EC Proposed Directive: Alternative Investment Fund Managers, April 2009

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The European Commission's Directive on Alternative Investment Fund Managers (AIFMD) is a proposed regulatory and supervisory framework for alternative fund managers (AIFMs) in Europe. The proposal, which was sent to the EC in March 2009, and proposed by the EC on April 29, 2009, provides more transparency to the investors and regulators associated with alternative investment funds. The funds being discussed in the proposal include hedge funds and private equity, that are not already regulated under (UCITS Regulation), the set of directives investment in mutual funds and other collective securities.

Proposed Rules

According to the EC press release, the proposed AIFM Directive will:

  • Adopt an 'all encompassing' approach so as to ensure that no significant AIFM escapes effective regulation and oversight, while recognizing the legitimate differences in existing business models and providing exemptions for smaller managers for whom the requirements would be disproportionate. Therefore, the Directive will only apply to those AIFM managing a portfolio of more than 100 million euros. A higher threshold of 500 million applies to AIFM not using leverage (and having a five years lock-in period for their investors) as they are not regarded as posing systemic risks. A threshold of € 100 million implies that roughly 30% of hedge fund managers, managing almost 90% of assets of EU domiciled hedge funds, would be covered by the Directive.
  • Regulate all major sources of risks in the alternative investment value chain by ensuring that AIFM are authorized and subject to ongoing regulation and that key service providers, including depositaries and administrators, are subject to robust regulatory standards.
  • Enhance the transparency of AIFM and the funds they manage towards supervisors, investors and other key stakeholders.
  • Ensure that all regulated entities are subject to appropriate governance standards and have robust systems in place for the management of risks, liquidity and conflicts of interest.
  • Permit AIFM to market funds to professional investors throughout the EU subject to compliance with demanding regulatory standards.
  • Grant access to the European market to third country funds after a transitional period of three years. This should allow the EU to check whether the necessary guarantees are in place in the countries where the funds are domiciled (equivalence of regulatory and supervisory standards, exchange of information on tax matters).

Related Document: AIFMD Proposal, April 2009

References

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