Opalesque Industry Update - The ‘patchwork quilt’ of regulatory requirements resulting from European Union member states exercising discretion under the Alternative Investment Fund Managers Directive is likely to deter many non-EU firms from operating in the market – but that need not be the case, according to Sturgeon Ventures, the regulatory incubator.|
The ‘National Private Placement Regime’ enables fund managers to market hedge funds in the EU that are ineligible for passporting under the AIFMD, either because they originate outside the European Economic Area or they are managed by non-EEA managers. It is estimated* that around 17 of the EU member states intend to allow some form of private placement, while others have even yet to announce their intentions. But the result is a patchwork of national treatments of the inward marketing of alternative investment funds.
Sturgeon believes a number of alternative fund management companies, especially US hedge funds domiciled in the Caymans, will give up on trying to operate in the European Union because of the difficulties navigating the variety of requirements each country will make.
But Sturgeon has launched a new service to enable AIFs to produce bespoke submissions meeting each country’s regulatory requirements.
Seonaid Mackenzie, Managing Partner at Sturgeon, commented: “We believe we are the first regulatory incubator or ‘umbrella’ to provide this service. We are working with a number of law firms that that can draft the relevant appendices to current offering memorandums in line with the different jurisdictions. We can update our service almost as fast as countries can announce their new regimes.”
Jake Green, Senior Associate at Ashurst, the regulatory legal firm, said: “The market is frustrated with the current uncertainty in the European Union and regards the AIFMD as having created some increased operational headaches in getting funds into the EU. These issues cannot be ignored but at the same time they are not insurmountable and Sturgeon’s new service does offer a solution.”
Sturgeon Ventures is the largest and longest-established wholesale regulatory incubator, which is also known as an ‘FCA umbrella’ or ‘regulatory hosting platform’.
Sturgeon specialises in helping entrepreneurs establish start-up financial services businesses, nurturing them through the initial regulatory phase until they can be directly regulated by the Financial Conduct Authority in their own right. Sturgeon provides advice on marketing, training, human resources, branding and compliance, helping companies to gain competency and prove their business models to the regulator. It also offers education and training courses covering: senior management obligations and governance; monitoring governance of fund directors; anti-bribery and anti-money laundering procedures; market abuse; data protection training; compliance induction for wholesale, private equity and real estate fund managers; and financial promotions. It believes it is the UK’s longest running regulatory umbrella in the institutional arena.
*Source: Ernst & Young, 2013