On Monday 17 May 2010 the European Parliament’s Economic and Monetary Affairs Committee (“ECON”) voted 33 votes for and 11 against for the latest amendments to the European Parliament’s draft of the AIFM Directive. On Tuesday 18 May European finance ministers met and agreed on a separate draft of the Directive.
Starting with the ECON draft, numerous changes were proposed including, interestingly, a different approach on the third country issue. Rather than granting equivalence status to third countries, the European Parliament draft now proposes a voluntary system, whereby a non-EU AIFM must agree to operate subject to the requirements of the AIFM Directive in order to access EU markets.
The national regulator of that country would need to work with the European Securities Markets Authority (“ESMA”) to supervise the manager. For a non-EU fund to be marketed within the EU, the country of that fund must have ‘high enough standards to combat money laundering and terrorist financing’, grant ‘reciprocal access to marketing of EU funds on its territory’ and have ‘agreements in place with the Member States where marketing is intended on exchange of information related to taxation and monitoring matters. Finally, the country must recognise and enforce judgements given in the EU on issues connected to the directive.’
A European Parliament press release (see link) sets out the other key amendments on issues such as transparency, leverage, valuators, depositories and capital requirements.
However, the parliamentary version’s new points, including the third country issue, voted on last night will ‘need to be elaborated on by the European Commission through implementing rules called delegated acts.’ These will specify the details on the agreements between ESMA and the national authorities for example. This version of the draft grants ESMA additional powers and involvement in many of the most important parts of the European Parliament text.
When Ecofin (a grouping of the EU Council of Ministers) met, EU finance minsters agreed on their own proposal for the AIFM Directive (see link), separate to the Commission’s parliamentary proposal text. With this version the national authorities would be given some involvement in the terms that funds and managers based outside the EU can market to professional investors within the EU.
Under the Ecofin proposal, third country fund managers ‘would be able to market funds established in third countries in an EU member state provided there is sufficient information for investors’ and ‘appropriate cooperation arrangements’ between authorities in the EU and the third country. Meanwhile, fund managers based in the EU ‘would be able to market funds located in third countries, provided that they comply with certain but not all provisions of the directive and the member state allows it’.
What next? The ‘working document’ (found in the link on the left from the European Parliament) states that trilogies with the Commission and the Council are the next stage before a European Parliament vote, scheduled for July 2010.