EU AIFM - Update No. 13
7 May 2010
As you will be aware, this week marked a critical juncture for the Alternative Investment Fund Managers Directive (AIFMD). Following repeated delays, on Monday the Directive was voted on in the Parliament's ECON Committee and European Finance Ministers reached a general agreement at yesterday's Economic and Financial Affairs Council (ECOFIN).
Whilst progress has been made in both the Parliament and the Council's text, the AIFMD is still not a done deal. The BVCA will now be working with EVCA and other national associations through the Public Affairs Executive as the process of 'trilogue' begins- wherein the Council, Parliament and Commission seek agreement on a common text.
There are a number of issues that remain subject to negotiation and are critical to our industry. These include:
As the agreement that came out of the Council recognised, the aspects of the Directive relating to third country rules remains an area of significant concern, particularly to the UK. The approaches taken by the Council and Parliament remain diverged. While the Parliament's text would require non-EU based fund managers to comply with various standards in order to market their funds to EU investors, the Council version proposes individual country regimes apply. To require fund managers to register and make arrangements with 27 national supervisors is at best impractical. It is fundamental that the EU strives for oversight and sound regulation that results in convergence to a global standard, but does not risk cutting off investment into the EU, at a time when investment is critical.
As we have repeatedly stressed it is critical that private equity and venture capital-backed SMEs are not disproportionally and unfairly targeted by the Directive. Whilst we are encouraged that the Council's text stressed that the disclosure requirements should not be extended to 'SMEs', the Parliament's proposals to only exclude firms with less than 50 employees and those with less than a 10% private equity or venture capital stake is woefully low and inadequate. For firms to have to divulge finances, strategy and planning information during their early stages of development would be a gift horse to better established competitors.
With the Council stressing that it will aim to ensure the Directive is adopted in first reading, the next few months will be critical. The BVCA will continue to engage with the new coalition government and policymakers and officials across the EU.
