Winter2012
Particular thanks to Bob Penn (Allen & Overy LLP) for his work on this submission.
4. HM TREASURY INFORMAL CONSULTATION ON POLICY OPTIONS FOR IMPLEMENTING THE ALTERNATIVE INVESTMENT FUND MANAGERS DIRECTIVE (THE “AIFM DIRECTIVE”)
The Committee made a number of
points in response to the
Treasury’s paper, the most salient concern being the consultation not addressing whether or not it would be appropriate for the UK to retain the existing definition of a “collective investment scheme” (CIS) in section 235 of the Financial Services and Markets Act 2000 (FSMA) alongside the definition of “alternative investment fund” (AIF), being introduced by the AIFM Directive.
In particular, the Committee expressed the view that the definition of AIF is clearer in both substantive and policy terms than the definition of a CIS and that layering the two regimes will make providing legal advice on many commercial arrangements even more complex than it already is. The Committee also noted that the layering of both the AIF and CIS regimes would be contrary to the government’s commitment to no “gold plating” in the context of the introduction of the AIFM Directive regime. At the very least, the Committee considers that there should be strong, clearly articulated policy reasons for maintaining the two regimes (no such reasons are expressed in the consultation paper).
The Committee also suggested that the Treasury should reconsider the unstated assumption in the paper that the current UK regime regulating persons who establish, operate or wind up a CIS should be retained alongside the new regime regulating those who manage an AIF.
The Committee also provided detailed comments on the policy options outlined by the Treasury regarding the application of the AIFM Directive regime to alternative investment fund managers (AIFMs)
that have a level of funds under management which fall under the de minimis threshold set out in the Directive. In particular, the Committee proposed that consideration should be given to the prospect of applying a limited “registration-only” regime to “below threshold” AIFMs of AIFs that are not marketed to retail investors and closed-ended internally managed AIFs.
vehicle is formed in the UK, rather than because it is managed in the UK, there would be a risk that UK entities would be deprived of the expertise of third country managers and will make it unlikely that the UK will be chosen as the place of fund formation.
Particular thanks to Tamasin Little (SJ Berwin LLP) for her work on this submission.
5. RESPONSE TO THE EUROPEAN COMMISSION’S GREEN PAPER ON SHADOW BANKING
The Committee also took the opportunity to strongly agree that the UK Government should not impose additional AIFM Directive requirements on third country managers of third country funds, nor on the marketing of third country funds by UK AIFMs. The Committee noted that professional investors in the UK should have access to the widest range of funds as is possible and that UK AIFMs of such funds should not be made any more uncompetitive than is the unavoidable consequence of the Directive.
The Committee also noted that the Government should not impose additional Directive requirements on third country managers of UK AIF, but that it should retain the current regulatory approach under which authorisation is only required when a relevant regulated activity is actually carried out in the UK. Otherwise, if third country managers are required to be authorised simply because the relevant investment
The Committee noted its view that publishing legislative proposals on shadow banking was premature and such proposals should not have been published until a more specific and finite definition of shadow banking has been identified, or clear statements can be made as to the categories of regulated and unregulated activities that are not intended to fall within the definition. In particular, the Committee considered that the Financial Stability Board’s (FSB) definition of shadow banking used by the Commission was “manifestly unsuitable” for framing good legislative proposals.
The Committee also expressed that a more sensible focus for future regulation might be the sources of funding for credit intermediation activities rather than the types of credit activity performed by shadow banking organisations.
The Committee suggested that defining a series of specific activities as a means to determine the scope of shadow banking measures (referred to as the “bottom up” approach) has the benefit of greater certainty of legislative intent and practical outcome. However, if the Commission should prefer to take a “top down approach” (that is, starting from a broad definition and excluding specific types of firm or activity from it), then it should exclude certain activities (e.g. insurance, asset management and investment activities) from the definition.
The Committee also urged the Commission to consider an alternative to full scale prudential regulation of the shadow banking
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