The European Commission has published a draft text for the implementation of the Alternative Investment Fund Managers’ Directive (AIFM) that has caused consternation among private equity fund managers and industry trade bodies.
The new text – which elaborates on how the AIFM will be implemented – shows the European Commissions’ desire to apply the AIFM more quickly by enacting it as a ‘regulation’ rather than as a ‘directive’, which would take longer to come into effect and offers member states more flexibility.
The European Commission has issued the new draft text having received advice from the European Securities and Markets Authority (ESMA) on the execution of the AIFM back in November.
But its advice appears not to have been heeded in some key areas, including third country provisions, depositaries, leverage and the calculation of assets under management.
In response to the Commission's draft, Alternative Investment Management Association (AIMA) chief executive, Andrew Baker, said in a statement: “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.”
One particular worry for AIMA is the result the new draft would have on third country provisions. These relate to non-EU jurisdictions such as the US, Hong Kong and Brazil and how managers operating in these areas would be able to access EU investors.
Baker said the Commission was contemplating the use of legally binding cooperation agreements.
“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,” he said.
This could make it extremely difficult for many regulators to sign up to the agreement whereas ESMA’s advice on this issue was for the cooperation agreements to be signed on a best-efforts basis.
A source close to the matter said this is and always has been an area of contention within the industry.
The source said the biggest issue the AIFM faces is ensuring that capital is not restricted from coming in to European funds, be it from within the EU or from outside of its jurisdiction.
Doerte Hoeppner, secretary-general of the European Private Equity and Venture Capital Association (EVCA), said: “In the EVCA's contact with the key stakeholders in the development of the AIFM Directive implementing measures, we have pressed home our expectation that the proportionality and tailoring for our industry that was included in level one be respected in level two.”
The draft was not met with universal unease however. One source close to the matter said it was usual for there to be differences between the level one and secondary legislation at this stage, and that there was still time to amend the legislation.