29 February 2012

EBF comments on proposal on Venture Capital Funds

First of all, the EBF would like to point to the important interaction with the Alternative Investment Fund Managers' Directive (AIFMD). In the proposed regulation there is a reference to a threshold above which funds automatically turn into the AIFM status. This would lead to several major problems EBF believes, i.e.

i) the loss of the passport for qualified retail investors; the AIFM regime is somewhat different and the passport offered is not the same;

ii) the necessity to register fully with the AIFM which triggers the question of what happens if the fund falls below the threshold at a later stage;

iii) the fact that this mechanism may be triggered by non-venture capital funds managed by the same entity;

iv) the question of relations with third country managers which is not addressed at all in the proposal (can a third country manager benefit from the regulation for its EU funds or must it be located in the EU?).

Furthermore, these funds do not require a depositary of any shape or form. The EBF believes that this is not acceptable. Even if these funds are small and specific, at least the recourse to one of the types of depositaries envisaged in the AIFM should be required, even if details are left to the EU Member States or the Fund to decide.

Furthermore, it is not clear if the fund or the manager must both be registered; there is mention of both but conflicting requirements apply. Some parts of the regulation speak about the manager, while other parts speak about the fund.

Moreover, from an EU economic development perspective it may be inappropriate that the investments may only be in shares, thus there is little or no possibility to use debt instruments or even convertible bonds. This may make the regulation unattractive.

The EBF strongly supports the proposal contained in article 6 which outlines the category of clients that may invest in these types of funds, they shall be either professional clients (per se or on demand) according to MiFID, then the category of other clients shall specifically be open for all other clients whatever their definition under MiFID provided they comply with the different criteria.

In conclusion, the EBF said it would be very grateful if its observations could be taken into account as Mr Lambert examines the proposal further and proposes amendments and improvements. It would also be happy to meet and explain its points of view and concerns further.

Full letter

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