Report: Spain postpones EU directive talks on UK pressure

Debate by members of the EU Economic and Financial Affairs Council on stringent regulations for EU fund managers scheduled for 16 March has been temporarily cancelled.

A crucial meeting of European finance ministers that could have paved the way for passage of stricter EU regulations on fund managers was taken off the agenda on Tuesday, reportedly following an intervention by UK Prime Minister Gordon Brown.

Members of the EU Economic and Financial Affairs Council were expected to iron out their differences over the “Directive on Alternative Investment Fund Managers” before sending it to the European Parliament for a vote.

If passed in its current form, the directive would impose new disclosure requirements and compliance costs on fund managers based in the EU. Differences remain among member states over issues like who can act as depositories and whether firms with less than €100 million in assets can be excluded from the requirements.

Such issues were scheduled for debate on Tuesday before EU president Spain took the discussion off the table, saying the rules needed more work and the directive would be back on the agenda at some point before the country’s rotating six-month term ends in June. 

“What’s happened today has taken us all a bit by surprise, but we have always said that there would be no sense in rushing to premature conclusions and that more work needed to be done, and this seems to have been recognised by the finance ministers,” said Alan Murray, head of communications and public affairs for the British Venture Capital Association (BVCA).

Although speculation about what caused the delay has included the economic problems in Greece and the upcoming UK general election on 6 May, the Financial Times also reported that Brown called Spanish Prime Minister Jose Luis Rodriguez Zapatero the night before the scheduled meeting and said Britain could not accept the compromise plans on the table.

The UK, home to 60 percent of Europe’s private equity firms, has been a staunch opponent of the directive in its current form, especially the “third country” rules that would prohibit foreign fund managers from marketing within the EU unless they have an equivalent regulatory regime. UK officials have said that such rules would create a barrier to investment by major EU trading partners such as the US, Russia, China and India.

What's happened today has taken us all a bit by surprise, but we have always said that there would be no sense in rushing to premature conclusions and that more work needed to be done.

Alan Murray

France and Germany have led the bloc seeking to keep such restrictions in place, but the delay by Spain to obtain more support may indicate that recent lobbying by the US and groups like the BVCA and European Private Equity and Venture Capital Association (EVCA) is making an impact. It was revealed last week that US Treasury Secretary Timothy Geithner wrote to the European Internal Market Commissioner to express concerns that US firms would be discriminated against by the directive. 

The EVCA on Monday also released a study showing that 67 percent of institutional investors surveyed said they would reduce or completely halt their allocations to European growth or venture funds if the current version of the directive passes. “We continue to be fully engaged in the process ahead in order to preserve the core objectives of the directive while maintaining the flow of capital that is so vital to the financing of economic recovery,” said Javier Echarri, EVCA secretary general.

Attention now shifts to the European Parliament, with an ECON committee debate on the directive going ahead for 17 March.

“Parliament is debating the directive as scheduled tomorrow, and no doubt some further views on Parliament’s position will emerge from that, and we are probably now in a position where the Parliament, the Council of Ministers and the European Commission will progressively be working together to try and arrive at a compromise,” Murray said. “And as part of that process ourselves and the other national associations will be wanting to input our views to that.”