Brussels, 10/11/2010 (Agence Europe) - On Thursday 11 November, the European Parliament will endorse the agreement in principle on the draft EU directive to introduce rules by 2013 on the activity of alternative fund managers, including hedge funds and private equity funds (see EUROPE 10244). The EPP, ALDE, PES and ECR political groups have all signed the sole amendment summarising this consensual directive, which suggests that it will be voted through by quite a large majority, explained Jean-Paul Gauzès (EPP, France), the EP rapporteur on the issue, to this newsletter on Wednesday 10 November. The Council of Ministers will then formally confirm the agreement, thereby ending the legislative procedure in a single reading.
Jean-Paul Gauzès said that the new directive was a significant step forward, moving from lack of regulation or supervision to a body of pragmatic, effective rules. The EP prides itself on the new ban on asset-stripping of companies bought up by private equity firms and the new obligation for private equity funds to inform the workers of the companies they buy up about their strategy. Luxembourg Socialist MEP Robert Goebbels commented to this newsletter that he would have preferred a four year (rather than two year) period during which private equity funds may not give shareholders the statutory reserves of a company that is bought up.
The introduction of a “European passport” with the necessary ringfences for funds located in the EU and elsewhere in the world is another area of satisfaction for Gauzès. This was initially mooted by the European Commission but the Council of Ministers had not agreed with it. The Belgian Presidency of the EU Council of Ministers worked hard behind the scenes to reconcile France and the United Kingdom in this domain and finally introduced the European passport rule. Hedge funds registered in Europe can get authorisation from the national supervisor in the country where they are registered to sell their products to professional investors anywhere in the EU from 2013 onwards. From 2015 onwards, the European passport, issued by national supervisors, will be available also for non-EU hedge funds registered in countries that have signed tax cooperation agreements with the countries in which the non-European funds are to be sold. In the event of a risk to financial stability, ESMA will be able to require national supervisors to restrict the activity of non-EU funds. The current private investment systems in the member states will be allowed to continue until 2018. Member states may continue to authorise non-EU funds to operate in their country that do not meet the requirements of the new directive, but in 2018 the new European passport will become compulsory. Welcoming the shifting of offshore funds to the EU, Goebbels did, however, criticise the new system for the over-lengthy procedure for granting the passports. (M.B./transl.fl)