Officials representing all three camps of EU decision-making – the European Commission, the European Parliament and the EU capitals – yesterday reached a final agreement on the controversial Alternative Investment Fund Managers Directive (AIFMD).
The draft suffered long delays as lawmakers grappled with 300-plus amendments and France and the UK became ever deeper embroiled in a row to protect the financial prowess of their respective capitals.
French MEP and rapporteur on the directive Jean-Paul Gauzès (European People's Party), who has been working to agree a compromise with the EU's member states and the Commission, admitted the deal was "imperfect," but said it was still "a considerable step forward".
A breakdown
The industry can now finally know with certainty what kind of requirements it will have to fulfill in order to operate in the EU in 2013, the date by which member states are expected to transpose the AIFMD into national law.
Soon, alternative investment funds will have to disclose their investment strategies and accounting practices to investors and regulators.
Fund managers will be obliged to have minimum capital requirements and have to ensure that their assets are secure in depositary banks.
In exchange for fulfilling these and other requirements, funds will be able to market their business to investors across the bloc without having to comply with 27 different sets of national laws.
The market license or 'passport', which has been the most hotly contested part of the directive, will be available to EU-domiciled funds in 2013 and non-EU domiciled funds by 2015.
The passport had become a bargaining chip in a row between France and Britain, with the French making a last ditch attempt to have a Paris-based body, the European Securities and Markets Authority (ESMA), vet applications for passports (EurActiv 29/09/10).
"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 Conservative MEP for London Syed Kamall.
According to yesterday's deal, national regulators will decide whether funds are eligible for an EU passport or not and ESMA will be tasked with drawing up and reviewing the requirements funds have to fulfill to get a passport.
ESMA will also be expected to settle disputes between national regulators if they disagree on whether a fund should have received the passport in the first place.
Regulating private equity buy-outs
The Parliament is claiming victory on provisions set for the private equity industry, with the Socialist and Green camps eager to secure safeguards for employees of companies in the throes of equity buy-outs.
The agreement now limits the distribution of capital – or asset stripping - within the first years that a company is taken over by a private equity investor to deter investors from buying companies purely to make an easy profit.
Though private equity firms will now be expected to tell the employees of the companies they are buying their planned strategy, they did, however, gain some leeway to guard sensitive company information from competitors.
"The AIFM Directive that will be voted on next month is imperfect legislation. It will impose unnecessary costs on our investors and ultimately Europe's pensioners, as well as unfair burdens on companies we invest in to help them grow," said Uli Fricke, chairwoman of the European Private Equity and Venture Capital Association.
All of the above rules will be subject to a review four years after AIFMD becomes a national reality. The Commission and the European Parliament are currently earmarking 2017 for the intended review.
The agreed text will now be put to a vote at the European Parliament's plenary session on 11 November, which Belgian Finance Minster Didier Reynders expects will show a large majority in favour.
