AIC issues call to arms over alternatives plan

Date: Monday, August 31, 2009
Author: Rob Langston, FTAdviser.com

The Association of Investment Companies (AIC) is drumming up support from members as it seeks to challenge proposals from the European Union that could have huge repercussions for the investment trust sector.

The Alternative Investment Fund Manager Directive has alarmed the investment trust community since it was first announced by the European Commission in April in response to the financial crisis.

The investment trust trade body argues that the directive could halt new fund launches and introduce burdensome regulation for trusts.

Guy Rainbird, public affairs director at the AIC, said it would continue to protect the viability of the investment trust structure and try to minimise the amount of regulation imposed on trusts.

He said: "Since the last update, we have made extensive representations to the European Commission and UK authorities - including participating on HM Treasury's dedicated closed-end funds working group."

Mr Rainbird said listed trusts on regulated markets should not be subject to the new directive as they already faced regulation under existing directives.

Where trusts are altered to be regulated under existing directives, Mr Rainbird said changes must acknowledge the "unique characteristics" of the trusts.

"However investment companies are regulated, any new obligations imposed should be commercially flexible and avoid unnecessary compliance burdens," he added. "The goal should be effective, proportionate regulation, not simply 'more' regulation."

Mr Rainbird said it would be difficult to predict what effect lobbying and consultation had had on the directive until it was published in the autumn.

The trade body is asking investment trust boards, fund managers and investors to contact MEPs to raise concerns over the directive.

Mr Rainbird said: "Over the coming months, MEPs will feature more prominently in the legislative process. We are, therefore, now also lobbying MEPs directly to seek support for modifying the directive."

The AIC has repeatedly called for the new directive to take into consideration the investment trust structure, arguing that new regulation should not put the funds out of business.

It has also advised members to refrain from referring to the directive as an "attack on London/the City", adding that it is "not the most productive message to put forward".

The directive first emerged in 2006, when the European Commission sought opinions from expert groups on the regulation of the alternative investment fund management industry.

The directive - in its final shape - is expected to come into force in 2011 and is likely to affect all funds not covered by Ucits regulations.