Brussels, 30/05/2011 (Agence Europe) - On Friday 27 May 2011, the EU Council of Ministers formally adopted a draft directive introducing EU rules for alternative investment fund managers (AIFM, hedge funds and the like), an industry processing some EUR 2 trillion a year The directive forces the managers of hedge funds and other investment funds to apply for EU authorisation to be allowed to sell their funds to professional investors across the EU.
The legislation covers all non-harmonised funds not covered by the OPCVM Directive, such as hedge funds, private equity, real estate funds and commodity funds. Member States will be able to decide not to apply the directive in their country to funds with assets of less than EUR 500 million (less than EUR 100 million for funds using leverage (raising debt for investment purposes).
In order to be given authorisation from the supervisor of the country where they are registered, fund managers will have to hold a certain amount of capital in the form of liquid capital. They will be allowed to practice risk management within their funds and will have to regularly report to the national supervisor, providing details about the main markets they invest in, the funds the negotiate and their main debt exposure. AIFM will have to ensure that the managed funds appoint an independent depositary responsible for overseeing the fund's activities and ensuring the fund's assets are properly protected. Professional investors must be given clear information about the fund's investment policy. Special requirements have been introduced for managers regularly using leverage - they will have to disclose aggregate leverage and the main sources of leverage, and competent authorities will be empowered to set limits to leverage. When buying up companies, AIFM will have to disclose information to other shareholders and workers' representative.
From 2013 onwards, funds registered in the EU will have to apply for authorisation to sell their products to professional investors across the EU. A system known as a European passport will be introduced in 2015 for funds registered outside the EU. Until 2019, national private equity regimes will remain available as a way of continuing to authorise funds from outside the EU that do not respect EU legislation. After 2018, EU authorisation will be compulsory.
ESMA. The idea of the EU passport applying also to funds from outside the EU was defended b the United Kingdom, where 80% of speculative funds in the EU are based. The idea is backed by the European Parliament and the European Commission. France also agrees with this idea, as long as the European Securities Markets Authority (ESMA) is allowed to play an important role in award of the passport. France not able to get accepted the idea of ESMA being given responsibility for granting the passport. ESMA will, however, be informed of all authorisation applications and will keep a blacklist of rejected funds. It will able able to ask the competent authorities of the country where a non-EU fund is based in the EU to introduce restrictions in the event of the danger of financial meltdown. Non-EU countries where funds are registered must pledge to cooperate with Member States by providing tax information to help combat money laundering. In a report due in 2016 on process in implementing the hedge fund directive, the European Commission will examine whether ESMA could be fit to grant the EU passport. (M.B./transl.fl)