Brussels, 18/03/2010 (Agence Europe) - During an exchange of views on compromise amendments on Wednesday 17 March (which Jean-Paul Gauzès -EPP, France - had updated at the economic and monetary affairs committee), the latter explained that the Spanish Presidency's postponement on Tuesday of discussions at the Ecofin Council on the draft directive for structuring alternative investment fund managers was not a dramatic development (EUROPE 10099). He added that there was a political problem involving third countries and the approaching elections in the United Kingdom, which could impact on a decision being taken, even though London did not have the capacity for imposing a minority blockage on procedures. He is convinced that this postponement is not expected to significantly upset the parliamentary calendar and explained that he believed it was possible for a vote to take place in the committee, initially planned for Monday 12 April. He did, nonetheless indicate that “it is out of the question to wait for a position to be taken by the Council before a position is taken”. According to Gauzès, the plenary vote was initially expected to be held in July but could take place later in order to leave time for inter-institutional negotiations and the adoption of future European legislation in the first reading. He warned that “the public would not understand why we were stalling on this text”.
Gauzès has so far presented MEPs with the compromise amendments focusing on nine themes: relations with third countries, short selling, remuneration policy, capital requirements, the field of application, the deposit agents' system, debt and the leverage effect, investment funds and asset ratings (EUROPE 10097).
Third countries. The question of distribution in the EU constitutes a stumbling block between the United Kingdom (which has an 80% share of the European alternative investment fund management market) and the great majority of member states.
London wants a maximum of freedom for City managers to manage their funds established in these offshore financial centres. When a manager is established in the EU and the fund in a third country, the rapporteur suggests a transition stage of two years, during which the private investment system would apply to countries that are already authorised to trade in these funds. This mechanism would not give these funds a right to a European passport. During the transition period, the Commission would assess the level of respect for several conditions, in view of ruling on the equivalence of the rules in force in the EU and fund countries. These conditions are as follows: the existence of a cooperation agreement between fund manager supervisors; the equivalence of rules in third countries on fighting money laundering and the funding of terrorism and European standards; reciprocity of access to European funds on third country markets; the signing of fiscal information exchange agreements between fund countries and member states in which managers are based and the distribution of funds. If the evaluation proves positive, the fund manager would be able to trade their funds throughout the EU. If the evaluation, however, is negative, the funds will be totally banned throughout the EU, except for funds that existed in Europe before 2010.
Last week US Secretary of State to the Treasury Tim Geithner warned the European Commission against creating any barriers to the activities of US fund managers in Europe. Gauzès is leaving it up to member states whether to allow managers to trade their funds with institutional investors, on the condition that the rules of the third country and European legislation are equivalent and that the fund manager in question established in the EU has access to third country markets. In this context and in view of legislating on regulatory equivalents, the Commission would have two years to legislate on the following areas: safeguard and supervision rules in third countries; the signing of a cooperation agreement between fund manager countries and the country that wants to trade in the latter's funds and the signing of a fiscal information exchange agreement between the fund managers countries of origin. Authorisations awarded before the end of the transition period will not grant the right to a European passport. If the evaluation made by the Commission is positive, the fund manager in question would benefit from the same certification as a European fund manager and their funds would obtain the European passport. In the opposite case, the fund manager in question would not be authorised to operate in the EU, not even within the private investment system.
This approach gels with the approach outlined by the Commission and is testimony to the rapporteur's developing ideas in this connection. It has led to a gnashing of teeth in Paris. On a fleeting visit to Brussels on Thursday, the French Finance Minister Christine Lagarde welcomed the extended deadline for reflection if it allows for greater protection of savers and more transparency (e.g. responsibility of deposit agents, categories of assets held). She did, however, warn that there should be no prevarication on the creation of a “highway” in the EU for third country funds “to the detriment of protecting savers”. The minister added that “regulation that facilitated the entry of third country funds without respecting legislation and registration does not appear to me to be compatible with protecting investors”. (M.B./transl.fl)