08/09/2010 Author: Tony Griffiths

Belgian presidency calls for passive marketing

Passive marketing would be legalised as part of the EU’s Alternative Investment Fund Managers (AIFM) Directive under a new proposal by the Belgian presidency, although private placement rules would be scrapped as part of the same plan, HFMWeek can exclusively reveal.  

The Belgian position paper, circulated at the second of two AIFM-themed trialogues last week (the first meetings following the EU’s August recess), was designed as a potential compromise in the as-yet-unresolved debate on third-country marketing. A copy of the proposal has been obtained by HFMWeek.

The plan is based on three “major axes”: the legalisation of passive marketing; a five-year transitional period after which private placement rules would make way for a marketing passport; and increased powers for Esma, the new European regulator. The paper also proposes that, for each AIFM, the passport – opposed by several member states, including France and Germany – be anchored in a “home member state” and that passport-seeking non-EU AIFMs be designated a member state of “reference” as equivalent.   

According to sources close to discussions, however, the Belgian proposal has failed to settle the third-country dispute. Some socialist MEPs are concerned by the removal of the passive marketing rule, while other parliamentarians are unhappy with the loss of the dual-regime; a Council-led compromise which would see the passport and private placement co-exist.  

UK MEP Syed Kamall, a staunch Directive lobbyist, told HFMWeek it was “smart to allow managers to apply for a European passport through one Member State,” but that there were “still some question marks about the role of Esma and the expiry of national private placement regimes.

“It would be wiser to retain private placement alongside the EU passport until we have established an EU system that investors understand and trust,” he said. “If we sign up to an end-date to private placement now, before assessing if and how well the EU passport is working, this could cause a lot of uncertainty and market turmoil.”
The continuing discord is increasing pressure on Michel Barnier, the European Commissioner responsible for financial regulation, to resolve the matter. Barnier, who this week said discussions were in the “last strait”, was due to attend yesterday’s AIFM trialogue meeting.

The final AIFM vote is scheduled for the week beginning 20 September. Some EU insiders have suggested that, with the third-countries issue still unresolved, it may be pushed back to October.

The AIFM Directive is not the only EU regulatory development with the potential to impact hedge funds. EU finance ministers met Tuesday in an attempt to hammer out fresh banking regulation. Among proposals discussed was a plan put forward by Germany for a tax on ‘financial transactions’ such as the trading of company shares – a huge potential tax burden for equity funds.