The European Commission has published a speech that Charlie McCreevy (European Commissioner for Internal Market and Services) gave on 17 November 2009 at the PriceWaterhouseCoopers’ European Asset Management Senior Executive Forum.
At the start of his speech McCreevy responds to the question as to why the regulatory spotlight has fallen on the asset management sector when it is accepted that the sector was not responsible for the financial crisis. In response McCreevy states "the importance of this sector to investors, the financial markets and the economy as a whole cannot be underestimated. G20 leaders have all agreed that regulation must be comprehensive: No significant financial market actor can be allowed to slip through the regulatory net."
In the remainder of his speech McCreevy looks at the following core objectives of the Commission:
- The maintenance of financial stability. McCreevy notes that the financial crisis illustrated that the build up of leverage by hedge funds and their subsequent rapid unwinding of leveraged positions made an unstable situation more dramatic and dangerous. In addition regulators were not well equipped to understand and mitigate the pro-cyclical nature of these risks. McCreevy argues that this is why a comprehensive system of macro-prudential oversight must include effective surveillance of the fund management sector and in particular, of hedge funds. The draft Alternative Investment Fund Managers Directive (AIFM Directive) will make a significant contribution in this regard.
- Protection of investors. McCreevy notes that UCITS are only one of several types of comparable product available to retail investors. The Commission has undertaken to deliver a more coherent, horizontal approach to the regulation of non-harmonised funds and structured products and will put forward proposals in 2010.
- Market efficiency and the deepening of the Single Market. On the AIFM Directive McCreevy notes that there is room for clarification and improvement and suggests that the ‘all encompassing’ scope of the proposal does not mean that ‘one size fits all’. The Commission will be looking closely at how the requirements can be differentiated to reflect the objective differences between business models.
In his conclusion McCreevy warns the asset management industry that it is far too late to question the whole of the AIFM Directive.
View PriceWaterhouseCoopers’ European Asset Management Senior Executive Forum, 17 December 2009