The AIC has been lobbying key MEPs, the Treasury and the FSA to make its concerns on the directive known and to try to influence the shape of the eventual legislation.
The AIC fears that in its current form the directive could see the demise of investment companies and prevent any new launches.
It is concerned that the proposal to regulate just the manager of a fund would compromise and restrict the independent boards of investment companies and that regulating a single manager would also be a problem for multi-manager funds.
The AIC also believes the leverage cap on alternative investment funds would be problematic for investment companies and, far from helping to reduce systemic risks as the directive intends, it would actually increase risks by forcing managers to sell assets in a falling market to keep within the imposed limits.
The directive’s proposal that depositories must be EU credit institutions could conflict with legislation in other parts of the world which requires funds to use local depositories, the AIC warns.
It says the proposals could therefore hinder investors’ ability to get geographical diversification.
The AIC also fears that the proposals could prevent investment companies from using local managers who benefit from specialised knowledge of their particular markets because it believes it is unlikely many overseas managers would meet the directive’s authorisation criteria.
But speaking at a briefing at the AIC’s offices in London yesterday, acting director general Ian Sayers was optimistic that concessions would be made.
He said that if the directive proceeds in its current form “there could never be an investment company launch again or an issue of new shares”.
But he added: “The good news is that the signs are that people are listening to the case we are making.
“We cannot show tangible results yet, we will get that at some point when they publish revised legislation, but they are listening, they are going to be changes. We cannot say how far they are going to go but we are cautiously optimistic, certainly that the industry will survive, but also that it can continue to thrive.
“But there is an awful lot more work to do before the middle of next year to make sure we get a satisfactory outcome.”