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While the debate revolves round specialist rules on how to apply the Directive, the industry sees the hawkish Commission interpretation as unpicking some of the hard-fought political compromises that underpinned the AIFMD deal in 2011. Beyond the substance, the Commission’s decision to overrule key parts of ESMA’s recommendations, submitted last November, also raises questions about the influence of a pan-European supervisor that is usually championed by Brussels.
European officials insist that most of the ESMA advice was adopted by the Commission as it translated the advice into legal text. They say the divergences were needed to enhance legal certainty or to ensure methods were comparable across the European Union. “Implementing measures are made to make the Directive operational, not to try and get back what might have been lost in earlier compromises”, said a Commission spokesperson. “There is very broad support for the direction of travel. Some issues still need to be ironed out which is completely normal at this stage.”
Banks and investment managers are adamant that the Commission is adopting a tougher line on numerous areas and will drive up the cost of alternative investments. They say that custodian banks would face increased liability for investment losses, overall fund borrowing would be limited, and fund managers in non-EU jurisdictions would have more difficulty accessing EU investors.
Concerns are so acute that industry representatives are speaking out while the draft is still under negotiation with Member States. Andrew Baker, chief executive of the Alternative Investment Management Association (AIFMA) which represents the $2 trillion global hedge fund industry, said: “We are concerned that this draft regulation appears to significantly and substantially diverge from the ESMA advice”.
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