THE progress of the draft Alternative Investment Fund Managers Directive is being monitored by the Financial Supervision Commission.
On May 18 the Council of the European Union agreed for negotiations to begin with the European Parliament on the draft directive.
If adopted by the EU Parliament this will increase the regulatory requirements for fund managers, including those based outside the EU, for any alternative investment funds - such as hedge funds and private equity - marketed or operated in the EU.
If the draft directive is approved by the EU Parliament next month much of the detail for the proposals will remain a work in progress and the commission will maintain a close watching brief on the situation as it develops.
The EU’s stated aim is to create harmonised regulatory standards for all alternative investment fund managers within its scope and to enhance transparency of the industry and reduce risks to financial stability.
Proposals which will be of primary interest to the Island’s funds industry are those relating to non-EU Managers of AIFs which will be marketed into the EU.
The directive proposes that individual member states may allow managers in non-EU states to market AIFs to professional investors in their jurisdiction providing there are rules in the home jurisdiction which are at least equivalent to the directive in relation to:
• Transparency Requirements – including requirements relating to an AIF’s annual report, requirements for disclosure to investors and reporting obligations to competent authorities in relation to issues such as leverage, investment strategies and valuation procedures
• The obligations and protections in place where an AIF acquires control of non-listed companies and issuers.
Additionally, there must be appropriate co-operation arrangements in place between the member state and home regulator for the purpose of systemic risk oversight and exchange of information in line with International standards.
The Committee of European Securities Regulators will be tasked with developing guidelines for such co-operation arrangements.
The Financial Supervision Commission is a full signatory to the IOSCO Multi-Lateral Memorandum of Understanding and is confident that it meets world class standards in relation to international co-operation.
Other matters that may be of relevance to an assessment of a 3rd Country could include: -
• international standing of the jurisdiction including IMF reports on anti-money laundering and countering terrorist financing and regulatory standards;
• reciprocal access for EU funds to the 3rd country jurisdiction; and
• tax information exchange agreements between relevant non-EU and EU authorities.
The commission believes that the Island’s regulatory environment and established co-operation agreements and practices mean that it is well placed to respond to the challenges and opportunities of the AIFMD.
However, until the fine detail is known, together with the EU assessment process for judging equivalence, the final position has yet to be determined.
The Island, and its advisers, have maintained and will continue to maintain, a careful watching brief on developments. The Financial Supervision Commission has undertaken to prepare for the AIFMD in order to react quickly as developments occur in the Island’s and the fund management industry’s interests.
