AMCs: Distribution to retail investors & client structures
Client:
"What we really meant is to arrange a call between us and our legal counsel in the UAE, as to make sure to build the best structure for the strategy manager and an SPV for the retail investors."
Answer:
"As far as the distribution of the AMC is concerned, we cannot offer you any advice in this regard. I recently had a brief call from Alex on this topic and I thought that I was very clear. The AMC format is a private placement and per se approved for professional investors only. Under MIFID law, investors' principal banks would have to refuse to purchase for them if they are classified as retail investors. The banks sometimes only warn their clients and make them sign a waiver so that they have fulfilled their obligations and cannot be held liable for losses. However, it is 100% your responsibility to not distribute such an AMC to a retail investor and to act within the local distribution rules of your investors' countries. Therefore, it may make sense to subsequently launch a different AMC for new investors if distribution becomes an issue. We cannot provide any advice on fancy options or legal structures that may act as investors. Experience has shown that neither the solution provider nor the paying agent will offer any advice in this regard. Neither the paying agent who accepts the orders from the investors house banks, nor the arranger (solution provider) nor we (as client introducer) can control whether the investors meet the qualifications. However, should a retail investor later sue due to a loss in your AMC, which is the result of distributing a professional product to a retail investor or selling any other fancy structure, only you will be held responsible. It is very important that you are fully aware of this. Any structures that contradict the nature of the product or any code of conduct would be immediately rejected by the Paying Agent if identified as such, and any further AMC requests from such a client could be subsequently rejected.
We are happy to hold the meeting to discuss the questionnaire and how to proceed with our cooperation partner."