22 Nov 2011
Response to the technical advice issued by the European Securities and Markets Authority (ESMA) on the Alternative Investment Fund Managers Directive (AIFMD).
Comment: Tom Brown, European head of investment management at KPMG
“There are no major surprises coming out of ESMA’s final report, however further clarity is needed on key issues including depositary liability, delegation to third countries, definition of what qualifies as a letter box entity, leverage reporting and co-operation agreements for third countries. These areas will need to be addressed in the final guidance to be issued by the European Commission next year.
“The more onerous requirements mooted in the consultation phase, particularly around third country equivalence rules, have been toned down. Concerns voiced by the industry have been largely addressed by ESMA, however significant challenges still remain over the co-operation agreements with third party jurisdictions.
“Aside from the technical details raised, the paper highlights the ever expanding regulatory burden faced by the investment management industry. There is a real fear within the industry that the quantity of regulatory initiatives underway will lead to a patchwork of over-complicated and potentially conflicting frameworks if all the regulatory bodies don’t work together. It is positive that ESMA has taken upcoming UCITS and MiFid reviews into account in their paper.
“As with other regulatory initiatives facing the industry, the issue of cost arises. The big question remains what price we’re willing to pay for consumer protection. Investor protection is a priority; however this must not be at the cost of investor choice, reduced returns and a permanent loss of competitiveness for the EU economy.”
Comment: Tom Brown, European head of investment management at KPMG
“There are no major surprises coming out of ESMA’s final report, however further clarity is needed on key issues including depositary liability, delegation to third countries, definition of what qualifies as a letter box entity, leverage reporting and co-operation agreements for third countries. These areas will need to be addressed in the final guidance to be issued by the European Commission next year.
“The more onerous requirements mooted in the consultation phase, particularly around third country equivalence rules, have been toned down. Concerns voiced by the industry have been largely addressed by ESMA, however significant challenges still remain over the co-operation agreements with third party jurisdictions.
“Aside from the technical details raised, the paper highlights the ever expanding regulatory burden faced by the investment management industry. There is a real fear within the industry that the quantity of regulatory initiatives underway will lead to a patchwork of over-complicated and potentially conflicting frameworks if all the regulatory bodies don’t work together. It is positive that ESMA has taken upcoming UCITS and MiFid reviews into account in their paper.
“As with other regulatory initiatives facing the industry, the issue of cost arises. The big question remains what price we’re willing to pay for consumer protection. Investor protection is a priority; however this must not be at the cost of investor choice, reduced returns and a permanent loss of competitiveness for the EU economy.”
