Sun, May 29, 2016
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. Performance - Hedge fund ETFs take a battering, Have long-short credit funds delivered?[more]

    Hedge fund ETFs take a battering From ETFStrategy.co.uk: It was a blow for the hedge fund world when Hillary Clinton’s son-in-law Marc Mezvinsky announced he would be closing his Greek-focused fund after it plummeted in value by 90%, just two years after it launched. For passive investor

  2. Ares Capital to buy American Capital in $3.4 billion deal[more]

    From PIOnline.com: Ares Management's business development company Ares Capital Corp. is buying troubled BDC American Capital for $3.43 billion, said a joint news release by the BDCs and another release by Ares Management. Ares Capital Corp.'s assets are expected to grow to about $13.2 billion when t

  3. Launches - Man Group and American Beacon launch new emerging debt fund, Nikko AM launches new Japan equity UCITS fund[more]

    Man Group and American Beacon launch new emerging debt fund American Beacon Advisors, an experienced provider of investment advisory services to institutional and retail markets, launched the American Beacon GLG Total Return Fund today. The Fund became effective May 20. The America

  4. Emerging markets hedge funds perform strongly, but capital base erodes[more]

    Komfie Manalo, Opalesque Asia: Latin American Emerging Markets and Russian hedge funds lead industry gains in the first months of 2016, posting strong performances through April as global and EM equity, commodity and currency markets surged in recent weeks following steep losses to begin the year

  5. Americas - Australian banks sending U.S. hedge funds broke, Ryan Puerto Rico ‘rescue’ bill could be windfall for hedge funds[more]

    Australian banks sending U.S. hedge funds broke From SMH.com.au: US hedge funds are not having the best of years. Profits are hard to find, they're underperforming and the punters are losing patience, withdrawing US$15 billion ($20.8 billion) in the March quarter. They're expected to wit