The Alternative Investment Management Association has released highlights of what effects a new directive from the European Union may have on the hedge funds industry.
The implementation of the Capital Requirements Directive, which is based in part on the existing regulatory capital directive, will affect banks, building societies and investment firms, and AIMA says most FSA regulated hedge fund managers will be affected by the new directive.
The directive, which will go into effect January 1, 2007, will include changes to the calculation of ‘regulatory capital;’ the controls governing outsourcing, such as conflicts of interest; the need to reapply for new waivers; and new reporting arrangements.
Also, firms that operate within a United Kingdom or European Economic Area management group must meet a group capital requirement for the first time.
“The FSA must implement the new Directive into its Rules by 1st January next year. Hedge fund managers will need to determine their capital requirements and whether there is a need for further monies. Given the scope of the regulations, certain parent companies will also have to consider their capital situation. Companies with existing capital waivers will also have to consider renewing them or applying for the first time. Although some changes will not affect managers for twelve months after the rules are implemented, others will have immediate impact and we urge affected hedge funds, if they are uncertain, to take advice,” says Matthew Jones, AIMA regulatory and legal manager.