Wed, Jan 18, 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. The Big Picture: The case for emerging market debt in 2017[more]

    Benedicte Gravrand, Opalesque Geneva: Emerging market (EM) assets outperformed in 2016 mainly because of stronger fundamentals and an improving international environment, with GDP picking up speed, leading to positive earnings revisions for the first time in five years,

  2. Short Selling - Long-short hedge funds are ditching the shorts to focus on longs[more]

    From Bloomberg.com: What happens when you take the "short" out of a long-short trading strategy? Some hedge funds are about to find out. Equity long-short fund managers, the biggest category in hedge funds, hold the fewest bearish stock bets on record, data compiled by Credit Suisse Group AG s

  3. SWFs - China sovereign wealth fund CIC plans more U.S. investments[more]

    From Reuters.com: China Investment Corporation (CIC), the country's sovereign wealth fund, is looking to raise alternative investments in the United States due to low returns in public markets, its chairman said on Monday. CIC will boost its investments in private equity and hedge funds as wel

  4. Some hedge funds strong start in 2017 nice contrast to 2016[more]

    With the 2016 HSBC Hedge Weekly performance rankings in the books - a year in which the same leader-board entries pretty much dominated unchallenged throughout the year - comes a new leader board that is a hard-scrabble mix of hedge fund styles and categories. What is clear after but a few short wee

  5. Macro hedge funds and CTAs outperform in December on strong dollar[more]

    Komfie Manalo, Opalesque Asia: The last month of 2016 saw risk assets climbing higher, as part of expectations that the new U.S. administration will remove barriers to growth and investment, Lyxor Asset Management said. December also saw the Fed hik