Oh, Canada… AIMA Finally Decides to Oppose E.U. AIFM Directive
So it appears that Canada finally woke up and realized that the AIFM drama that’s been dominating the European stage for the past little while just might have an impact on its own burgeoning hedge fund industry which manages about US$25 billion according to FINalternatives. A little late to the party, but better late than never, right? Well, that’s one more cry of dissent added to the many opposed to the proposed European Union hedge fund regulations.
The Canadian chapter of the Alternative Investment Management Association is lobbying the country’s government to join in protesting the passage of the AIFM directive, which could ban the most, if not all, non-E.U. based hedge funds from marketing themselves to investors within the 27 member states. The legislation includes rules restricting everything from fund managers’ compensation to hedge fund borrowing and hiring of third parties to carry out tasks on their behalf, in addition to rules governing risk management, liquidity, transparency, and conflicts of interest. The legislation also includes proposals to combat terrorist financing and money laundering. The Canadian AIMA’s opposition is based on the fact that participation in the European market is vital to the continued growth of their emerging hedge fund industry.
“We are hoping the Canadian government voices its concerns about the directive” as U.S. Treasury Sec. Timothy Geithner has done, AIMA Canada chief Gary Ostoich told the Globe and Mail, at the Group of 20 finance ministers meeting later this month.
The proposed E.U. legislation is currently being held up by debate about the final form it will take. Jean-Paul Gauzes, its chief sponsor within the European Parliament, is attempting to build compromise by introducing the idea of a “passport” system, under which non-E.U. based hedge funds meeting the stringent financial regulations would be allowed access to the entire European bloc. However, Britain, which is home to over 70 percent of Europe’s hedge fund industry, opposes the protectionist aspects of this plan, and France simply opposes the idea, favoring even more restrictive legislation. The first committee vote of the European Parliament is set to take place on April 27, followed by the final word from the full assembly. After the parliament approves its version of the law, it must then begin negotiating the final shape of the legislation with national governments at the European Council.
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