• FSA critical of European Commission for not addressing full impact of AIFM Directive before drafting
  • AIMA calls for European-wide impact assessment

The Financial Services Authority has hired consultancy CRA International to produce an impact assessment on the proposed EC Directive for Alternative Investment Fund Managers (AIFM).

The FSA shares several of the concerns of the hedge fund industry about the planned Directive. In a speech earlier this summer, FSA Asset Management Director Dan Waters warned of a "significant risk of ill-considered and disproportionate regulatory intervention," which he said could damage the European hedge fund market.

Waters criticised the speed with which the Directive had been drafted and suggested that the market analysis conducted by the European Commission before drafting "could not have possibly addressed the myriad sweeping impacts" of the Directive. Waters said the FSA would be "very worried" if the Directive led to "prescriptive product regulation" and was concerned by measures to restrict non-EU funds from being marketed to EU investors: "To impose an outright ban on third-country funds and managers would extinguish valuable, open and successful markets without justification."

The Alternative Investment Management Association welcomed the FSA's decision to commission a third-party assessment. CEO Andrew Baker said he hoped the European Commission would follow suit and added: "It would be extraordinary if there were no proper assessment at a European level of the impact of a directive that could have extremely wide-ranging consequences."

According to AIMA, the scope of the FSA assessment will include impact on investment portfolios, impact on costs for firms and directors, the impact on functioning of markets and the question of risk, and the effect on European competitiveness.

Meanwhile, lobbying efforts against the AIFM Directive have intensified with both Mayor of London Boris Johnson and UK Treasury Minister Lord Myers making trips to Brussels to meet with key members of the Commission and MEPs. Earlier this month, the European Parliament appointed MEP Jean-Paul Gauzès as "Rapporteur" for the draft Directive, who will play a critical role in steering the legislation through the parliamentary stages.

To view a video clip highlighting AIMA's concerns about the AIFM, click here.

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