House of Lords expresses concerns about EU AIFMD - coordination with US regulation essential in order not to lose competitiveness
11 December 2009
House of Lords EU Committee is concerned the directive does not fulfil global regulatory arrangements. It also considers the Swedish compromise proposal a good agreement, moving towards a directive more compatible with emerging proposals in the US and the rest of the G20.
The House of Lords EU Committee has written to Lord Myners, the Financial Services Secretary, to express its concerns about the EU Commission's proposed Alternative Investment Fund Managers Directive.
The Committee is concerned that the directive does not fulfil global regulatory arrangements. It also considers the compromise proposals of the Swedish Presidency to be a good agreement, moving towards a directive more compatible with the emerging proposals in the US and the rest of the G20.
The Committee believes there are serious problems with the detail of the directive as originally drafted and the tools provided for supervisors to tackle risk. The transparency and disclosure requirements within the directive need to be amended to take into consideration the different types of alternative investment funds. Information requirements have to be proportionate and carefully thought out to ensure that the directive does not lead to supervisors being swamped with large amounts of irrelevant data. It may be more appropriate to agree that disclosure requirements are set at Level 2, allowing for more flexibility than Level 1.
Concerning leverage ratios, the Committee thinks these are not an absolute measure of risk. As such, an overall leverage limit or cap, proposed by the directive as drafted, will not automatically cap risk. On the contrary, it may, indeed, create systemic risk by requiring several funds to liquidate positions in a particular company at the same time.
© HM Treasury
