AIFMD II tightens rules for outsourcing. Standard funds will also feel impact

This article is the first in a three part series on the subject and follows the general overview of the changes introduced by AIFMD II that we examined in mid 2025.

Tightening of rules

The changes to AICIF relating to outsourcing are not limited to qualifying investor funds and special funds. AIFMD II also regulates the rules for standard funds, and the proposed transposition is explicitly based on the objective of eliminating unjustified differences between regimes. Outsourcing is one area where the rules are converging, including licensing requirements and reporting.

The amendment to the AICIF reopens the topic of ‘letter-box companies’, i.e., management companies that have been entrusted by other persons with the performance of (almost) all of the activities of a fund manager. The amendment extends the impact of this concept to services provided by the fund manager in addition to the fund management itself. The rules for the outsourcing of key fund activities, such as portfolio management or risk management, are being tightened. In addition, if a company wishes to continue to use outsourcing, it is obliged to maintain transparency towards investors and the Czech National Bank (CNB).

Fund managers must now prove that they have selected a qualified and competent person, that they will be able to monitor them continuously and effectively, that they can give them instructions, and that they can terminate the authorisation without delay if the interests of investors so require. The manager's responsibility to the fund and investors remains even after a third party has been appointed. This applies regardless of the legal status or location of the authorised person or other authorised persons. The exception is now explicitly addressed for certain distribution models where the distributor acts on its own behalf under MiFID/IDD.

 
Sufficient documentation and evidence

The biggest change will concern documentation and evidence. The transposition proposal anticipates that managers will provide the supervisory authority (CNB) with more extensive information about whom they have authorised, what they have authorised them to do, and how they monitor them. Emphasis will also be placed on describing the manager's own human and technical resources for the day-to-day performance of activities within the manager’s organisation and for the supervision over authorised persons. The proposal also stipulates record-keeping of regular due diligence reviews, and manager’s ability to document any problems identified and measures taken.

AIFMD II expands and significantly refines supervisory reporting to include delegated activities, particularly the delegation of portfolio and risk management. Managers will have to regularly report detailed information on the persons to whom they delegate activities, the scope of the delegation and how they actually monitor and control the delegation, including due diligence capacities and results.
 

Practical implications

Looking at the situation in the Czech Republic, it will not be just a matter of amending one contract: companies will need to review their authorisations, including supporting activities, adjust their record-keeping, check the settings of their control systems, and harmonise their internal rules.

Furthermore, AIFMD II anticipates that the European Securities and Markets Authority (ESMA) will have more data on outsourcing across the EU and will evaluate market practices. This will lead to a more uniform interpretation and stricter control at the national level. We therefore expect that the CNB will also focus more on substance and actual supervision in outsourcing, rather than just formal contractual arrangements.

We will be happy to help you map your outsourcing arrangements and adjust your control framework and outsourcing and distribution agreements to meet the new expectations and pass compliance checks.

In the next issue of the Tax and Legal Update, we will focus on liquidity management. And the third article in our series on AIFMD II will be on credit funds.