AIFMD implementation must enable fair competition, says Swedish trade body
The Swedish Investment Fund Association has said the implementation of AIFMD in Swedish law must enable domestic firms to compete across Europe as easily as they can currently via Ucits.
The statement came in its latest response to Swedish government proposals for implementing the Directive.
In its latest response (http://www.fondbolagen.se/sv/Juridik/Remissyttranden/2013/Dokument/Remissvar-avseende-betankandet-Forvaltare-av-alternativa-investeringsfonder-SOU-201267-Fi20123710/ ) to the consultation SOU 2012:67 (http://regeringen.se/download/3fd39684.pdf?major=1&minor=200894&cn=attachmentPublDuplicator_0_attachment – published October 2012) the Association said that the Directive opens up new opportunities for the Swedish fund market, which in turn requires a review of the existing Swedish fund rules.
“The Directive means opportunities for fund companies to manage all types of so called alternative investment funds (AIFs), which previously was not possible. Fund companies and other AIF managers will not be able to manage as well as market these cross-border funds. In time one can count on the AIF market developing in the same way as the Ucits market. On the Swedish market there are today more than 4,000 foreign Ucits for sale, and about 500 Sweden registered ones. It is therefore important for Swedish AIF managers to get the same opportunities as managers in other EEA countries to operate competitive businesses.”
“The lack of a Swedish framework for other types of funds than ‘specialfonder’ [special funds, defined in current Swedish law] will constitute a challenge for Swedish AIF managers both in the Swedish market as well as across borders. There is therefore a need to introduce regulation of such funds that is common in other countries, particularly property funds (for example, Reits), ‘associationsrättslig’ funds [a type that may constitute a stock company or an association] and funds that are allowed to have other kinds of investment assets than the special funds.
“For fund investors there will otherwise be a lack of Sweden registered alternatives for investing in such funds. It would be remarkable if, for example, a Swedish AIF manager who wishes to buy an ‘associationsrättslig’ fund on the Swedish market would have to register his fund in another country because of holes in Swedish regulation. That would also imply that Swedish lawmakers have absolved themselves of responsibility to regulate, for example, proper consumer protection in such funds. From a broader socioeconomic perspective and in respect of taxation it would be preferable if there were an opportunity to establish such funds in Sweden. Particularly when it comes to the ‘associationsrättslig’ fund type it is internationally well known, and therefore often easier to market in other countries than the ‘kontraktsrättslig’ type of fund that exists in Sweden [this latter type of fund is based on agreement between three parties, a company managing assets – fund company – a bank or other credit institution providing custody of the assets, and the shareholders].”
Apart from the need to ensure local law is amended suitably to ensure domestic managers can compete across Europe, the Association also highlighted retail investors, consumer protection, certain proposed exemptions, and the need to ensure that the implementation of the new rules do not constitute an excessive burden on the industry.
Consumer protection is a key area of concern because existing ‘special funds’ are encompassed by specific rules. However, the implementation proposals as they currently stand suggest that similar protection would not be offered for other types of alternative funds under the new AIF regime.
“There is a risk that in the long run this becomes confusing for fund investors, who with some reason may come to expect that even these investment funds, which can seem similar to ‘special funds’, are encompassed by the protection regulations.”
That said, the Association also notes in its latest response that it is important to maintain certain exemptions for ‘special funds’ that specifically do not target retail investors.