The European Private Equity &Venture Capital Association (EVCA) has formally complained to the European Commission about France requiring GPs marketing in the country to hire a local bank or administrator as part of their implementation of the Alternative Investment Fund Managers Directive (AIFMD), pfm has exclusively learned.
Last week pfm exclusively revealed that French market watchdog, the L’Autorité des marchés financiers’ (AMF), went above and beyond the directive’s requirements by requiring GPs to hire a “local correspondent” to “process subscription and redemption requests, make coupon and dividend payments and supply information documents to investors.”
“We feel that gold-plating a passport is contrary to the letter and spirit of AIFMD and have therefore written formally to the European Commission to express our concerns,” said Michael Collins, public affairs director at the EVCA. The Commission is currently investigating the complaint, according to Collins. The Commission was unable to return a request for comment by press time.
Legal sources speaking to pfm said this is not an open and shut case for the Commission. “The legal arguments are not incontrovertible, neither side appears to have a slam dunk,” said one source with knowledge of the complaint.
Some lawyers speaking to pfm say it is unclear legally if there is anything to prevent the French from adding to the directive because ultimately it is national law that prevails and the directive is there to instruct on implementation. Others argue that a local correspondent requirement is a breach of the EU’s freedom of services principle, which gives business the right to equal footing when providing services across EU borders.
Clarity on the issue will take some time as the Commission’s internal review processes “grind slowly”, according to legal sources. And even if the Commission sides with the EVCA, the industry would still need to wait for France to act before they could bypass the new marketing requirements.
“If they [France] fight it tooth and nail it will then need to go to the European Courts before a final decision and that can take months or frankly years,” said one EU-based regulatory lawyer.
Accordingly fund managers seriously interested in marketing in France will have to live with the local correspondent requirement, advise lawyers and compliance professionals. One COO of a UK-based firm told pfm he has put marketing in France on hold because of the provision, adding that his firm would not make formal marketing efforts in France unless they were sure they would be able to raise a significant amount of capital.