Call for global solution to alternative directive
Members of the European Parliament continue to disagree over the alternative investment fund managers directive, with UK MEPs fighting against “protectionist” regulation that they say will harm the City.
Debating the directive at a press briefing in Brussels last week, MEPs clashed over the direction of the directive.
Key sticking point in negotiations is the conditions for the marketing of third country funds, where a manager is based in the EU but the fund is domiciled outside the EU.
UK MEPs claim that pension savers could be left worse off and there will be job losses in London if the regulations are implemented as they currently stand.
The European Commission proposed the directive in April last year as part of a package of measures to respond to the financial crisis and to improve investor protection.
The EC wants to see a new regulatory and supervisory framework for alternative investment fund managers, who are not covered by the Ucits directive.
The new directive would apply to all mangers with a portfolio of more than €100m and would cover a range of funds, including hedge funds, private equity, commodity, real estate and infrastruc ture funds.
The Commission is proposing the introduction of an EU passport so that alternative funds that comply with the directive can be sold in other EU countries without requesting further permits. Currently, these funds can only be sold if they comply with the different national rules of individual member states.
The European Parliament is debating capital requirements, rules on leverage to make sure that funds can meet investor claims and mandatory registration. It is also considering reporting obligations and standards for administrators and depositories.
The issue of where a fund is registered, where it is managed from and which jurisdiction it falls under is currently dividing opinion.
French MEP and shadow rapporteur Pascal Canfin said: “All funds managed in the EU should have the same rights and obligations, no matter where funds are domiciled.”
But MEP for Ukip and shadow rapporteur Marta Andreasen said the EU needs to find a more global solution.
She said: “The approach of the EU has not been global. The EU has rushed this - the US is only in the early stages of consultation in Congress.
“We cannot afford to have a directive that is protectionist and does not allow the market to grow. The EU is using elements and controls that are excessive.”
Conservative MEP for London and shadow rapporteur Syed Kamall said he is concerned about the directive’s impact on pension funds in the UK. He said: “If pension funds are banned from investing in non-EU funds, savers are going to end up with smaller pots thanks to this directive. We need to push for open markets and not make today’s workers poorer.
“The debate on domiciles like the Cayman Islands is interesting. Are we going to try to stop people from investing in these funds or try to bring them onshore? I think that it would be a shame to bring them into the EU because I believe in globalisation and open markets.”
Although the UK has 80 per cent of the EU’s hedge fund investment, the EU has the power to push through consent for the directive without UK support.
The plenary first reading vote is expected to be held in the first week of July. The directive rapporteur, French MEP Jean-Paul Gauzès, said he is aiming for first reading approval, which would speed up the legislation process.
But Andreasen said the vote is likely to be delayed.
She said: “Spanish presidency of the Council of the European Union will finish at the end of June and the Belgians, who will take over, will need time to form their own position. I do not think we will see a vote early in July.
“But whenever the vote is held, the UK will have to comply. Large funds will not have too much of a problem but small funds will suffer and there will be job losses. I expect 50 per cent of smaller funds to move away from London.”