A THOROUGH UNDERSTANDING OF PRIVATE EQUITY

RETOUR SOMMAIRE

A CACEIS PRODUCT DEVELOPMENT PUBLICATION - 2010

PERSPECTIVES FOR THE INDUSTRY

The statement singled out hedge funds for additional regulation but made no mention of whether private equity funds would also be subject to greater scrutiny by financial authorities. However, following the G20, on April 30 th 2009, the European Commission released a directive proposal on Alternative Investment Fund Managers (AIFM) with the aim of creating a compre- hensive and effective regulatory and supervisory framework for alternative investment fund managers within the European Union. Under this proposed directive, European managers of non-UCITS investment funds – which include private equity funds, hedge funds, real estate funds, commodity funds and other types of institutional funds – would have to comply with a common set of rules in term of licensing and supervision, in return for a European passport. Several of the provisions in the Commission’s draft were highly controversial. The European venture capital association as well as the industry as a whole did not welcome the EU Com- mission draft proposal, arguing that it means “increased levels of disclosure that rival buyers do not have to comply with, spiralling costs that will severely affect mid-market firms and rules being needlessly imposed given the lack of systemic risk in the private equity industry” 64 . Nota- bly, the industry blamed the proposal for lumping together private equity with all other alterna- tive investments, whereas one size does not fit all and it has been clearly acknowledged that private equity does not create systematic risk. Across the Channel, little interest was demon- strated for tightening the regulation of private equity funds. For its part, the British private equity and venture capital association declared that the United Kingdom had already gone some way towards self-regulation of the industry with guidelines on transparency and disclosure put in place some 18 months ago 65 . The Swedish Presidency of the Council of the European Union publicly issued a compromise proposal on 12 November 2009, followed by a revised text on 25 November 2009. The latest compromise proposal addresses many of the areas of concern for the industry but others still remain. The text will be influential as a basis for discussion; it should be noted, however, that the text needs to be agreed by the Council, before also reaching an agreement at European Commission and European Parliament levels. On 23 November 2009, the rapporteur of the European Parliament’s Committee of Economic and Financial Affairs on the AIFM Directive, Jean-Paul Gauzès, issued its draft report proposing amendments to the text proposed by the Commission (known as “Gauzès report” ). The pro- posed amendments will be considered and revised by the Committee of Economic and Finan- cial Affairs. The European Commission being the sole institution empowered to draft legislation, it may come forward with a new draft in the light of the Council’s proposals, the amendments pro- posed by the European Parliament, and other discussions 66 .

64 Source: Financial News Online, “The EU private equity: The devil is in the detail” by Paul Hodkinson, 11 May 2009 65 Source: Dow Jones Newswires, “Private equity rails against EU regulation proposals” by Marietta Cauchi, 20 April 2009 66 Source: Ernst & Young, “AIFM-The Alternative Investment Fund Managers Directive”, December 2009

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