The European Parliament and Council reached compromise on language over the controversial AIFM directive. The agreed text is set to be voted into law in mid-November during a plenary session of parliament.
Once passed, the directive would take effect early next year and required to be implemented by all 27 EU member states by early 2013.
The agreement follows last week’s European Council meeting in Luxembourg in which EU finance ministers hammered out compromise language over the much debated “passport” rules for non-EU funds and managers.
Under the council agreement, passports will be available to private equity managers from outside the EU provided they and the countries where they are based meet certain criteria including disclosures on pay structures.
The new system under ESMA will be phased in over the next few years, starting with a passport for European funds in 2013 followed by non-EU private equity managers in 2015.
It appears the deal is now agreed in principle between the negotiators on behalf of the council, commission and the parliament, said Norton Rose partner and AIFM specialist, Michael Newell, in an interview with PEM. “However we still await details of the amendments to the 20 October text agreed by the council, which may yet need further discussion before voting will be a formality,” said Newell, adding “We’re certainly in the endgame though”.
“We will need to keep a close eye on ESMA and the European Commission to make sure they do not overburden the EU passport with too much costly red tape or try to restrict funds from being marketed in the EU,” said Syed Kamall, Conservative MEP for London and European Conservatives and Reformists group chief negotiator on the directive, in a statement.
“Ideally, we would have kept national regimes for the marketing of funds in place forever, now it looks as though they will expire in 2018,” added Kamall.
The current agreement is “a major improvement on what it might have been”, said Simon Walker, chief executive of the BVCA, in a statement. However, the directive is “defective” and many sections in the agreed text are “ambiguous, inconsistent or incoherent”, added Walker.
“This means that the detailed procedure for translating this directive into national law becomes unusually important,” said Walker, adding the BVCA along with the European Private Equity and Venture Capital Association will represent industry concerns as the directive undergoes an implementation phase.
“Most worryingly, there is no light-touch opt-in for small funds envisaged in this directive,” said Uli Fricke, chairwoman of the EVCA, in a statement.
“This will have a damaging knock-on impact for financing of innovative SMEs. The European Commission should urgently address this disproportionate burden that jeopardizes a European recovery based on innovation and knowledge,” Fricke added.
“This is not a perfect proposal but hopefully we can all live with it,” added Kamall.