The US Congress passed landmark legislation this summer that deeply impacts the private equity and real estate industries, including required registration with the Securities and Exchange Commission for fund managers with more than $150 million in assets, and the so-called Volcker rule regulated bank ownership of private equity funds.
European developments, however, slowed during the summer. But, that may be about to change.
This week, Michel Barnier, the EU internal market and services commissioner, said the agreement of European bodies on post-crisis financial reform shows a political willingness to negotiate on other pending regulatory rules including the Alternative Investment Fund Manager directive.
Indeed, the AIFM will impact the industry in numerous ways, depending on its final text as agreed between the EU Council of Ministers, the European Commission and the European Parliament. Perhaps most significant is the agreement on the “passport” provision which will dictate how private equity funds are marketed throughout the European Union.
Action on the EU directive has had numerous false starts.
In May, the EU Parliament’s Economic and Monetary Affairs Committee approved a version of the directive, while the Council of Ministers, which has representatives from each member state, approved a separate version of the directive. Lawmakers have been working since then on a compromise.
Barnier has said resolution is expected in coming weeks.
According to reports, Barnier indicated European lawmakers were now “in the last straight” regarding the AIFM. “There are two or three sensitive points including on the treatment of third countries and the passport,” Barnier was quoted as saying.
Under both the Parliament and the Council texts, non-EU domiciled fund managers, or “third country” managers, would be barred from marketing their funds to European investors unless they can demonstrate they comply with certain sets of requirements; doing so would give them a “passport” to market their funds. The requirements as well as the passport measures are treated differently in each text.
Some of the EU’s largest trading partners have expressed concern over their ability to meet the requirements proposed in the Parliament’s version, which is considered more restrictive because it features fewer exemptions for marketing and more protectionist language.