"The US is unlikely to be able to comply with the equivalence criteria proposed by the European Parliament to enable the marketing of US hedge funds to European investors," said senior regulators at the US Securities and Exchange Commission (SEC).
The US and UK regulators' concerns struck a nerve in the EU as disagreement over rules on marketing foreign funds – called third-country rules in the draft Alternative Investment Fund Managers Directive (AIFMD) – is at the centre of a row between the European Parliament and the EU's finance ministers.
"There are differences in regulation that would mean the US would not be able to comply with current proposals in the Alternative Investment Fund Managers Directive," according to a joint statement from the SEC's associate director for regulation, Robert Plaze, the UK Financial Services Authority's (FSA) director of retail policy and conduct risk, Dan Waters.
The UK has persistently called for the EU to use international standards such as those drawn up by the International Organisation of Securities Commissions (IOSCO), Waters told a London conference organised by InvestoRegulation.
Plaze pointed out that unlike the EU, the US is not calling for capital requirements, remuneration policies or leverage limits for hedge fund managers, like those in the European Parliament's draft AIFMD.
Waters said the FSA preferred the European Council's position, which proposes maintaining a form of private placement whereby non-EU funds get access to each market individually.
The EU's three institutions, the Commission, Parliament and Council, are currently discussing their differences but recent talks hint that the two sides' positions on third-country funds are irreconcilable (EurActiv 08/07/10).
Though Commission officials are under the impression that agreement is close, a spokesperson for the European Parliament's economics committee (ECON) said last week's talks gave no indication that a compromise on the issue was imminent.