Registered Alternative Investment Fund (RAIF) License

 A RAIF comes into existence by first going through an external fund manager (AIFM) licensed by the Cyprus Securities Exchange Commission (CySEC) under the AIFM Directive or by the relevant competent authority of any other EU member state. In either case the RAIF secures European substance. The AIFM then registers the RAIF with the competent authority (“regulator”). Having stated the above, a RAIF is similar to an AIF with the main difference being that a RAIF is under the responsibility of its manager whilst an AIF is supervised directly by the regulator. In effect, the external fund manager is the liable sponsor of the registered fund and the entity that is ultimately responsible for the application and registration process but also for the ongoing compliance of the fund with the provisions of applicable legislation.

On top of being responsible for all operational, marketing and compliance matters, the external fund manager is responsible for the assignment of:

• the depositary;
• the fund administrator; and,
• the investment advisor (if any).

For the setup of a Registered Alternative Investment Fund (“RAIF”) in Cyprus Secqoia and its associates (external fund managers and depositaries) offer a complete service of fund formation, securing of licensing, fund management and administration and depositary services.

Secqoia acts as the Promoter of the RAIF and is responsible for the incorporation of the legal entity, the drafting of the memorandum and articles and the fund’s prospectus, the preparation of the application file (to be reviewed and signed by the external fund manager prior to its submission) and for securing the regulator’s approval for the registration of the fund.

Secqoia works with numerous Alternative Investment Fund Managers (AIFMs) licensed by CySEC, under one of which your RAIF will be registered. The selected AIFM will take care of the Portfolio Management Function (having no problem delegating such function to a specialist manager, perhaps an entity controlled by the UBO and/or by your firm under separate arrangement; in fact, such outsourced arrangement is beneficial in the overwhelming majority of cases for the purpose of securing required track record), the Risk Management Function, Internal Audit, Fund Administration (which includes AML Compliance, NAV calculation and handling of subscriptions/redemptions), Regulatory Compliance (full regulatory reporting coverage) and EU Passporting. The selected AIFM will also be in position to open a bank account for the RAIF with a Tier 1 bank in Cyprus and/or abroad.

Secqoia also works with numerous depositaries who are licensed to offer safe-keeping and asset monitoring services to RAIFs. In addition, Secqoia maintains relationships with statutory auditors willing to offer their audit and tax services to the newly registered fund.

Lastly, a RAIF is usually required to appoint two (2) Executive Directors (Fit and Proper). An external legal advisor could also be appointed if included in the Offering Memorandum.

Estimated time to achieving registration for a RAIF in Cyprus:

• 10 business days to collect all the necessary information and prepare the Offering Memorandum (“Prospectus”) and Memorandum and Articles of Association.
• 1 – 3 weeks to secure RAIF’s name (its name should include the “RAIF” designation) and register the company with the Registrar of Companies.
• Up to 2 months for CySEC review and registration on its Registry list.

In total it should be expected that the process would be completed within 2-2,5 months (potentially less depending on the responsiveness of each party involved in the process).

General Information on Registered AIFs (RAIFs)

1. An AIF can operate as a RAIF if ALL the below conditions are met:
   • Its externally managed;
   • It is addressed only to professional and/or well-informed investors; and,
   • Its articles/rules explicitly state that it is regulated under Part VIII of the AIF Law.
2. It can be open or closed ended.
3. It can be an umbrella RAIF with more than one investment compartment (which means that a single RAIF can be converted to umbrella scheme if needed).
4. It can designate as external manager a CY AIFM, an EU AIFM, or a non-EU AIFM that has a passport as provided in the AIFMD.
5. The AIFM must appoint a depositary to which relevant clauses of the AIFM Law apply (describes entities that meet certain criteria).
6. CySEC can ask the RAIF external manager to provide it with any information or any material that would allow it to determine the application of the Cyprus law in regards to the setup and operation of RAIF.
7. It has the same minimum capital requirements as an AIF which means that a RAIF must have at least €500,000 in assets within 12 months from the date of its registration (on CySEC registry).
8. It will be entered into a special CySEC registry for RAIFs. The external manager should, within one (1) month from the date of the RAIF’s registration at the Registrar of Companies, submit an application to CySEC for the registration of the RAIF to its Registry. The application should be accompanied with the following:
   • Information relating to the investment strategies, the sub-funds (if it invests in any sub-funds), leverage use policy of the external manager, the risk profile and other characteristics of the RAIF it manages or it intends to manage;
   • The rules or Memorandum and Articles of Association of the RAIF it intends to manage;
   • Information on the measures taken for the appointment of a depositary;
   • The RAIF offering memorandum; and,
   • The external manager’s license.
9. The RAIF offering memorandum (and other material related to the RAIF and offered to investors) should clearly indicate on the cover that:
   • The RAIF has not been licensed by the CySEC (it is registered with CySEC);
   • It is addressed exclusively to Professional and Well -Informed investors; and,
   • The entry into the CySEC Registry does not equate to an authorization/license.

CySEC, within one month from the receipt of the aforementioned so as to proceed with the necessary checks that the external manager’s authorization allows it to manage the RAIF with its indicated investment policy, would enter the RAIF to the Registry.

Distribution/Placement (subscriptions) of units/shares/interests are no allowed prior to the RAIF’s entry into the CySEC Registry.

The external manager should notify CySEC of any changes to the information it provided. If the change involves changes in the investment policy, the external manager must notify CySEC at least one month prior to the proposed change.

In case of dissolution/liquidation of the RAIF, the external manager notifies CySEC immediately so that the RAIF can be removed from the Registry.

Comparison of Alternative Investment Funds and Registered Alternative Investment Funds (“RAIF”)

Area	AIF	AIFLNP	RAIF
License Requirements	YES	YES	YES
Competent Authority	CySEC	CySEC	CySEC
Limitation on Number of Investors	NO	Fifty (50) with Look-Through Provisions	NO
Available Structures	Variable Capital Investment Company (VCIC), Fixed Capital Investment Company (FCIV), Limited Partnership (LP), Common Fund (CF)	Variable Capital Investment Company (VCIC), Fixed Capital Investment Company (FCIV), Limited Partnership (LP)	Variable Capital Investment Company (VCIC), Fixed Capital Investment Company (FCIV), Common Fund (CF), Limited Partnership (LP)
More than one investment compartment (“umbrella structure”)	Possible for all structures	Possible for all structures	Possible for all structures
Investment Restrictions	May apply if the collective investment scheme is addressed to retail investors	No, as it is addressed to well-informed and/or professional investors	No, as it is addressed to well-informed and/or professional investors
Minimum AUM	500k Euro within the first 12 months (possible extension to 24 months)	250k Euro within the first 12 months (possible extension to 24 months)	500k Euro within the first 12 months (possible extension to 24 months)
Minimum Share Capital	For all Self-Managed Funds 125k Euro	For all Self-Managed Funds 50k Euro	Zero
Assets Under Management (AUM)	No restriction if externally managed. Otherwise, AIF can hold assets under the threshold of 1. EUR 100 Million including assets acquired through use of leverage, or 2. EUR 500 Million where no leverage is employed and the unitholders have no redemption rights for 5 years	No restriction if externally managed. Otherwise, AIF can hold assets under the threshold of; 1. EUR 100 Million including assets acquired through use of leverage, or 2. EUR 500 Million where no leverage is employed and the unitholders have no redemption rights for 5 years	No restriction
Requirement for External Manager	Can be self-managed*	Can be self-managed*	YES
Directors	Fit and Proper	Fit and Proper	Fit and Proper
Depositary Requirements	Based in Cyprus, EU or third country that has cooperation agreement with Cyprus. When it is managed by AIFM shall be located in Cyprus	Based in Cyprus, EU or third country that has cooperation agreement with Cyprus; certain exemptions apply**	Based in Cyprus except for LPs managed by MiFID entity
Reporting	YES	YES	YES
EU Passporting	YES	NO, must secure such license individually from each Member State	YES

*An AIF may be managed by its board of directors (only if it is formed as a variable capital investment company) assuming (i) that the assets of its portfolio, including any assets acquired through use of leverage, in total, do not exceed EUR 100,000,000 (or currency equivalent), or (ii) the assets of its portfolio, where the AIF does not employ leverage and its unitholders have no redemption rights exercisable during a period of five years following the date of initial investment in the AIF, do not exceed EUR 500,000,000 (or currency equivalent).

**Exemptions from depositary requirement

• The Total assets under management of all investment compartments is less than €5.000.000, or
• The total number of investors for all investment compartments is restricted to 5 persons, or
• The assets eligible to custody do not exceed the limit of 10% of the total value of the AIFLNP’s portfolio, and

• 1. the total number of investors for all investment compartments is restricted to 25 persons and
  2. each of the investors invests at least 500.000 in the AIFLNP

Secqoia and its CPT can help you in setting up your RAIF in Cyprus and guide you through the registration process.

Despite the fact that our prices are, most probably, the best in the industry, we are committed to provide you with a beneficial counteroffer in case you receive a better offer from any other firm.

Please feel free to contact us.