Bank body slams funds directive

AN influential body backed by the Bank of England has warned that EU plans to regulate hedge funds and private equity could cause chaos.

The Financial Markets Law Committee (FMLC), whose members include partners from Linklaters and Clifford Chance, said the Alternative Investment Fund Managers (AIFM) directive was riddled with ambiguities.

Central concepts such as the difference between hedge funds and private equity vehicles were not clearly defined in the draft proposal, the committee said, while technical terms such as “leverage” were used vaguely. The FMLC was concerned that the directive would clash with existing rules, leading to confusion.

The lawyers found “fundamental issues which would create significant legal uncertainty leading potentially to systemic failure and widespread market disruption” unless fixed.

The committee, set up eight years ago to liaise between the judiciary and financial markets, has articulated fears felt throughout the City.

Simon Walker of the British Venture Capital Association said: “We remain committed to working with our European partners to improve the directive, but it is imperative the legislation is revised.”
The Spanish presidency of the EU this week published a “compromise” draft of the AIFM directive which was greeted as a positive step.