The London-based Alternative Investment Management Association (AIMA) has warned hedge fund managers not to drag their feet on implementing the Markets in Financial Instruments Directive (MiFID).
MiFID, which is due to be implemented in November 2007, is expected to have a significant impact on hedge fund managers across the European Economic Area. AIMA warns that the volume and complexity of the new directive, in addition to a lack of some final information, will leave hedge funds facing a very tight implementation schedule.
“Hedge fund managers need to start working on MIFID now,” says Matthew Jones, Regulatory and Legal Manager at AIMA. “Although an 18 month run up period sounds adequate, experience shows, particularly after the experiences of N2 and A-Day, that there is an instinct to leave serious implementation work to the last possible minute. Realistically this will not be possible with the new Directive. It has the potential to have a major impact on our members’ business structures, systems and documentation.”
Added to that, says Jones, is a further heavy workload with the likelihood of the FSA in the UK introducing a single set of Conduct of Business rules, even for regulated firms that are outside the scope of MiFID.
AIMA says that, while it has produced for its members an in-depth Preliminary Guidance ‘Matrix’ on how to prepare for the Directive, non-AIMA members will have to go through a steep learning curve and seek their own interpretation of the new arrangements.
“There are finite industry resources to carry out all the likely legal and structural work involved and these will become progressively scarcer as the industry approaches the November 2007 deadline,” concludes Jones. “In the worst case scenario, a hedge fund manager that does not have its arrangements in place by then may have to cease trading until they are MiFID compliant.”
Founded in 1990, AIMA is a not-for-profit global trade association with corporate membership in 46 countries. It has more than 1000 corporate members (covering 3,500 individuals).