Jean-Paul Gauzes, the French MEP in charge of the AIFM Directive, has put forward a multi-tiered approach in an attempt to ease the directive through the EU parliament.
The lack of compromise among EU members led to the directive being dropped from the European Economic and Financial Committee’s agenda in March.
Gauze has attempted to instigate consensus for the directive by putting forward a rating system for third-party investment managers. Speaking to reporters on 13 April, Gauze described a top tier for foreign investment managers that abided by EU rules and could market their funds across Europe.
The second tier would be those funds that did not abide by EU rules in their entirety. In such cases, domestic rules for placing money would apply, but EU-wide approval would be withheld. Gauzes gave the example of funds domiciled in the Cayman Islands as a tier-two domicile.
The bottom tier would consist of a black list, and EU investors would not be allowed to place assets with these funds.
The main sticking point for the directive has been the insistence by French officials that non-EU hedge fund managers must register in Europe in order to market to European investors, and must receive approval from each EU country.
The UK, home to 70% of European hedge funds, prefers a ‘EU passport’ approach, where alternative investment vehicles receive the right to attract investors across the entire EU bloc.
US Treasury Secretary Timothy Geithner recently wrote to major European finance ministers urging them not to discriminate against third-party investment vehicles.
Gauzes’ attempt in brokering a deal has also been handed a deux ex machina by EU financial services chief Michel Barnier. Although Gauzes stated he has not discussed to Barnier about his tiered proposal, according to Reuters, Barnier has visited Xavier Musca, one of French President Nicolas Sarkozy’s top economic advisers, to ask Paris to compromise on the new rules regarding the introduction of an EU passport.
The directive will be put to the vote in the European Economic and Financial Committee on 27 April.