07 January 2016

ALFI / LPEA response to Commission consultation on the review of the EuVECA and EuSEF Regulations

Any manager complying with the EuVECA regime (in addition to the AIFMD rules for managers also authorised under the AIFMD) should be allowed to manage, name and market their EuVECA-compliant funds as “EuVECAs”. This change would (a) be good for investors, as same products would be named the same way, (b) generally be good for the development of EuVECAs because bigger players could put more resources in promoting this product than smaller ones; if they were given access to the EuVECA brand they paved the way for smaller players, and hence (c) further promote the development and financing of small and mediumsized enterprises.

It should be taken into account that, to the extent AIFMs above the threshold are required to be authorised under the AIFMD and comply with the rules of the AIFMD, there are no prudential concerns in allowing these AIFMs to set up and market EuVECA and EuSEF funds to professional investors. From a regulatory and supervisory perspective, an authorisation under the AIFMD is more stringent than a registration under the EuVECA and EuSEF Regulation.

Any manager complying with the EuSEF regime (in addition to the AIFMD rules for managers also authorised under the AIFMD) should be allowed to manage, name and market their EuSEF-compliant funds as “EuSEFs”. This change would (a) be good for investors, as same products would be named the same way, (b) generally be good for the development of EuSEFs because bigger players could put more resources in promoting this product than smaller ones; if they were given access to the EuSEF brand, they paved the way for smaller players, and hence (c) further promote the development and financing of qualifying portfolio undertakings. [...]

Registration requirements are indeed perceived as a hindrance for small managers which sometimes do not even consider an application for registration. Inappropriate requirements from a perspective of small managers include high minimum capital requirements, high registration and marketing fees, the requirement to set up a local IT infrastructure or to use local service providers as opposed to well-known international cloud offerings, the requirement to hire an external auditor for the manager, and finally the separation of roles for micro entities.

Moreover, the requirements are to a large extent aligned to the requirements of the AIFMD, especially in terms of human resources (segregation between portfolio and risk management), own funds (currently at EUR 125,000 in Luxembourg), infrastructure (including IT) and audit requirement at manager level (with annual costs of around EUR 20,000).

The time, costs and hassle for registering a small venture capital fund in numerous countries are not only too onerous but also a heavy burden for most EU venture capital funds.

Full response

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