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Transparency of institutional investors, Exchange of views
Rapporteur Klaus-Heiner Lehne (EPP/DE) presented his draft report on the transparency of institutional investors. Mr Lehne emphasised the need to target improvement of existing national legislations and to avoid merely adding EU legislation to them. He also underlined the need for harmonisation in the private equity funds system with relation to asset stripping and debt, and the need for the business sector to assume its responsibilities and allow more transparency.
He proposes to reduce the threshold form 5% to 3% for shareholders to notify issuers of the proportion of their voting rights resulting from an acquisition or disposal of shares.
The Commission should also investigate the issue of money laundering in the context of hedge funds and private equity funds, he says in his report.
With regard to hedge funds, he also calls the Commission to investigate the possibility of mitigating the undesirable effects of securities lending, and to examine whether reporting requirements should also apply to cooperation agreements between several shareholders and to indirect acquisitions of voting rights via option arrangements.
On private equity funds the Commission should establish rules that forbid private equity funds to “plunder” companies (so called “asset stripping”). The Commission should examine ways of addressing the issues arising when banks lend huge amounts of money to private equity funds and then disclaim any responsibility whatsoever as to the purpose for which that money is used or the provenance of the money used to repay the loan.
Manuel Medina (PES/ESP) and Aloyzas Sakalas (PES/LIT) underlined the importance of transparency. They also criticized the role of CRAs (point F) noting that self regulation via Codes of Conduct and best practices are not enough. Off-balance sheet trading is also an important issue.
Sharon Bowles (ALDE/UK) noted that the report ended up addressing a lot of fears, rather than facts. She noted that national regulatory regimes may bet he best solution to apply existing regulation (point C). Also, Codes of Conduct should be flexible and not ‘written in stone’ as they need to be adapted to changing situations. She also felt that the role of CRAs is overstated (F). On point (H) she noted that Codes must be made public and it has to be made clear who complies and why. More analysis and discussion were needed in order to define properly the scope of application of future legislation. She finally opposed the rapporteurs intention for further regulation and referred to currently existing regulation (point 1).
Mr Lehne pleads for dividing the consultative role and the rating of CRAs. He noted that current problems cannot be solved by self-regulation alone (H). With regard to the cooperation among supervisors (C) he said the “core regulation” must be identical between supervisors. He agreed with Mrs Boles that any discrimination among the different groups of investors should be avoided (Annex).
Provisional timeline (subject to change with regard to Rasmussen report in ECON):
5 May: Deadline for amendments
Vote in JURI: 27 May
Hedge funds and private equity, Presentation of working paper
Piia-Noora Kauppi (EPP/FIN) concentrated on the positive role hedge funds play in the European economy and proposes several non-legislative measures to meet enhanced transparency requirements (further details here).
She noted that currently no common definition of hedge funds exists. The Commission should come forward with a uniform definition of private placement in case of a forthcoming proposal.
Codes of conduct and best practice standards should be looked at to improve the regulatory framework for alternative investment industry. She listed the different EU acts applicable in this area and rejected the idea of a new text and suggested a better use of the existing legislative texts.
Several funds are operating off shore to avoid possible double taxation and to avoid bureaucratic hurdles. Therefore, important issues to look at include tax laws, private placement, etc. which could bring business back to
Mrs Kauppi will come forward with a draft opinion in due course.
Provisional timeline (subject to change with regard to Rasmussen report in ECON):
5 May: Deadline for amendments
Vote in JURI: 27 May
Draft opinion on Solvency II
Sharon Bowles (ALDE/UK) presented her draft opinion noting that it is necessary to make it clearer that all supervisors are involved in group supervision, that all should have access to documentation as a routine matter and be dynamically involved in decision making (Amm 6/25). She also underlined that the transfer of funds from subsidiary to subsidiary should be made possible, but the transfer will require mutual contractual obligations (Amm23). However, the special treatment of surplus fund is currently discussed in ECON Committee and will not be subject to her amendments.
Other things she touched upon were related to the MCR conflicts of interest when a national supervisor acts as a group supervisor, the legal entity of CEIOPS, and supervisory liability, on which she calls for some kind of a uniform provision.
Peter Skinner (PES/UK) agreed with her amendments to strengthening the colleges and also to those with regard to the court treatment of SCR and MCR. On other issues such as the legal entity of CEIOPS and the transfer of funds issue the debate will go on in ECON.
Piia-Noora Kauppi (EPP/FIN) in particular agreed with Amm 25 mentioning that all information has to be shared among supervisors and the reference to Code of Conducts as made in Amm 19.
Timeline:
5 May: Deadline for amendments
Vote in JURI: 27 May