The EU Commission wants to tighten the regulations for hedge funds, real estate and investment funds. These investment products belong to the so-called alternative investment funds, and next week the Brussels authority will present an amendment to the EU directive that regulates the management of such funds. Of the Süddeutsche Zeitung a draft is available and, among other things, the requirements for delegating fund management to non-European countries are stricter.
This is a reaction to Brexit and is primarily directed against the powerful financial center of London. This delegation is widespread in the industry. In the case of funds that are based in the EU, for example in Luxembourg or Dublin, the investment decisions are then made by managers in London. The EU stock exchange supervisory authority ESMA in Paris already suggested last year that this delegation to London after Brexit should be more restricted. After all, the financial center there is no longer subject to European control.
“Real threat to consumer protection”
The Commission is taking up this demand in the EU legislative proposal, which must now be dealt with by the European Parliament and the Council of Ministers, the decision-making body of the member states. The amendment is part of a package of legal acts on financial market regulation. Among other things, the directive will stipulate according to the draft that funds must have at least two sufficiently experienced managers living in the EU, even if the investment decisions have been delegated to non-EU countries.
Approval has already come from the European Parliament. “The tightening points in the right direction,” says the CSU MP Markus Ferber, the economic policy spokesman for the Christian Democratic EPP group. “Foreign hedge funds are not allowed to bypass European rules by setting up a letterbox company in the EU and then outsourcing key management functions to third countries: after Brexit, this has become a real danger, also for consumer protection.”