EU proposes directive on alternative investment fund managers

Abstract

PurposeThe purpose of this paper is to explain the content, purpose, and likely effects of the European Commission's draft directive on Alternative Investment Fund Managers published on April 30, 2009.Design/methodology/approachThe paper explains which firms will be affected by the AIFM Directive; the proposed new regime for fund promotion; organizational and capital requirements, including required background information and conditions of ongoing authorization; leverage disclosure requirements; and controlling interest disclosure requirements.FindingsThe AIFM Directive, were it to be implemented in its current form, would reshape the European investment management landscape, subjecting all entities managing or promoting pooled funds to regulation, imposing capital and disclosure requirements, and permitting a fund incorporated outside the EU to be promoted within the EU only if its country of incorporation exchanges tax information with the member state authorizing the fund.Practical implicationsThe AIFM Directive is at a very early stage, contains ambiguities and inconsistencies, and will be subject to revision and refinement.Originality/valueThe paper presents a practical explanation by experienced securities lawyers.