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MFA and AIMA Issue Concerns on European Prudential Regime for Investment Firms

On November 7, following the release of the European Banking Authority’s opinion on the design of a new prudential framework for investment firms, MFA and AIMA issued joint comments outlining their key concerns for the alternative investment industry.  Following the EBA’s opinion, the European Commission is scheduled to release its legislative proposal on the topic in December 2017.

Among other points, the associations encouraged the European Commission to:

  1. Propose a €10 million cap on any capital requirement, similar to the cap imposed in both the AIFMD and the UCITS Directive, to avoid creating capital rules that are too disconnected from the risks the capital rules are intended to address;
  2. Eliminate specific, prescriptive remuneration provisions, recognizing that there are frequently existing alignments of interest between the asset manager and the client, which prescriptive rules could disrupt; and,
  3. Reconsider thresholds (both AUM and revenue) that would determine whether a firm is Class 2 or Class 3.