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Geithner persuades France to drop AIFM opposition

Thursday 7 October 2010 - by Nicola York

France has bowed to pressure from the US and has dropped its opposition to a key element of the proposed European hedge fund rules.

US Treasury secretary Tim Geithner wrote a letter to French Finance Minister Christine Lagarde earlier this week, urging her to drop the "unfair and damaging" stance that France was taking.

A key part of the Alternative Investment Fund Managers Directive is the issue of how third country fund managers and funds are treated. The latest proposals of AIFMD set out that third country funds would have the same access, as EU funds would have, to a passport allowing them to operate across the EU.

But France has opposed this proposal and new legislation is being drafted which would allow member states to opt out of the third country passport or delay a decision on the passport, while EU firms would be granted access.

In his letter, which was also sent to UK Chancellor George Osborne and German Minister of Finance Wolfgang Schäuble, Geithner says: "A proposal that limits or delays the access of third country firms to a passport - while granting EU domiciled managers and funds access to the European market - would be discriminatory and contrary to G-20 commitments.


"We would consider adoption of such a proposal as unfair and damaging to our shared interest in maintaining an open, global financial system."

French officials say they will accept the principle of third country passports but only subject to strict criteria and they want the new European Securities and Markets Authority to approve and supervise all third country passports.

The European Parliament's Rapporteur on the AIFMD Jean-Paul Gauzès MEP says: "The negotiation on a European passport for third countries is well underway and going in the direction wished for by a large majority of the European Parliament.

"The conditions for granting the passport to non-European actors and funds and the control of its use must be defined and undertaken at European level, notably as regards the attribution of real powers to the new competent European authority, the ESMA.

"Investors who invest in non-European funds must use the necessary diligence to ensure that these funds are not managed according to rules that are not compatible with the underlying principles in the European Regulation."


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