On Thursday the US Commodity Futures Trading Commission (CFTC) and seven other regulators from Japan, Malaysia, Mexico and the Bahamas negotiated cooperation agreements with pan-EU regulator the European Securities and Markets Authority (ESMA) that will be used to sign bilateral agreements with individual EU member states.
The agreements, called for by the Alternative Investment Fund Managers (AIFM) directive which takes effect Monday, allow for information sharing, cross-border on-site visits and enforcement cooperation on private equity and hedge fund managers in and outside of the EU.
The CFTC has significant oversight of the US hedge fund industry, though built a bigger presence in the private equity asset class following Dodd-Frank legislation.
As part of the AIFM directive, if a non-EU country fails to sign a cooperation agreement with any one EU sovereign, fund managers in the non-EU country will not be able to access that EU jurisdiction.
ESMA had approved 31 agreements with other non-EU regulators in May. That list of regulators included the US Securities and Exchange Commission, the Australian Securities and Investment Commission and the Office of the Superintendent of Financial Institutions (Canada), as well as a number of watchdogs from offshore financial centers and emerging markets popular with general partners.
Individual EU sovereigns may go above and beyond the agreements negotiated by ESMA, but legal sources expect this to be a rarity.
Notably absent from the list of regulators approved by ESMA is China. An ESMA spokesperson said negotiations with Chinese authorities are on-going, and that “the aim would be to have an agreement as soon as possible”. It only emerged less than a month ago that the China Securities Regulatory Commission would be primarily responsible for the administration of private equity funds in the country.
Dörte Höppner, secretary general of the European Private Equity and Venture Capital Association, said in a response email to the agreements that they “will facilitate our members’ worldwide fundraising efforts”, noting that last year 40 percent of funds raised came from non-EU investors.