Proposal for a Directive on Alternative Investment funds managers (AIFM) CEPS Conference on the AIFM Directive Bruxelles, 29 June 2009

Political context G20 Conclusions: “HF or their managers will be registered and will be required to disclose appropriate information on an ongoing basis to supervisors or regulators, including on their leverage, necessary for the assessment of the systemic risks that they pose individually or collectively. Where appropriate, registration should be subject to a minimum size. They will be subject to oversight to ensure that they have adequate risk management. …” Commitment made by the Commission in its 4 of March communication on “driving European recovery” 2008 EP reports (Rasmussen and Lehne)

Guiding principles  AIFM activities are essentially cross-border: national rules not enough; need for EU common approach.  This proposal is the first attempt in any jurisdiction to create a common framework for direct regulation and supervision of the alternative investment industry. Important to get the balance right – avoid “overshooting” and protectionism.  Avoid risk of depriving EU economy from much needed funding. Risk of EU AIFMs and investors leaving EU.

Objectives  AIFM to be authorised and subject to ongoing supervision; and key services (asset safe-keeping, valuation) performed subject to strict controls  Enhanced transparency and monitoring of macro-prudential risks at national and European level, share information between Member States  Improved risk management and organisational safeguards to mitigate micro-prudential risks  Enhanced investor protection  Improved transparency and accountability to stakeholders of AIF controlling companies  Development of single market for alternative investments  Ensure an appropriate treatment of third-countries entities

Scope  Large but adapted to the different business models:  All managers are covered, no asset class definitions, but important indirect effect on funds (AIF) operation  Not covered if below 100m euros threshold or 500m euros (if no leverage and lock-in periods of more then 5 years), national rules apply (possibility to opt-in)  Common set of rules with specific chapters for AIFM using leverage or taking controlling stakes in companies. Differentiation principle within common provisions.

Architecture of draft proposal  Authorisation procedure for all AIFM within scope  Common organisational and operating provisions applying to all AIFM within scope (conflict of interest, risk and liquidity management, capital, organisational requirements, delegation)  Specific provisions applying to AIFM giving rise to particular risks  Rights of AIFM to manage funds and to market to professional investors throughout the EU  Third country chapter  Supervisory cooperation – exchange of information on systemic issues

Third country chapter  An AIFM will be able to market 3rd country AIF only if:  Agreement based on OECD Model Tax Convention with MS of the investor  Presence of a depositary and independent valuator in the EU (in case of delegations to a 3rd country, strict conditions are met).  Possibility for Home Member State to take more time to take decisions allowing the marketing of the fund.  MS can authorise 3rd country AIFM if:  regulation and supervision of 3rd country are equivalent  3rd country provides effective market access for EU AIF/AIFM  Information sharing about AIFM and AIF is ensured  Co-operation agreement on systemically relevant institutions and tax issues in place

Calendar 29 April 2009: adoption of the Commission proposal 26 May 2009: first Council working group meeting, other meetings on 17 June, 6 and 23 July 7 June 2009: EP election → appointment of a rapporteur (date ?) Priority file for the Swedish Presidency