A member of the European Parliament has proposed a compromise on the controversial third-country rules of the proposed EU Directive on Alternative Investment Fund Managers. Jean-Paul Gauzes, the appointed “rapporteur” for the directive, reportedly told journalists Tuesday that he is considering a tiered-system of access to the EU market, rather than the all-or-nothing passport process that had been under consideration.
The current version of the directive would prohibit foreign fund managers from marketing within the EU unless they can demonstrate that they are subject to a regulatory regime of equivalent rigor in their home country. Currently, many major EU trading partners, including the US, Russia, China, India and Brazil, do not meet this standard, and therefore would be denied a “passport” to market within the EU.
Gauzes today discussed the idea of a three-tier system, according to Dow Jones. The first tier would include fund managers from countries that have regulatory regimes deemed “equivalent” to the EU’s. Those managers would be granted EU passport status and access to market in all EU member states.
The second tier would include fund managers from countries that have strong regulation, but with some gaps, would have to conform to individual member states’ marketing rules. Gauzes gave the example of the Cayman Islands for this second tier.
All other countries would fall into a third tier that would be blacklisted from marketing in the EU.
Gauzes’ idea is similar to a proposal that the European Private Equity and Venture Capital Association (EVCA) has submitted to parliament, which suggests allowing non-EU fund managers to market in individual EU member states by complying with the existing system of national private placement regimes until the managers are able to establish the equivalence of their home regimes.
Members of the EU Economic and Financial Affairs Council were expected to iron out the details of the directive at a meeting in March before sending it to the European Parliament for a vote. But the directive was taken off the agenda reportedly following an intervention by UK Prime Minister Gordon Brown. The EU president said the directive would be back on the agenda at some point before the country’s rotating six-month term ends in June.