By Simon Miller
European Commission draft proposals for alternative investment fund managers risks closing off national private placement regimes, the Alternative Investment Management Association (AIMA) has warned.
The EC proposed text for the Alternative Investment Fund Managers Directive (AIFMD) was in response to advice from the European Securities and Markets Authority (Esma) and seeks to implement the AIFMD though a “regulation” which enters affect more quickly than a “directive” which gives more implementation flexibility.
However, with only two weeks for EU member states and the European Parliament to respond, AIMA warned that the text appeared to “significantly and substantially diverge from the Esma advice in a number of key areas, including third country provisions, depositaries, delegation, leverage, own funds, professional indemnity insurance, appointment of prime brokers and calculation of assets under management”.
AIMA CEO Andrew Baker commented: “We fully respect the Commission’s right not to follow ESMA advice when producing secondary legislation. However, there should be more transparency and better consultation if the Commission has decided to depart from the advice in such crucial areas for the global asset management industry.”
AIMA was particularly concerned about the international ramifications of the third country provisions relating to non-EU jurisdictions and how managers operating in those jurisdictions may access EU investors.
The Association said the proposed third country provisions did not appear to reflect advice the European Commission received from ESMA on implementing AIFMD.
With the Commission contemplating a requirement that EU and non-EU regulators sign co-operation agreements which are legally binding on both parties, AIMA said these would be extremely problematic if not impossible to conclude “if the Regulation prescribes that the cooperation agreements ensure that third country regulators enforce EU law in their territories”.
Baker added: “It could be extremely difficult for many regulators to be able to sign up to that. We urge the Commission to clarify this issue in their final text.”
In addition, without cooperation agreements, asset managers outside the EU would not be able to access investors in the EU except through reverse solicitation.
“This would close the door to national private placement regimes in the EU, which would have a major impact on asset managers globally. It would also prevent delegation of portfolio management outside of the EU, which would be of great concern for global asset managers,” Baker continued.
He added: “ESMA has made it clear in its advice that cooperation agreements are to be signed on a best-efforts basis and are meant to reflect international norms such as the IOSCO Multilateral Memorandum of Understanding. We hope the Commission follows this advice.”