Political and regulatory news
Issue 1 - 26 February 2010
Fierce debate over AIFM Directive continues
The Council of Ministers and the European Parliament are still fiercely debating their policy positions on the AIFM Directive.
The Council of Ministers and the European Parliament are working in parallel to scrutinise the proposals for the AIFM Directive (see previous article). Both parities have to agree on the final position before the Directive can become law.
Spain is now leading the review on behalf of the Council of Ministers, having taken over from Sweden which held the presidency until the turn of the year. It has adopted the Swedes closing position as a starting point for further negotiations. As a result, many of the positive changes for the investment company sector which were provisionally agreed in earlier stages have been maintained. In particular, it enables the investment company itself to be the AIFM. This, and other adjustments, resolve problems including removing restrictions on new share issuance, requiring redemption and threats to the role of the board. If this position can be preserved in the final Directive, then, although far from ideal, the outcome should be ‘liveable with’ for the investment company sector.
Despite these encouraging signs, there is still significant scope for the Directive to change. The Spanish have highlighted a range of significant, and controversial issues, which remain unresolved. These include the scope of the regulation, valuation, depositary requirements, leverage, remuneration and third country issues. Intense political debate rages over these points which could create unforeseen changes and disrupt hitherto established positions.
There have also been developments in the Parliamentary process, which has now published draft proposals to amend the Directive. These number nearly 1,700 changes – and amount to many times the pages represented by the original proposal. These cover diverse positions, for example, including calling for extensive exemptions (including for investment companies) and to only apply the Directive to larger funds (i.e. those with assets over Euro 1Billion). On the opposite side, other amendments call for no threshold at all (i.e. applying the rules to all funds irrespective of size) and extending the scope of the provisions. How these issues will be resolved remain to be seen but these amendments will form the basis for discussions over Parliament’s final position.
Although significant issues remain to be resolved on both sides of this process, there is still significant political pressure for the AIFM Directive to be agreed in July. Whether this is possible is likely to become clearer in March, when a common position agreed by the Member States may emerge. If this is achieved then it will provide a marker against which to judge the Parliamentary negotiations, and whether or not they are likely to reach a position which is reconcilable with the Council. The AIC will continue to lobby all relevant parties to protect the position of its members and their shareholders but it remains difficult to predict – for the moment – where this process will end up.
Next article: VCT rule changes on the horizon
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