Correspondent's Choice

This story about the vote on hedge fund rules in the European Parliament was published by EurActiv on 18th May 2010.

After the European Parliament approved tighter controls on hedge funds and private equity firms yesterday (17 May), the ball now passes to the court of the EU’s finance ministers, who find themselves in a very different position.
Wedged between the two, the EurFinance ministers are meeting in Brussels today to secure an agreement on the contested Alternative Investment Fund Managers Directive (AIFMD), after a vote in the European Parliament yesterday on the issue.

But the two camps sit on different sides of the fence, leaving the European Commission to pick up the pieces.

The crux of the issue comes down to whether so-called third country funds can actively attract EU investors once they have a passport to do so, or whether these funds would have to establish themselves in each member state to gain access to the national market.

The European Parliament is in favour of an EU passport, while the EU’s finance ministers are against it, allocating some of the blame for systemic risk in the financial crisis to hedge funds and other such vehicles.

Though MEPs voting in the Parliament’s economics committee (ECON) largely agreed on a draft version of a law creating an EU passport, there is still some resistance from liberal (ALDE) and conservative (ECR) camps, who argue the passport will be difficult to enforce in jurisdictions like the Cayman Islands, who do not subscribe to OECD rules on tax and money laundering.

According to early reports this morning, German Finance Minister Wolfgang Schaeuble has reportedly said the UK is no longer resisting AIFMD, despite having openly deemed it protectionist. opean Commission says it wants a “dynamic compromise” by June.

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