IMS Group condemns political interference in regulation

Peter Moore, head of regulation & compliance for the IMS Group, a compliance and regulation consultancy, has reproached policymakers for failing to carry out proper cost/benefit analysis in their implementation of the Alternative Investment Managers Directive (AIFMD).

Moore’s disapproval of policymakers’ handling of the AIFMD was made clear in a recently published IMS Group statement. “The absence of an EU commissioned cost/benefit analysis at any stage of AIFMD’s development serves up one of the best examples of political interference with the regulatory environment,” he declared.

“The mere perception that alternative funds presented systemic risk carried the day, on both sides of the Atlantic. Those perceptions are now adding to the cost of investing,” he added. Moore (pictured) also accused policymakers of failing to deliver consistency across regulatory regimes.

“Any new regulatory requirement should be directed towards an identified market failing and formulated upon an analysis that the benefits accruing from the new rules outweigh the costs of their implementation,” Moore concluded.

His comments were in part a response to a recent report from the Alternative Investment Management Association (AIMA) on the European Securities and Markets Authority’s (ESMA) assessment of how AIMFD should be implemented.

ESMA is responsible for advising the European Commission on the implementing measures for the AIFMD and asked for feedback on a consultation paper it circulated in July. AIMA said it had several major areas of concern regarding the directive, including proposals relating to depositaries, leverage, valuation, transparency and liquidity management.

An AIMA study into the potential impact on depositaries found that the total cost to hedge funds of implementing the severest options proposed in the paper could reach $6bn. Depositaries may increase their fees to funds to compensate for the liability they would be expected to absorb for losses incurred by unaffiliated sub-custodians. AIMA said those costs would be passed on to hedge fund investors such as pension funds, charities, universities and insurers.

Andrew Baker, chief executive of AIMA, said he was concerned that some of ESMA’s propositions were so extreme “the eventual regime could end up being not only wholly unworkable but also potentially dangerous by greatly increasing systemic risk.”

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