• Alternative Investment Fund Managers Directive: Update
  • September 28, 2009 | Authors: Peter Anthony Bibby; Helen Janet Marshall; Christopher Leonard; Roger P. Joseph; Neal E. Sullivan
  • Law Firms: Bingham McCutchen (London) LLP - London Office; Bingham McCutchen (London) LLP - Boston Office; Bingham McCutchen (London) LLP - Washington Office
  • On 30 April 2009, the EU Commission published a proposal for a directive on Alternative Investment Fund Managers (the “AIFM Directive”). As we described in our alert of 6 May 2009, in its current form the AIFM Directive would significantly reshape the European investment management landscape. Even though the AIFM Directive refers to alternative investment fund managers, the Directive as proposed would require all entities managing or promoting pooled funds of any kind in the European Union — even those funds not normally thought of as alternative investment vehicles — to be subject to regulation.

    Those entities that were authorised to manage alternative investment funds pursuant to the AIFM Directive would be subject to limitations on the use of leverage, and would be required to carry a specified level of capital and to provide greater levels of disclosure to their investors and regulators. A manager incorporated outside of the EU, including for example US investment advisers registered with the SEC, would only be permitted to promote funds within the EU where it is authorised pursuant to the Directive or able to demonstrate that it is subject to regulation equivalent to the AIFM Directive and where the manager’s country of incorporation has entered into co-operation agreements with the EU member state as to the exchange of tax and supervisory information. To date, there is no indication that the EU is minded to treat current or future US regulation as “equivalent” for this purpose.

    The EU Commission originally intended that the AIFM Directive would be implemented by the end of 2011. The AIFM Directive is now before the European parliament and there is a general consensus that a directive will be adopted.

    However, Charlie McCreevy (European Commissioner for Internal Market and Services) said on 18 September 2009 that he recognised “that there are certainly ways to improve our proposal in several respects, for example on technical issues such as depository arrangements and valuation”. Speaking at the FSA’s Asset Management conference on 19 September 2009 David Wright (Deputy Director General of the EU Commission’s Internal Market and Financial Services Directive) accepted that the AIFM Directive would have to be re-worked and that there would be a delay in implementation of at least one year.

    Nevertheless, the Commission remains committed to the core principles of the draft directive and in particular the requirement that non-EU managers (including US managers) should only be permitted to market funds in the EU if authorised pursuant to the directive or subject to “equivalent” regulation.

    Our alert of 6 May 2009 concluded that the regulation of the European fund management industry was on the verge of a significant shake-up. That shake-up has been delayed, but it remains on course.