Regulators learn from “painful process” of AIFMD

Four regulators and a representative from the EU Commission admitted during a panel in Luxembourg that the first stage of the Alternative Investment Fund Managers Directive (AIFMD), designed to introduce sweeping reforms of the regulation of hedge funds, private equity and real estate, was “a painful process” they can learn from in future.

“The Commission occupies an interesting and complex role,” said Dan Waters, director of conduct risk and asset management at the FSA, describing its direct political influence as “problematic”.

“We have learnt from that,” he said. “If we had to do it again, we would find a less painful way.”

Level One of AIFMD, the first round of the implementation process of the directive, had shown the importance of having a sound impact assessment, he said.

Jean-Marc Goy from Luxembourg’s financial regulatory body echoed Waters’ concerns, saying it was important to engage with industry during the implementation process.
France admits it slowed the process down

France’s head of asset management regulation policy Patrice Berge-Vincent, meanwhile admitted it was France’s fault it took 18 months to adopt the directive.

He said France would have preferred to see national private placement regimes maintained, whereby national rules would be upheld for the marketing of non-EU funds within the EU, a more protectionist approach.

He thanked the “diplomatic, tireless negotiations from the UK” that ensured non-EU funds could be marketed across the region by extending the EU passport to third country funds and managers.

Waters appeared to confirm the UK had pushed efforts to see the passport extended, saying he had found “it is not shouting that wins, but reasoned debate”.

The passport allows alternative investment funds and fund managers to register in one EU Member State but enables them to market across all EU Member States.

Mistakes made in the original drafting

Berge-Vincent said a negative outcome of AIFMD was that it was too detailed at the Level One stage, when those details should have been worked out at Level Two.

Adding an investor protection proposal had also made the debate “a little more complex”, he said.

“We should have stuck to the one objective of financial stability,” he argued.

Ugo Bassi, head of internal market and services, asset management at the European Commission, defended the AIFMD’s original proposal.

It was a post crisis measure that had to be seen in the conditions and circumstances of April 2009, he said, admitting that as a result the drafting process had been quick.

Although industry had highly criticised the directive at first, he said the Commission had been successful in bringing industry round to what it was trying to achieve, to the extent that some of them changed their position papers.

He conceded that AIFMD had been “one of the most controversial proposals made by the Commission in the last years,” however.
It’s not over yet

“It’s not over,” he warned. “We’re in the middle of the process; we’ve got the first step right.”

He said he hoped to see more cooperation with industry as AIFMD goes into its next stage, Level Two, even though Member States will only have six months to implement it.

“If we work together, [both the] Commission and industry to get the results right, then the issue can be transformed into an opportunity,” he said.

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