) as a depositary, and permit the appointment of entities other than those mentioned in subsection (1), and permit the appointment of a depositary established outside the EEA. Section 5-3 Depositary's tasks (1) The depositary shall act honestly, fairly, professionally, independently and in the interest of the AIF and the investors of the AIF. (2) The depositary shall monitor the AIF s cash flows and ensure that payments from investors in connection with subscription of units or shares have been duly received, and that all liquid assets are booked correctly on accounts opened in the name of the AIF or in the name of the AIFM acting on behalf of the AIF or in the name of the depositary acting on behalf of the AIF. Accounts shall be opened with the central bank, a credit institution authorised in accordance with Directive 2006/48/EC, or similar institution in a non-eea member state subject to regulation and supervision for the safe-keeping of client assets. (3) Financial instruments that can be registered in a securities account and financial instruments that can be physically delivered to the depositary shall be held in custody by the depositary. For other assets the depositary shall verify the ownership of the AIF or the AIFM acting on behalf of the AIF of such assets and shall maintain a record of those assets for which it is satisfied that the AIF or the AIFM acting on behalf of the AIF holds the ownership of such assets. (4) Assets shall be segregated from the assets of the depositary in such a way that they can at any time be identified as belonging to the AIF. Such assets shall not be reused by the depositary without the prior consent of AIF or the AIFM. (5) The function of depositary shall be carried out independently from functions which may involve conflicts of interest between the AIF, its investors, the AIFM and the depositary. Potential conflicts of interest shall be adequately identified, managed and monitored and disclosed to the investors of the AIF. (6) The ministry may by regulations make further provision concerning the depositary's tasks and the depositary's right to delegate tasks. Section 5-4 Liability (1) The depositary shall be liable to the AIF and its investors for any loss of financial instruments held in custody under section 5-3 subsection (3) first sentence by the depositary or the depositary's

15 delegate, unless the loss has arisen as a result of circumstances beyond the depositary's control the consequences of which the depositary could not reasonably be expected to avert or to overcome. (2) In the case of a loss as mentioned in subsection (1) the depositary shall transfer a financial instrument of identical type or the corresponding amount to the AIF or to the AIFM acting on behalf of the AIF without undue delay. (3) The depositary shall be liable to the AIF and its investors for any other loss suffered by the latter as a result of the depositary's negligent or intentional breach of its obligations under this Act. (4) The ministry may by regulations make further provision concerning the depositary's liability and the depositary's right to discharge itself of liability. Chapter 6 Marketing to professional investors Section 6-1 Marketing in Norway of AIFs established in the EEA (1) An AIFM authorised under section 2-2 shall notify Finanstilsynet before it starts marketing an AIF it manages that is established in Norway or another member EEA state to professional investors in Norway. The notification shall contain the following information: (a) a programme of operations identifying the AIF and specifying the state in which the AIF is established, (b) information about the AIF that is available to the AIF's investors, including information listed in section 4-2, (c) a statement of any measures designed to prevent the AIF from being marketed to nonprofessional investors, also where the marketing is done through a distributor. (2) Finanstilsynet shall within 20 working days following receipt of a complete notification inform the AIFM whether it may start marketing the AIF in Norway. Marketing may be prevented only if the AIFM s management of the AIF or the AIFM otherwise does not or will not comply with this Act. The AIFM may start marketing the AIF from the date of the notification by Finanstilsynet to that effect. If the AIF is established in another EEA member state, Finanstilsynet shall also inform the supervisory authority of the AIF's home state that the AIF may be marketed in Norway. (3) The AIFM shall inform Finanstilsynet in writing in the event of a material change to any of the particulars mentioned in subsection (1). The information shall be given at least 1 month before implementation of the change, or immediately after an unplanned change has occurred. If, pursuant to a planned change, the AIFM s management of the AIF would no longer comply with this Act, Finanstilsynet shall take all due measures as mentioned in section 9-3, including, if necessary, prohibiting the marketing of the AIF. (4) If the AIF to be marketed is a feeder fund, the master fund and the master fund's AIFM must also be established in an EEA member state. Section 6-2 Marketing in other EEA member states of AIFs established in the EEA (1) An AIFM authorised under section 2-2 shall notify Finanstilsynet before it starts marketing an AIF it manages that is established in Norway or another member EEA state to professional investors in an EEA member state other than Norway. The notification shall be in English and contain information as mentioned in section 6-1 subsection (1). The notification shall in addition

16 specify which EEA member state the AIF is to be marketed in and provide information on how the AIF is to be marketed. (2) Finanstilsynet shall within 20 working days following receipt of a complete notification forward the notification to the supervisory authorities of those states in which the AIF is to be marketed. Finanstilsynet shall enclose confirmation that the AIFM is authorised to manage AIFs with the investment strategy of the AIF concerned. The notification shall be forwarded only if the AIFM's activity and management of the AIF complies with this Act. Finanstilsynet shall inform the AIFM that such notification has been forwarded. The AIFM may start marketing the AIF once it has received such notification. If the AIF is established in another EEA member state, the AIF's home state authority shall also be informed of the marketing authorisation. (3) Section 6-1 subsection (3) first, second and fourth sentences and subsection (4) shall also apply. If the AIFM or the management of the AIF following the change is in accordance with this Act, Finanstilsynet shall inform the AIFM's host state thereof without undue delay. If, pursuant to a planned change, the AIFM s management of the AIF would no longer comply with national legislation implementing Directive 2011/61/EU of the European Parliament and of the Council, Finanstilsynet shall without undue delay inform the AIFM that the change must not be implemented. Section 6-3 Marketing in Norway of AIFs established in the EEA that are managed by an AIFM established in another EEA member state (1) An AIFM established in another EEA member state may market AIFs that are established in the EEA and are managed by the AIFM to professional investors in Norway from the date that the supervisory authorities in the AIFM's home state have notified the AIFM that notification of marketing has been sent to Finanstilsynet. (2) Section 6-1 subsection (4) shall apply. Section 6-4 Marketing in Norway of AIFs established outside the EEA having an AIFM established in the EEA (1) An AIFM authorised in Norway or another EEA member state that manages an AIF established outside the EEA, or an AIF established in an EEA state that is a feeder fund to such an AIF, may market the AIF in Norway to professional investors subject to authorisation from Finanstilsynet. Such authorisation may be granted provided that: (a) the AIFM abides by the provisions of this Act and provisions made pursuant to this Act, with the exception of the rules governing depositaries in chapter 5, but such that the AIFM must provide documentary evidence that an entity other than AIFM itself performs the depositary functions mentioned in section 5-3 subsections (2), (3) and (4) and regulations made pursuant to section 5-3, (b) the AIFM takes the necessary steps to be able to make payments in Norway to investors, redeem units and shares and provide the information to be prepared by the AIFM under the rules of the home state, (c) appropriate cooperation arrangements are in place between the supervisory authorities of the AIF's home state and Norway, (d) the AIF's home state is not listed by the Financial Action Task Force on Money Laundering (FATF) as a non-cooperating country.

17 (2) Finanstilsynet may attach conditions to authorisation pursuant to subsection (1) to secure the protection of investors in Norway, including conditions imposing the obligation to disclose information to investors and public authorities and concerning how the sale of units in Norway shall take place. Section 6-5 Marketing in Norway of AIFs having an AIFM established outside the EEA (1) An AIFM established outside the EEA that manages an AIF may market that AIF in Norway to professional investors subject to authorisation from Finanstilsynet. Such authorisation may be granted provided: (a) the AIF and the management of the AIF are subject to satisfactory supervision in the home state and fulfil the requirements for carrying on business in the home state, (b) the AIFM complies with the provisions of chapter 4 and provisions made pursuant thereto, (c) satisfactory collaboration has been established between the supervisory authorities of the AIF's home state, the AIFM's home state and Norway, (d) requirements as mentioned in section 6-4 subsection (1)(b) and (d) are met. (2) Section 6-4 subsection (2) shall apply. Section 6-6 Enabling regulations The ministry may by regulations make further provision concerning the marketing of AIFs. Chapter 7 Marketing of AIFs that are not domestic AIFs to nonprofessional investors Section 7-1 Marketing of AIFs that are not domestic AIFs to non-professional investors (1) An AIFM authorised in Norway or another EEA member state may market AIFs under its management which are not domestic funds, see the Securities Trading Act section 1-2 subsection (1) no. 5, to non-professional investors in Norway subject to Finanstilsynet's authorisation. An application for authorisation shall contain the following information: (a) information as mentioned in section 6-1 subsection (1)(a) and (b), (b) key investor information under section 7-2 and associated regulations, (c) confirmation that the AIF can be marketed to non-professional investors in the home state (d) an account of how marketing and sale are implemented, including measures designed to ensure that marketing to non-professional investors is in accordance with the requirements of section 7-3 concerning good business practices. (2) If the AIF is established outside the EEA, or the AIF is a feeder fund to such a fund, requirements as mentioned in section 6-4 subsection (1) must be met. (3) The AIFM may start marketing the fund to non-professional investors in Norway from the date it receives notification that the IAF may be marketed in Norway. (4) Section 6-1 subsections (3) and (4) shall apply.

18 (5) Finanstilsynet may attach conditions to authorisation pursuant to subsection (1) to secure the protection of investors in Norway, including conditions concerning the obligation to disclose information to investors and public authorities and concerning how the sale of units in Norway shall take place. (6) Finanstilsynet may in special cases prohibit an AIFM from marketing an AIF to nonprofessional investors. The ministry may by regulations make further provision concerning prohibition of marketing to non-professional investors. (7) The ministry may by regulations make provision concerning appeal processing, including requiring AIFMs to join an appeal scheme. (8) The ministry may by regulations make further provision concerning marketing of AIFs to nonprofessional investors in Norway, including setting exemptions from the provisions of this Act. Section 7-2 Key investor information (1) An AIFM shall prepare key investor information for each AIF it manages and that is marketed to non-professional investors in Norway. (2) Key investor information shall in an easily intelligible, clear and non-misleading manner give an investor the basic information needed in order to make an informed investment decision. Significant aspects of the information shall be kept up to date. An updated version of the key investor information shall be available on the AIFM's website. (3) The AIFM and others who market AIFs are required to provide key investor information to nonprofessional investors prior to an investment. The AIFM is required on request to provide key investor information to others who market AIFs, and to providers of products in which an AIF is incorporated. (4) The ministry may by regulations make further provision concerning key investor information, including on content, format and presentation. Section 7-3 Conduct of business rules The conduct of business rules referred to in the Securities Trading Act section subsection (4) and associated regulations shall be complied with in the marketing of AIFs to non-professional investors. Section 7-4 Documentation requirement Documentary evidence of the advice given on and the marketing of AIFs to non-professional investors must be available. The documentation shall at minimum be sufficiently thorough to enable Finanstilsynet verify that the rules are complied with. Such documentation shall be retained for at least five years. Section 7-5 Language Disclosures made or information given to non-professional investors under this Act shall be in Norwegian, except where the ministry by regulations or Finanstilsynet by individual administrative decision provides otherwise. Chapter 8 Cross border management

19 Section 8-1 Norwegian AIFMs' activity in other EEA states (1) An AIFM authorised pursuant to section 2-2 subsection (1), (3) or (4) that intends to manage an AIF established in another EEA member state or to provide services as mentioned in section 2-2 subsections (3) and (4) in another EEA member state, either from Norway through the establishment of a branch, shall notify Finanstilsynet thereof. The notification shall contain a programme of operations stating the services which the AIFM intends to provide, and the member state in which it intends to operate and the AIFs it intends to manage. (2) The notification of the establishment of a branch shall in addition contain the following information: (a) the organisational structure of the branch, (b) the address in the home state of the AIF from which documents may be obtained, (c) the name and contact details of the persons responsible for the management of the branch. (3) Finanstilsynet shall within one month following receipt of a complete notification as mentioned in subsection (1), or within two months following receipt of a complete notification as mentioned in subsection (2), transmit the notification to the supervisory authorities of the AIFM's host state. Finanstilsynet shall enclose confirmation that the AIFM is authorised to carry on activity in accordance with Directive 2011/61/EU of the European Parliament and of the Council. Finanstilsynet shall immediately inform the AIF of the transmission. The AIFM may start to provide its services upon receipt of the transmission notification. (4) An AIFM shall give Finanstilsynet written notice of a change to any of the information mentioned in subsections (1) and (2) at least 1 month before implementing the changes, or immediately after an unplanned change has occurred. Section 6-1 subsection (3) third and fourth sentences shall apply. If the change would not affect the AIFM's compliance with the provisions of this Act, Finanstilsynet shall without undue delay inform the AIFM's host state of the change. Section 8-2 AIFMs established in another EEA member state AIFMs established in another EEA member state with authorisation to manage AIFs or to provide services as mentioned in section 2-2 subsections (3) and (4) may manage AIFs established in Norway or provide services as mentioned in section 2-2 subsections (3) and (4) as from the time that the supervisory authorities of the AIFM's home state have notified the AIFM that the notification of activity in Norway has been sent to Finanstilsynet. Section 8-3 Right of Norwegian AIFMs to manage AIFs established outside the EEA that are not marketed in the EEA An AIFM with authorisation pursuant to section 2-2 may manage AIFs that are established and exclusively marketed outside the EEA provided that appropriate cooperation arrangementsare in place between the supervisory authorities of the AIF's home state and Norway, and that the AIFM complies with provisions set out in or made pursuant to this Act, with the exception of section 4-1 and chapter 5. Section 8-4 Enabling regulations The Ministry may by regulations make further provision concerning cross-border management of AIFs.

20 Chapter 9 Supervision Section 9-1 Supervisory authority Finanstilsynet shall supervise compliance with the provisions of this Act in accordance with the provisions of the Financial Supervision Act. Section 9-2 Disclosure obligation (1) The AIFM shall provide Finanstilsynet with the information needed regarding the AIFM's activity. The same applies to the AIFM's delegates as mentioned in section 3-5, primary brokers under section 3-4, depositories and their auditors, insofar as activity under this Act is concerned. Finanstilsynet may convene the board of directors of the AIFM, the AIF and the depositary. Finanstilsynet may request necessary information from any person with a connection to the AIFM's or the AIF's activity insofar as activity under this Act is concerned. (2) The depositary shall at Finanstilsynet's request forward information it has obtained while performing its duties under this Act. (3) If there is a risk that an AIFM will not meet the stipulated capital requirements, or circumstances arise which may represent a major risk to the operations of the company, the AIFM shall promptly notify Finanstilsynet thereof. Section 9-3 Rectification order and temporary prohibition of activity (1) Finanstilsynet may issue an AIFM and depositary with a rectification order or impose a temporary ban on carrying on business if they have failed to perform their duties pursuant to law or regulations, or have acted in contravention of the conditions for their authorisation. The same shall apply if the company's bodies have failed to comply with the company's or the AIFs' articles of association or their own internal policies established under provisions of law or regulations. An order may also be issued in order to prevent future non-compliance with obligations as mentioned in the first and second sentences. (2) Finanstilsynet may order an AIFM to resign as AIFM for AIFs if circumstances as mentioned in section 2-8 subsection (3) are not rectified despite Finanstilsynet having issued a rectification order. (3) Subsections (1) and (2) similarly apply where Finanstilsynet is informed by the supervisory authorities of another EEA member state that a Norwegian AIFM has breached rules governing its business in that state. Finanstilsynet shall inform the authority concerned about the orders it issues. (4) If called for in the interest of the investors or the general public, Finanstilsynet may order an AIFM to suspend the right to subscribe and redeem units in AIFs that it manages. Section 9-4 Change, withdrawal and lapse of authorisation (1) The AIFM's authorisation to carry on business shall lapse if the AIFM becomes subject to bankruptcy proceedings or public composition proceedings. (2) Finanstilsynet may change in whole or in part, set new conditions for or withdraw the authorisation issued to an AIFM where that AIFM: (a) fails to use the authorisation within twelve months of issue, expressly renounces the authorisation or ceased to carry on its activity more than six months previously,

21 (b) obtained the authorisation by making false statements or by any other irregular means, (c) no longer fulfils statutory requirements or the conditions under which authorisation was granted, (d) seriously or systematically infringes provisions laid down in or pursuant to law, (e) is guilty of misconduct which gives reason to fear that continuation of the activity may harm the public good, (f) fails to comply with an order issued under section 9-3, or (g) being authorised to carry on portfolio management under section 2-2 subsection (3), fails to comply with capital requirements under section 2-6 or section 2-7 and associated regulations. (3) Where authorisation to carry on management activities lapses or is withdrawn, AIFs managed by the AIFM shall be wound down or transferred to another AIFM. (4) If the authorisation of an AIFM carrying on business in another EEA member state lapses or is withdrawn, Finanstilsynet shall inform the supervisory authorities of the host state. Section 9-5 Confidentiality et al. Whoever performs work or service for Finanstilsynet or the ministry must not disclose to unauthorised persons information about measures or sanctions imposed under this Act, if such disclosure may seriously jeopardise the financial markets or cause disproportionately large damage to the parties involved. Chapter 10 Supervision of foreign AIFMs' activities in Norway Section 10-1 Disclosure obligation (1) Finanstilsynet may for statistical purposes require a foreign AIFM carrying on business under sections 6-3, 6-4, 6-5, 7-1 or 8-2 to submit reports on its activity. (2) Finanstilsynet may request such information for foreign AIFMs as is deemed necessary to verify compliance with the rules applied to their business in Norway. Section 10-2 Rectification order etc. (1) Finanstilsynet may issue an AIFM carrying on business, including marketing, under sections 6-3, 6-4, 6-5, 7-1 or 8-2, with a rectification order, or order the AIFM to cease business in Norway, if that business is carried on in contravention of law or regulations. (2) Before an order is issued under subsection (1), the supervisory authorities of the AIFM's home state shall be alerted and given the opportunity to take measures to bring the illegal circumstance to an end. (3) If measures under subsection (2) are not sufficient to bring the illegal circumstance to an end, Finanstilsynet may take such measures as are necessary, including measures to prevent new

22 contraventions. Before a decision is taken, Finanstilsynet shall alert the supervisory authorities of the AIFM's home state. (4) Finanstilsynet may take requisite measures to safeguard financial stability and the integrity of the market or to protect investors in Norway, if rules of the AIFM's home state are not complied with. Before measures are taken the supervisory authorities of the AIFM's home state shall be alerted and given the opportunity to take steps to bring the illegal circumstance to an end. Section 10-3 Withdrawal of authorisation to carry on marketing in Norway Finanstilsynet may withdraw authorisation to market AIFs in Norway granted pursuant to sections 6-4, 6-5 or 7-1 if the requirements of those provisions are no longer met, conditions for the authorisation are breached or rules established pursuant to section 6-6 have been contravened. Finanstilsynet may moreover in special cases withdraw authorisation under section 7-1 in the interest of protecting non-professional investors. Section 10-4 Supervisory collaboration and exchange of information with other supervisory authorities (1) Finanstilsynet may permit the authorities of other states to carry out supervision in Norway. (2) Subject to prior notification to Finanstilsynet, the relevant authorities in the AIFM's home state may, in collaboration with Finanstilsynet, undertake an on-site inspection at a branch established pursuant to section 8-2. (3) Subsection (2) shall not prevent Finanstilsynet from undertaking such on-site check as is deemed necessary to verify that the rules applying to the branch's activity in Norway are complied with. (4) Finanstilsynet may forward information received in accordance with this Act to supervisory authorities of other EEA member states. (5) The Ministry may by regulations make further provision regarding supervisory collaboration and exchange of information between authorities. Chapter 11 Penalties Section 11-1 Penalties (1) A fine or imprisonment not exceeding 1 year shall be handed down to anyone who wilfully or through negligence: (a) violates sections 2-2, 3-5, 4-4, 4-5, 5-3, 6-1 to 6-5, 7-1 to 7-3, 8-1 to 8-3, 9-2, 9-3, 10-1 or 10-2, or rules made or authorisations granted under the above provisions, (b) is guilty of gross or repeated violation of section 3-2 or section 3-3. (2) Complicity is subject to the same penalties. (3) Prosecution shall take place only when required in the public interest.

23 Chapter 12 other Acts Commencement and transitional rules. Amendments to Section 12-1 Commencement (1) This Act comes into force as and when the King decides. (2) The King may give effect to individual provisions at different times. (3) The ministry may make transitional rules. Section 12-2 Amendments to other Acts The following amendments to other Acts will apply as from the commencement of the present Act: - - -