The Association of Investment Companies says the proposed Alternative Investment Fund Managers Directive fails to take account of the benefits the investment company structure provides for shareholders.
In its written evidence to the House of Lords European Union Committee inquiry into the directive, the AIC says the proposals would create unnecessary and duplicating regulatory objectives, increase costs and reduce investment companies’ commercial flexibility.
According to the AIC, the directive fails to recognise the role of the independent board. It says this should be resolved by ensuring that the rules do not create regulatory obligations which conflict with the investment manager.
Other measures in the directive threaten the sector’s ability to meet investor needs and will ultimately lead to greater costs for consumers, it says. This arises, for example, because of a potential ban on using non-EU suppliers, preventing the employment of managers with regional investment expertise.
Ian Sayers, acting director general at the AIC, says: “Policymakers across Europe should stop and take stock of what they are trying to achieve and whether or not the current proposals will actually deliver their goals. In their current form these measures are deeply damaging for the investment company sector and those investors who support this vehicle’s unique governance arrangements.
“There may be a need for increased regulation for alternative investment funds, but action should be targeted, effective and proportionate. Additional controls should be designed to fill the gaps where this will increase market confidence, financial stability and investor protection. In the case of investment companies this means recognising the role the board plays in protecting shareholder interests and using existing rules to secure proper regulatory coverage where possible.”
