EUROPE - Jean-Paul Gauzès, rapporteur for the European Parliament's Committee on Economic and Monetary Affairs, has received over 1000 proposed amendments from MEPs while recommendations from other sources suggest the entire Directive should be widened to cover all alternative investment funds.

A key meeting is being held in Brussels tomorrow by the JURI Committee - a group of 27 legal representatives which advises the European Parliamentary Committee on Economic and Monetary Affairs - to discuss draft opinion to the Directive, for which they themselves have presented 29 amendments.

This is alongside more than 1000 amendments presented by MEPs, according to the European Venture Capital Association (EVCA), although the sheer volume of proposed amendments should come as no surprise as it affects so much of the investment market, according to Javier Echarri, secretary general of the EVCA.

"We understand that well over a thousand amendments have been tabled by MEPs - this is unprecedented in EU financial services regulation, and shows clearly that there's a long way to go to get the AIFM directive into an acceptable shape, which will protect rather than damage Europe's economies and competitiveness," said Echarri.
The rapporteur himself made 135 amendments to the first draft of the AIFM Directive, but some of those being presented by legal experts from JURI could be further reaching. (See earlier IPE story: Gauzes proposes 138 changes to AIFM Directive)

Among the amendments presented by JURI is a first key recommendation that the name of the directive itself be changed to the Alternative Investment Funds and their Managers as the Committee is concerned this directive would regulate fund managers and not the products or funds themselves.

The argument made for this change is managers or foreign funds who are not EU nationals, such as hedge funds domiciled in the Cayman Islands, "would be able to invest in the EU without being registered or supervised".

An additional idea presented by the JURI Committee is any fund or manager marketing in more than three EU member states would also be a new ‘competent authority' above the national authorities, as its Amendment 2 states: "If an AIFM markets AIFs in more than three Member States, the competent authority shall be the European Securities Monetary Authority" - a new body - and would be required to be listed on a central public register maintained by ESMA.

Justifying its proposal, JURI argued in its draft opinion: "As soon as AIFMs start to operate in more than one country, national supervisory authorities can no longer provide adequate oversight. Since, unlike other financial market actors, few AIFs work exclusively in a given region, the transfer of responsibility to a European monitoring authority makes sense."
Similarly, an earlier proposal to exclude small to medium-sized companies from the proposals has also been removed, in part because officials felt it played no part in determining whether a firm is systemically important or not, and would be important in cases where the EC sought to monitor private equity management buyouts. It also argued firms would be required to disclose when it holds at least 25% of a company and meet certain information requirements as a result.

EVCA's Echarri also criticised JURI's stance on management buyouts as he said: "There are a number of areas where the Juri report fails to account for the reality of private equity activities. For example, its stance on systemic risk is at odds with every major fact-based analysis, from the European Central Banks to the de Larosiere report. Proposals regarding disclosure would prejudice companies supported by private equity without justification.

One key proposal directed specifically at pensions funds recommended that those schemes holding alternatives investments or funds should in future be required to sufficiently advise members of the risks that alternative investments might pose.

This is on top of concerns already raised by Dutch pension fund officials in particular, who argue the move could add substantial additional costs to pension funds. (See earlier IPE story: Alternatives directive predicted to raise Dutch pension costs by 6% and APG calls on EC to temporarily withdraw AIFM)

This comes hot on the heels of a document produced by the Spanish Government earlier this month which noted the Swedish Government had "done a remarkable job" on the AIFMD when it held the EC Presidency last year and sought to reach a compromise proposal and text for the AIFM Directive.

The Spanish Presidency "issues note" recognised the Directive is complex as it has to "adapt to different types of managers in a number of provisions".

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