Revised compromise texts of this draft directive have been released by the Belgian Presidency. The European Parliament is to vote on these at the Parliament Plenary session on 18 October 2010.
The EU Commission issued a draft Directive in 2009 to introduce the regulation and supervision of EU domiciled Alternative Investment Fund Managers (AIFM) who manage and administer or market alternative investment funds in the EU. The Directive aims to regulate alternative fund managers, rather than the alternative investment funds themselves. However the provisions of the Directive indirectly impose requirements on alternative investment funds, including requirements for valuation, risk management and depositary rules. The Directive was due for sign off earlier in 2010 but no agreement has been reached in relation to a final draft. The Directive is accordingly being debated by representatives from the Council of the European Union, the European Parliament and the European Commission seeking to negotiate a mutually acceptable compromise directive. Following several postponed European Parliament votes on the AIFM Directive through summer and into September there has been recent activity from the Belgian Presidency in an attempt to secure a compromise regarding the Directive. A vote is now scheduled to take place at the Parliament Plenary session on 18 October 2010.
A full plenary session of the European Parliament was scheduled to vote on the compromise text of the Directive on 5 July 2010, but this was rescheduled to September and has now been postponed to October. There is still a long way to go before the Directive is finalised and implemented. It is likely that many of its provisions, including the rules on valuation, delegation, third-country rules and depositary liability, will remain contested.
Some of the most contested issues in respect of the draft Directive have included:
- authorisation and organisational requirements for AIFM;
- passport provisions to permit marketing in other Member States;
- third country issues which encompass issues concerning non EU AIFM operating in the EU and also the marketing of non EU funds in the EU;
- notification requirements whereby AIFMs report to their regulators on a variety of issues;
- transparency requirements whereby AIFMs disclose details to fund investors;
- delegation provisions whereby AIFMs may be permitted to delegate to third parties;
- remuneration provisions to ensure that AIFM do not encourage risk taking which is inconsistent with the risk profiles of their funds;
- depositary issues dealing with who may act as a depositary, the liability of depositaries, and their ability to delegate;
- valuator and valuation of assets requirements;
- leverage provisions;
- short-selling provisions to ensure that short-selling will operate in a harmonised regulatory framework;
- regulatory co-operation provisions so that EU regulators co-operate and share information.
The most notable point regarding the latest texts issued by the Belgian Presidency is that they do not include any details regarding requirements for marketing or private placement of third country funds/managers or requirements relating to private equity. The treatment of non-EU funds is the most significant unresolved issue in the ongoing negotiations as there are still divergent views on this between Member States within the European Council. It is understood that the primary differences relate to the provisions to allow private placement to continue, possibly for a limited period, subject to certain conditions and the possibility of a European marketing passport, under certain conditions, for third country funds.