27 September 2011

IMA: ESMA's advice on third countries should reflect AIFMD Level 1

In its  response to ESMA’s draft advice to the European Commission on AIFMD (Alternative Investment Fund Management Directive) Level 2, the IMA said ESMA’s proposals go beyond the carefully negotiated framework of AIFMD and the advice requested by the Commission.  Of particular concern is the re-introduction of an ‘equivalency’ requirement when delegating investment or risk management to non-EU entities, or in relation to depositaries in non-EU jurisdictions.

Commenting, Julie Patterson, Director at the IMA, said: “ESMA’s proposed equivalency requirements would create a fortress around Europe and go against the interests of EU investors and the political consensus at Level 1. The extensive AIFMD Level 1 debate on delegation concluded that a requirement for equivalency of regulation of non-EU entities was unworkable and undesirable.  Even in highly-regulated jurisdictions, it is not possible to find an equivalent provision for every EU requirement. Therefore, equivalency could have the unintended consequence of closing off investment in non-EU jurisdictions for EU institutions wishing to invest via alternative investment funds."

 “We have similar concerns with the proposals on third country depositaries. AIFMD Level 1 recognises that contractual measures can be used to provide the same level of investor protection. We agree that EU and non-EU alternative investment funds should compete on a level playing field. That is why AIFMD Level 1 and the Commission’s request to ESMA refer to regulation having the ‘same effect’. We urge ESMA to review its draft advice to ensure the rules are workable.”

Full response

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