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Comment: Who's afraid of EU alternatives regulation?

The Alternative Investment Management Association is already up in arms about the European Union's planned Alternative Investment Fund Managers Directive, even though the draft legislation is not due to be unveiled until next Wednesday. But Aima executive director Florence Lombard has already seen enough for her to describe the draft directive as 'flawed'.

Lombard complains that the legislation has been drawn up with little or no industry input and without reference to other international organisations with responsibility for alternative fund regulation, including the newly-established Financial Stability Board and the International Organisation of Securities Commissions. 'It is not clear how this directive will fit in with the new international architecture established by the G20,' she says.

True enough. But it might be a long wait to see the final shape of the G20's mooted architecture, and in the meantime the European Commission is under growing pressure from European Parliament legislators to take action.

Given that the member of the European Commission responsible for the legislation, internal market commissioner Charlie McCreevy, has made it abundantly clear that he sees no particularly pressing need for additional regulation of the alternatives industry at EU level, one can have some confidence that the proposals are what he adjudges to be the minimum to take the heat off the sector.

From what has emerged so far, it appears that managers with less than EUR250m in assets will not be covered by the directive, and crucially the Commission has upheld a key Aima plea - that any regulation bear upon the manager, not their funds (which is only sensible anyway when so many funds are domiciled beyond the EU's remit in places like the Cayman and British Virgin Islands.

Poul Nyrup Rasmussen (pictured), the former Danish prime minister who now heads the Socialist bloc in the European Parliament and an outspoken advocate of draconian restrictions of hedge funds and private equity, has already expressed his disgust with McCreevy's draft.

In a letter to Commission president José Manuel Barroso, Rasmussen described the legislation as 'almost worthless,' saying the proposed rules were 'filled with loopholes' and would be 'highly ineffective'.

As ever, the devil will be in the details, but it's tempting to think that any regulatory regime that Rasmussen and his colleagues hate so vehemently must in the greater scheme of things be something the industry will be able to live with.

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