FI issues AIFM Capital a remark and an administrative fine

Summary

AIFM Capital AB (AIFMC or the company) is authorised to operate as a management company under the Swedish UCITS Act (2004:46) and as an alternative investment fund manager under the Alternative Investment Fund Managers Act (2013:561).

Finansinspektionen has investigated whether, during the period from 1 January 2021 to 13 September 2023, AIFMC complied with the provisions of the regulatory framework for investment funds that must be observed when a management company enters into and manages an agreement under which portfolio management is delegated to a third party acting on its behalf.

Finansinspektionen’s investigation shows that AIFMC did not comply with its internal rules governing how such agreements must be entered into and did not conduct a sufficiently thorough evaluation of the delegated activities before entering into the agreements. The investigation also shows that, when monitoring the portfolio management delegated to third parties, the company did not pay sufficient attention to whether the unit-holders had received an adequate return on their invested capital in relation to the risk profile specified in advance.

AIFMC has therefore failed to act with the skill, care and diligence required under Chapter 14, section 2, first paragraph, of Finansinspektionen’s regulations (FFFS 2013:9) regarding Swedish UCITS (the Fund Regulations) when entering into and managing delegation agreements relating to its fund operations. The company has also failed to comply with the requirement set out in Chapter 14, section 2, second paragraph, point 1, of the Fund Regulations to ensure that the delegate effectively performs the delegated activities or functions. Through its conduct, AIFMC has also failed to comply with Chapter 2, section 17 f of the Swedish UCITS Act. Under that provision, a management company must conduct its business in a professional manner and otherwise in such a way as to maintain public confidence in the investment fund market. It must also have sufficient resources and procedures to ensure that its operations function properly.

AIFMC’s violations have been of such a nature that there are grounds for intervention against the company. However, the violations are not so serious as to warrant consideration of withdrawing the company’s authorisation or issuing the company a warning. Finansinspektionen is therefore issuing AIFMC a remark accompanied by an administrative fine of SEK 2,000,000.