Sun, Jul 23, 2017
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Parliament ushers in new EU rules for hedge funds and private equity - to take effect by 2013

Thursday, November 11, 2010
Opalesque Industry Update - New EU-wide rules on the marketing of alternative investment funds overcame the final hurdle on Thursday when the European Parliament adopted the directive which will impose registration, reporting and initial capital requirements on these funds. Parliament successfully pushed through chapters on asset stripping and remuneration principles, as well as strongly influencing the rules on the passport system, depositary liability, capital requirements and the use of leverage.

The EP, under the leadership of Jean-Paul Gauzès (EPP, FR), won concessions from Member States in a number of areas aimed at increasing economic stability and investor security, the two key priorities for Parliament all throughout the process. The legislation introduces pay rules and restrictions on asset stripping, points that were both initially not dealt with by the Commission proposal and strongly resisted by Member States. The EP - which approved the directive today by 513 votes to 92 with 3 abstentions - also successfully pushed for strict liability of depositaries, who are key players in the running of these funds, to ensure that damages can always be claimed by the investors.

Special attention to asset stripping by private equity funds

Parliament insisted from the outset on the need to combat asset stripping, which was not covered by the Commission proposal and the inclusion of which was resisted by Member States during negotiations. The directive now includes a number of provisions to this end, relating primarily to limits on distributions and capital reductions within the first two years that a company is taken over by a private equity investor. This is intended to deter private equity investors from attempting to take control of a company solely in order to make a quick profit.

Thanks to Parliament, strong information and disclosure requirements are to be imposed on private equity investors, particularly regarding information for shareholders, employees and their representatives on the planned strategy for the company.

Depositary liability

Depositary liability has been increased in comparison to the initial positions of Council and the Commission to prevent further Madoff-style scandals. The directive requires that if a depositary legally delegates its tasks to others, it must provide a contract which allows the fund or the fund manager to claim damages against the entity to which the tasks are delegated. This should ensure that at no point in the chain will liability be irretrievably lost. MEPs also secured a requirement that the AIF investors concerned must be informed about the potential delegation of liability and the reasons for this.

Marketing passport for everyone without a free-for-all culture

Today's agreement will enable non-EU AIF and AIF managers to market to investors across the EU without first having to seek permission from each Member State and comply with different national laws. This was a bone of contention between Parliament and some Member States, with Parliament pushing for a marketing passport to be granted to non-EU players.

Parliament allayed these Member States' fears by proposing the provisions now in the text whereby AIF and AIF managers will obtain passports only if the non-EU country they are located in meets minimum regulatory standards and has agreements in place with Member States to allow information sharing.

Next steps

The directive's rules are to take effect by 2013, and four years after this the Commission will undertake a general review of the rules. ESMA and the Commission will also have the considerable task of fleshing out the details of how the directive works, through guidelines and implementing legislation.

(Press release from Economic and monetary affairs − 11-11-2010 - 12:25
Plenary sessions) : Source


See also: European Commission statement at the occasion of the European Parliament vote on the directive on hedge funds and private equity Source


Bg

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Little-known cryptocurrency hedge fund seeks $200m in SEC filing[more]

    From Coindesk.com: A little-known, newly established hedge fund is seeking to raise $200m to invest in cryptocurrencies, according to regulatory filings. The bid by Cryptocurrency Fund LP to raise the money was revealed in a Form D submission to the US Securities and Exchange Commission (SEC), dated

  2. FinTech - Bitcoin hedge fund director: ICOs are having a 'eureka' moment, Big data and analytics: Not just for quants anymore, Data breach of a single firm impacts systematic risk (and cost of capital) for the firm's entire sector[more]

    Bitcoin hedge fund director: ICOs are having a 'eureka' moment From Coindesk.com: The director of one of the first bitcoin hedge funds offered praise for initial coin offerings (ICOs) today, arguing in an investor note that the novel fundraising method is already showing signs of

  3. Already above average, Singapore high-networth investors add hedge funds and alternative investments[more]

    Komfie Manalo, Opalesque Asia: An above-average proportion of Singaporean HNW wealth is allocated to alternative investments - the majority of which is held in hedge funds, according to the latest research by ReportLinker. In its report entitled, Wealth in Singapore: HNW Investors 2017

  4. Launches - Crypto boom: 15 new hedge funds want in on 84,000% returns, Crypto madness is striking VCs as Union Square analyst leaves to start new fund[more]

    Crypto boom: 15 new hedge funds want in on 84,000% returns From Forbes.com: With 43 projects raising $1.2 billion in initial coin offerings since May 1, according to Nick Tomaino's The Control, and with stratospheric returns for so many ICOs -- 82,000% for Ethereum, 56,000% for IOTA, 44,

  5. FinTech - The machines are coming... Elon Musk's grim warning, Tezos' $232 million ICO may just be the beginning, A gentle introduction to Initial Coin Offerings (ICOs), Billion dollar tokens, ICOS & crazy market swings WTF is going on!?, How AI is changing the way we invest, How the tech revolution is bringing flip-flops and beanbags to Wall Street, A 'machine-learning' approach to venture capital[more]

    The machines are coming... Elon Musk's grim warning From Tenplay.com.au: Tesla chief Elon Musk has called on US Governors to take 'decisive' action to curtail "the greatest risk we face as a civilization": Artificial Intelligence, or AI. Speaking at a meeting of the National Governor Ass