Responding to the publication today of the European Commission's Directive on Alternative Investment Fund managers, Simon Walker, Chief Executive Officer of the British Private Equity and Venture Capital Association, said.
"This proposal has been the cause of intense debate within the European Commission, with a number of key figures doubting its logic. It should be obvious that this is a deeply undesirable and immensely damaging exercise which the British Government, in particular, should be doing its utmost to forestall.
This measure is irrational in that it seeks to bring very different asset management classes such as private equity and hedge funds within the same domain. It is contradictory in that the purpose of this exercise was supposed to be the regulation of institutions believed to pose systemic risk to the financial system yet as the Commission's own press release confirms, private equity houses "are not regarded as posing systemic risks". It is draconian in that it would draw almost 70 UK private equity houses and many hundreds of portfolio companies into a new regulatory regime with very significant direct and indirect compliance costs. It is manifestly unfair in that it does not apply to other forms of private ownership placing them at a competitive advantage to private equity. It is appallingly timed as deep recession is hardly the moment to increase the burden on business.
It is especially counter-productive for Britain as 57% of the European Private Equity industry is located here (and hence the UK has the most to lose if firms choose to relocate) and it would effectively override a domestic disclosure procedure under the Walker regime which is widely regarded as working extremely well and only yesterday announced an extension of its own provisions. This is the start of a process that could take two years or longer to complete in whatever form but Ministers need to focus on this issue forensically in the months to come. This proposal is bad for British business."
John Cridland, CBI Deputy Director-General, said:
"Business needs private equity to help lead investment out of recession - in fact we need it now more than ever. Disproportionate regulatory burdens from Brussels will therefore be counterproductive.
It seems that the proposed draft directive applies the same rules to both hedge funds and private equity - such an approach does not make sense."
For further information please contact:
Tim Hames, BVCA: 07721 508082
Nathan Williams, BVCA: 020 7025 2967
Notes to Editors
1. The BVCA - The British Private Equity and Venture Capital Association, is the industry body for the UK private equity and venture capital industry. The BVCA has over 450 member firms, representing the overwhelming number of UK-based private equity and venture capital firms and their advisers.
2. The CBI is the UK's leading business organisation and is also the UK's official business representative in the European Union, which generates more than 50 per cent of regulation affecting British firms. With offices across the UK as well as in Brussels, Washington and Beijing, the CBI coordinates British business representation around the world.
