Gauzès believes the proposed equivalence criteria - though it would need to be broadly similar - would not require non-EU countries to have identical legislation to the EU. He is “not worried" about the US being able to meet the criteria since the transition period would be between 3 and 5 years.
The EP is moving closer to agreeing conditions that would enable hedge funds domiciled outside the EU to gain a passport under the alternative investment fund managers (AIFM) directive, it has emerged.
Directive's rapporteur Jean-Paul Gauzès said equivalence with non-EU countries could be determined by four conditions. A jurisdiction's regulator would have to exchange regulatory information with EU regulatory authorities. In addition, an EU fund would have to be able to market itself freely in the third country in the spirit of reciprocity. Another condition is anti-money laundering and anti-terrorist regulation in place in the third country. Finally, there would need to be tax agreements in place between the non-EU jurisdiction and the EU.
If a country met those four conditions, it would enable three fund types to use a passport to market across the EU. These groups would cover funds domiciled in a third country but managed from the EU, managers with funds based in the same third country and situations where the manager was based in one non-EU country managing a fund domiciled in a another non-EU country.
Gauzès said today in London that "deadlock" remained over what would happen to funds domiciled in a country that failed to meet the equivalence criteria. Gauzès said he and a number of MEPs favoured an outright ban on the selling of such funds to EU investors.
However, some MEPs maintain that such funds should be sold under the existing private placement regime. British Conservative MEP Syed Kamall, one of the four shadow rapporteurs negotiating the compromise directive with Gauzès, said banning funds and managers based in countries without equivalent regulatory criteria would be "hugely protectionist".
Kamall and British Labour MEP Peter Skinner both said international standards, such as those drawn up by the International Organisation of Securities Commissions (Iosco) would be preferable to EU standards for determining equivalency.
Gauzès said he was "not worried" about the US being able to meet the criteria. There is likely to be a transition period of between three and five years before the equivalence criteria would kick in. During the interim the same conditions as at present would apply.
The rapporteur said the proposed equivalence criteria would not require non-EU countries to have identical legislation to the EU, although it would need to be broadly similar.
The criteria could be defined in the directive. There was likely to be a role for the newly-established European Securities and Markets Authority (Esma), although this was yet to be agreed.
© Hedgeweek
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