Although endorsing the much debated proposal of the European Commission, the EESC calls for uniform risk data provision for all AIF and emphasizes their responsibility in triggering the crisis. The EESC insists that all alternative investment fund managers should be covered by the AIFMD.
The EESC tabled its opinion on the regulation of alternative investment funds, such as hedge funds and private funds. Although endorsing the much debated proposal of the European Commission, the EESC calls for uniform risk data provision for all such funds and emphasizes their responsibility in triggering the crisis.
"Within the European economy, the impact of hedge funds and private equity funds is more serious in social and employment terms than in the economic and financial sense," stated rapporteur Mr. Angelo Grasso. He nevertheless stressed that alternative investment funds have contributed to the increase of the leverage of and the inherent risk within the financial system, a fact lately illustrated by the downgrading of Greek sovereign debt which is pushing the Eurozone country to the brink of default.
The EESC therefore endorses efforts to regulate the industry and its recommendations to a corresponding Commission proposal was passed with a clear majority at the April session of the body.
At the April plenary, the EESC tabled a series of concrete recommendations to the Commission proposal aiming to create an appropriate and efficient regulatory and supervisory framework for the European alternative funds industry.
It believes that both the alternative investment fund managers and their products should urgently be regulated by the proposal, even if many aspects of the managers' regulation already impact the operation and features of the products.
As for hedge funds' and private equity funds' future obligations to hand over systemic risk data about their operations, the EESC recommends taking over the internationally supported principles worked out by the International Organisation of Security Commissions (IOSCO), specifying eleven kinds of data including much needed information from large leveraged funds.
In order to ensure transparency and to protect investors, the EESC insists that all alternative investment fund managers should be covered by the rules of the new directive, and therefore be required to record and submit key information. However, the data to be given and the rules to be complied by have to be scaled to the funds' sizes and the risks they run.
The proposal of fixing a leverage cap triggered a rich debate at the plenary floor. Nevertheless, the EESC has endorsed the fixing of a leverage cap, but warned legislators to keep a certain degree of flexibility in constraints to limit the pro-cyclical effect occurring when managers liquidate assets in reaction to a fall in the value of the investment.
How to treat funds based outside the EU was a central point of dispute at the EESC. In its opinion, it wants transparency standards that are equivalent to both European and non-European fund managers. The EESC hopes that Internal Market Commissioner Michel Barnier's initiative for a European passport extends also to non-EU managers. The EESC also notes that the protection of investors and market integrity are non-negotiable principles whose scope should be as wide as possible.
© Economic and Social Committee
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