The IMA has questioned the scope of European Securities & Markets Authority (ESMA) proposed measures on Level 2 of the Alternative Investment Fund Management Directive (AIFMD) warning requirements will create a fortress around Europe.
The IMA says that the proposals “go beyond the carefully negotiated framework of AIFMD and the advice requested by the Commission.” Issues that lie at the heart of the IMA’s concerns include the re-introduction of an ‘equivalency’ requirement when delegating investment or risk management to non-EU entities, or in relation to depositories in non-EU jurisdictions.
The IMA insists these proposed equivalency requirements will create a fortress around Europe working against the interests of EU investors and the political consensus at Level 1.
IMA Director Julie Patterson made the point that the extensive AIFMD Level 1 debate on delegation concluded that a requirement for equivalency of regulation of non-EU entities was unworkable and undesirable.
She reminded ESMA that even in highly-regulated jurisdictions, it is not possible to find an equivalent provision for every EU requirement. Therefore, she believes such equivalency could have the unintended consequence of closing off investment in non-EU jurisdictions for EU institutions wishing to invest via alternative investment funds.
Patterson concludes that whilst agreeing that EU and non-EU alternative investment funds should compete on a level playing field, the IMA urges ESMA to review its draft advice to ensure the rules are workable.
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