24/02/2010 Author: Tony Griffiths

Gauzés to reinstate AIFM third-country restrictions

Hedge fund lobbying efforts suffered a potentially serious setback in the EU Parliament on Tuesday, as the legislation’s parliamentary representative announced he was reassessing his approach to third-country marketing stipulations in the draft Alternative Investment Fund Managers (AIFM) Directive.  

Directive rapporteur Jean-Paul Gauzés began Tuesday’s two-hour Economics and Monetary Affairs (Econ) committee meeting – scheduled to discuss amendments to his largely well-received first drafting of the AIFM document – by announcing that he was “rejecting” his previous position on third-country marketing in which he had reinstated the Directive’s use of national private placement rules.

His new position, he explained, would be to introduce a transitional period of three-to-five years during which private placement rules would apply and there would be a search for as-yet-unspecified equivalency rules. Once the transitional period ends, however, so too will national private placement rules. At this point, those third countries deemed to have met the necessary standards would be deemed worthy of a marketing passport, while those not deemed equivalent would be prohibited from marketing within the EU altogether. A grand-fathering period would then take place for those funds not meeting requirements.     

The original draft of the AIFM Directive, published by the European Commission back in April 2009, had dispensed with private placement rules and had introduced an EU passport that, critics have argued, would be difficult for non-EU funds and managers to comply with.

Managers, investors and trade bodies have all argued that the original provisions are protectionist, seeming to lock out non-EU managers altogether. Gauzés had been praised for reinstating national private placement rules in his first drafting – submitted in November 2009 – but he now appears to have back-tracked.   

Econ is due to meet again on 17 March for a second exchange of views on the 1,669 amendments submitted by its MEPs. Gauzés said that he will spend the next few weeks drawing up details of the new proposed equivalency rules for presentation in March. A vote on the Gauzés version of the Directive is due to take place in Econ on 12 April.
Earlier this month, the Alternative Investment Managers Association (Aima) criticised EU council president Spain’s own, new drafting of the Directive for reinstating the “protectionist” third country marketing provisions that had been removed by previous council president Sweden.       

“Stipulating that these co-operation arrangements must be in place sounds reasonable enough, but we are worried that they would be difficult to establish and to comply with,” said Andrew Baker, Aima’s chief executive, referring to Spain’s reintroduction of the controversial article 35. “The practical consequence would be that the EU market would be closed to non-EU funds and managers with obvious protectionist implications.”