Current Developments in Monetary and Financial Law, Volume 6

Chapter 18: European Initiatives for the Regulation of Nonbank Financial Institutions: The EU Directive on Alternative Investment Fund Managers

International Monetary Fund. Legal Dept.
Published Date:
February 2013
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Research assistance by Maria Smolka-Day and Maria Costanza Barducci is gratefully acknowledged.


I am deeply honored and pleased by the invitation to present my observations regarding the European initiatives for the regulation of nonbank financial institutions to this distinguished audience. The topic confronts us with several difficulties. One is how to define nonbank financial institutions. So far there exists no agreement, what a bank is; most European legal systems operate with a definition which is considerably broader than the one used in the U.S.1 But this and other questions of drawing lines appear to be less relevant since the EU Commission in April 2009 presented the proposal for a “Directive on Alternative Investment Fund Managers,” abbreviated AIFMD.2 This proposal narrows the scope of my investigation. It explicitly excludes insurance companies, “credit institutions” and mutual funds;3 they are all subject to existing regulation4 like the UCITS-Directive;5 UCITS being the abbreviation for “undertakings for collective investment in transferable securities,” this is the official definition of mutual funds. The proposal equally excludes the management of pension funds and of “non-pooled investments” such as endowments, sovereign wealth funds or assets held on own account by credit institutions, insurance or reinsurance undertakings.6 The proposal contains a list of the institutions that should be regulated; the enumeration includes hedge funds, private equity funds, real estate funds, commodity funds, infrastructure funds, funds of hedge funds and “other types of institutional funds” like venture capital funds.7 The debates preceding and following the publication of the proposal indicate that the primary targets are hedge funds and—to a lesser degree—private equity funds.8 My paper will first present the content of the proposal. It will then give a short summary of the conflicting views and interests shaping the public debate. In a next step I shall briefly report the legislative reasons or policy objectives motivating the Commission and explained in a lengthy Commission Staff Working Document called “Impact Assessment.”9 Then we have to look at the costs that the implementation of the proposal would entail. From there we look to the other side of the cost-benefit-analysis, followed by a short conclusion.

The Proposal

The proposal is quite ambitious. The draft is designed to generate a comprehensive regulatory framework for a broad range of financial institutions.

At the same time the proposal is not final, many of its articles ask for implementation through rules to be enacted by the Commission10 using the comitology or “Lamfalussy” procedure.11 The basic features can be characterized by the notions of authorization, organization and duties of conduct. The following aspects appear to be particularly important:

  • The proposal does not address “alternative investment funds” (abbreviated AIF), but only the providers of management services to these funds, the “alternative investment fund managers” or AIFM. The directive shall apply “to all AIFM established in the Community.”12 This could be understood as requiring an establishment within one of the Member States; an AIFM operating out of Switzerland would not be covered. Art. 2 para. 2.(b), however, exempts AIFM “which do not provide management services to AIF domiciled in the Community and do not market AIF in the Community,” and the Explanatory Memorandum emphasizes the policy “to ensure that all AIFM operating in the European Union are subject to effective supervision and oversight.”13 This language indicates that the term “established” in Art. 2 does not require any form of incorporation in one of the Member States; it is sufficient that the AIFM operates within the territory of the EU. This reading is confirmed by the consideration that it would not make any sense to subject AIFM, which are incorporated within one of the Member States, to a quite rigid regime of regulation and supervision, and to allow them at the same time to move their seat to a place outside the EU and to continue their operations within the common market from such an outside location in a completely unregulated manner.

    At the same time there is a de minimis exception;14 the proposal exempts an AIFM where the cumulative AIF under its management do not exceed the threshold of 100 million Euro. Where none of these AIF is leveraged or grants investors redemption rights before the end of five years, this threshold goes up to 500 million Euro. The Commission plausibly assumes that such funds are unlikely to undermine financial stability or market efficiency.15

  • A core element of the proposal is the requirement of prior authorization: the Member States are obliged to ensure that no AIFM covered by the Directive will operate without being authorized by one of the Member States.16 The authorization procedure requires the applying AIFM to provide detailed information regarding the AIFM, its controlling shareholders, its program of activity; the characteristics, fund rules and articles of incorporation of all the funds the AIFM intends to manage and much more.17 The authorization granted by one of the Member States’ will allow the AIFM to operate throughout the community; it is designed as a “single passport” which has to be respected by all other Member States.18

    This license allows the AIFM not only to manage various funds but also to market their shares or units to professional investors, but not to the public in general.19 Member States, however, may allow the marketing of AIF shares within their territory also to retail investors and impose for that purpose stricter requirements on the AIFM as well as on the AIF.20

  • The proposal, in its central Chapter III, subjects the AIFM to “operating conditions.” They include rules of how to conduct business and they require specific procedures for dealing with conflicts of interest21 as well as for risk22 and for liquidity management.23 Art. 14 requires the AIFM to have own funds of at least 125,000 Euro; the amount increases with the value of the managed portfolios. In addition, there are organizational requirements. The AIFM has to separate the functions of risk management and of portfolio management24 It has to appoint for each AIF a valuator and a depository (who receives payments and safe-keeps the assets of the AIF); both functions have to be performed by persons who are independent from the AIFM.25 An AIFM is allowed to delegate some of its functions to third parties, only after this has been authorized by the competent Member State’s agency.26

  • Chapter IV of the proposal deals with “transparency requirements.” Each AIFM has to provide annual reports and make them available to their investors and to the competent authorities, the reports have to be audited. In addition, each AIFM is obliged to disclose its investment strategy and many specifics of its operations to its investors before the investment is made;27 this provides certainly less information than the prospectus which is mandated by the POP-Directive,28 but it by far exceeds the disclosure duties triggered by a private placement. In addition there are reporting obligations to the competent Member States’ authorities, there primary objective is to inform the supervisors about the various risks which each of the managed funds presents to its investors and to the public,29 information relating to companies which are controlled by a managed fund will be included into the annual report of the AIFM.30

  • Chapter V provides for additional obligations imposed upon an AIFM managing specific types of funds. In a first category are highly leveraged funds. Its managers have to disclose the degree of leverage to its investors31 and to report to its supervisor the overall level of leverage employed by each of its managed funds,32 and the competent authorities of the Member States will have to exchange this information in order to allow them to assess the build-up of systemic risk in the financial system.33 The Commission and—under exceptional circumstances—the competent authorities of the home Member State will be empowered to set limits to the leverage used by the fund;34 the commission will be referred again to rule-making through the comitology or “Lamfalussy” procedure.35 In another specific category are funds that acquire controlling influence in companies.

    Whenever such a fund acquired 30 percent or more of the voting rights of an issue or a non-listed company domiciled in the EU, the fund manager has to notify the company, the other shareholders and the representatives of the employees.36 In addition, the Member States will be asked to ensure that information relating to companies which are controlled by a managed fund will be included into the annual report of the AIFM.

  • The Directive would allow all AIFM to market shares of their managed funds to professional investors in its home Member State.37 Marketing in other Member States will require notification of their competent authorities.38 Member States may allow the marketing to retail investors within their territory. An AIFM may also market funds which are domiciled in non-EU countries, but this would require an agreement with the third State that it will provide all relevant tax information.39

The Debate

It is not surprising that this proposal has generated a lively and occasionally controversial debate. It is fueled by contributions from individual funds,40 industry associations,41 regional organizations,42 EU representatives,43 and from academics.44 The summary of these and other comments allows to draw a few general conclusions. First, it appears that among the different categories of financial institutions addressed by the proposal the emphasis is on hedge funds and—to a slightly lesser degree—on private equity and venture capital funds.45 At the same time the conflicting positions can be easily located. The UK is clearly opposed;46 the City of London, where the European hedge fund and private equity activities are concentrated, is afraid that fund managers will leave47 and relocate in places like Zurich or Singapore. Some of the continental Member States like France, Italy and Germany support the proposal48 and the French Finance Minister Christine Lagarde, has asked for even more stringent regulation.49 The main concern is that the returns, which are derived by the fund industry, imply excessive risks which will be increasingly shifted to the budgets of central banks and Member States governments. In their view there are externalities: the bonuses paid in London will in the end have to be financed by the taxpayers in the Member States of the EU. There are two documents which provide for a considerably deeper analysis. The EU Commission has explained its position in a comprehensive “Impact Assessment,” a working document produced by the Commission staff and published in the spring of 2009.50 On the other side, the Financial Services Authority as the consolidated supervisor of the British financial markets and institutions has asked Charles River Associates (CRA), a consulting firm, for an evaluation of the proposal which has been published in October of this year.51 Both documents confirm what is indicated by the mere size of the proposal. This is the fact that the Commission is not just aiming and shooting at one problem to be resolved. The proposal is motivated by several policy objectives which have to be discussed one after the other.

The Policy Objectives

The main concern of the Commission appears to be systemic risk. The Impact Assessment distinguishes two “channels” linking the behavior of funds to the stability of financial markets.52 Through the “credit channel” systemically relevant banks can be directly exposed to the failure of a large fund. This is what had happened in 1998 with Long Term Capital Management (LTCM),53 but at this moment the banks, which had lent several billion dollars to the fund, had sufficient liquidity to rescue LTCM by transforming their loans into equity positions. Even if it is true that there is no evidence that hedge funds were the cause of or contributed to the most recent financial crisis through the “credit channel,”54 the LTCM case illustrates the possibility that a large fund could fail in a moment when the banking system is under stress and thus increase the burden for the central banks and the governments who have to provide liquidity and additional equity in order to prevent the collapse of the financial system. The other link between fund behavior and systemic risk runs through the “market channel.”55 When large hedge funds follow common patterns of leveraging by investing in the same or similar opportunities—this is often called “herding” behavior—and they come under stress, the unwinding of large and similar positions can trigger a vicious circle of a continuing decline of asset prices which requires more and more fire sales into a permanently deteriorating market. It appears to be uncontested that this has happened between 2007 and 2009. The Charles River Associates study concludes a comprehensive analysis56 by stating that the “extent of this selling does appear to have been sufficiently non-trivial to have contributed to a vicious circle of declining prices and for this selling to have had an impact on overall financial markets.”57 The potential of various types of funds to contribute to systemic risk has institutional or “micro” implications. The staff working document comes to the conclusion, that the management of liquidity risks has posed a serious problem for the AIFM sector. In particular for hedge funds and funds of hedge funds the combination of illiquid investments and pressures for deleveraging and for investor redemption has exposed a severe mismatch which has contributed to the present crisis.58

A second concern motivating the EU Commission is investor pro-tection.59 The working document60 refers to a number of studies which document dissatisfaction of institutional investors with the information they receive from hedge funds and with the resulting intransparency of fund behavior and policies.61 The Commission staff is aware that hedge funds do not make public offerings and are rarely selling their securities to retail investors. Even if it is to be assumed, however, that institutional and wealthy individual investors are generally able to look for themselves, the harmonization of a basic set of disclosure and transparency rules could be an improvement. They would relieve the investors from the need to bargain for information and thus allow reduced transaction costs. At the same time a more homogeneous system of transparency might have a beneficial effect on the governance of the fund business; it could reduce conflicts of interest and improve valuation and custody procedures.

Another concern motivating the EU Commission is the efficiency and integrity of financial markets. Hedge funds and private equity funds have been blamed for making excessive use of strategies like “naked” short selling which can undermine the stability of financial markets or may be detrimental to other stakeholders in companies targeted by the funds.62 The staff working document, however, mentions correctly that short selling and other questionable market strategies are not the exclusive preserve of the AIFM sector; regulation requiring more transparency or imposing stricter controls should be addressed not only to the fund industry but to all market participants.63 With regard to the market for corporate control, however, the proposal takes a different position. As mentioned before, the Directive would require a fund which has been designed to acquire controlling shares in companies to inform management, the other shareholders and the representatives of the employees whenever the fund acquires 30 percent or more of the voting rights of a listed or non-listed corporation domiciled in the EU. It is unclear why such a rule would be imposed only upon a specific category of AIFM and not upon other purchasers as well; mandating acquisition transparency should be a rule not only of fund regulation but of the general capital market law dealing with mergers and acquisitions. At the same time it is equally unclear why the threshold triggering the disclosure obligations should be only 30 percent. Laws of Member States provide for a staggered approach, starting at a threshold of 3 percent64 or even 2 percent.65 In addition, the proposal does not appear to take into account that the acquisition of a controlling block of the voting rights triggers the mandatory bid under the Take-Over-Directive;66 it can be argued that this rule provides sufficient protection at least for the other shareholders. The staff working document admits that these issues should be examined and addressed not only for specific institutions, but on a market-wide basis.67

A final problem mentioned by the proposal68 and discussed by the staff working document69 is the corporate governance impact of AIFM after the acquisition of control of a target company. The main concern is that the controlling funds will try to retrieve the liquidity spent for the acquisition by using the assets of the target company to the detriment of creditors, minority shareholders and in particular of the employees who risk to lose their jobs. This can be illustrated by the example of ProSiebenSatl, the second largest commercial television company in Germany. It had been part of the Kirch media empire which failed years ago. The Kirch shares were acquired by two hedge funds. They owned already a Scandinavian television company which they sold to ProsiebenSatl; the acquisition was exclusively financed by debt. The resulting interest liabilities appear to be higher than the profits made by the combined television firms. Therefore ProSiebenSatl dismissed more than a third of its employees, mostly those producing television programs; the own productions are replaced by mostly older films and series bought at low cost on the international market. The viewer rates declined; and there have been questions if the TV license should not be revoked. Cases like these have triggered emotional reactions. Horst Köhler, the German Federal President and former Managing Director of the IMF, has publicly blamed the “monsters” operating on the globalized financial markets. Franz Müntefering, a former Federal Minister of Labor Relations, has famously equaled hedge funds to “locusts”: they come, they eat, they go, and nothing is left. This populist language is inspired by the stakeholder approach which has traditionally dominated the theory and practice of corporate law on the European continent. This tradition, however, is fading: the Regulation introducing the European Stock Corporation70 and the case law of the European Court of Justice71 have opened up the rigid corporate law systems of most of the Member States. Increasingly, business firms enjoy the freedom to chose the Member State and the law of incorporation; if they wish they can avoid burdensome rules of legal capital or of employee participation on corporate boards, there is slow convergence with the U.S. system which emphasizes shareholder value.72 For these and other reasons I do not see the need for corporate governance regulation at the European level, this can and should be left to the Member States. And, in spite of discussing the issue, the proposal of the AIFM Directive in fact abstains from suggesting any corporate governance rules.

The Costs of AIFMD

Charles River Associates73—on behalf of the FSA—presents an estimate of the costs which would be generated by enacting the Commission proposal. This is a valuable approach to a cost-benefit-analysis; but it is not more than a first step. CRA has based its analysis primarily on interviews with representatives of the fund industry. The emphasis is on costs the various categories of funds would have to face under the proposed regime. As the fund industry is generally opposed to the draft it cannot be assumed that the figures given to CRA have been determined in a particular modest and prudent way. Starting from the CRA analysis I suggest taking the following costs into consideration:

  • First there are the compliance costs which will have to be met by the AIFM who will accept the new regime and continue to operate within the EU. CRA distinguishes one-off and ongoing costs. The sum of the one-off cost is estimated to be up to 3.2 billion dollars for all AIFM.74 A more detailed forecast refers to basic points. For hedge funds, private equity and venture capital funds the one-off costs would be 62, 42 and 39 basis points (bp); the ongoing costs 1.2, 13.8 and 24.8 bp.75 Another part of the analysis splits the costs for the various elements of the proposal. They remain comparatively low for transparency requirements76 are somewhat higher for independent valuation and depositories77 and still comparatively low for capital requirements.78 The estimated costs are considerably higher for the relocation and legal restructuring for AIFM presently domiciled outside the EU.79 However, these are one-off charges and they are still much less than 1 percent of equity. In addition, it remains completely unclear to which extent a relocation would require a legal restructuring. The corporate law regime of the EU today allows much more flexibility than it did 20 years ago.80

  • Another category of cost could be the loss of choice and of favorable opportunities for European individual and institutional investors.81 This would require that AIFM presently operating from outside the EU and offering investment opportunities to EU residents would decide not to relocate and to withdraw from the Common Market; these funds would not face any of the compliance costs. European investors would not be prevented to continue to make use of their services; there is, and there will be, no rule forbidding European individuals or institutions to do business with AIFM in Zurich or Singapore. In addition, it is at least not unlikely that the market share of the withdrawing AIFM would be absorbed by fund managers willing to comply with the Directive. In this case the burden would again be the compliance costs; and it is to be assumed that the funds and their advisers will shift them to the issuers and/or to the investors.

  • A third category of costs could be a negative impact on growth and employment within the EU.82 This could occur in two ways. It is conceivable that AIFM which are domiciled in third countries and decide not to relocate would abstain not only from offering investment opportunities within the EU territory but also from investing there. But this is unlikely to happen. The proposal does not provide for any rule which would prevent non-European AIF from making capital investments in the EU. And whenever this opportunity offers a competitive return, it will attract capital, regardless from where it comes. It is true that capital coming from AIFM domiciled inside the EU would be burdened with the compliance costs; and they could be reflected in slightly higher costs of capital for the receiving firms. They might prefer the cheaper capital offered by the outside AIFM; in this case the Directive would interfere with the competitiveness of the European fund management.

Looking at the Other Side of Cost-Benefit-Analysis

To what extent can these costs be compensated by benefits the Directive would generate? This question brings us back to the policy objectives which inspire the proposal83 and confronts with the problem of how these can be quantified. This cannot be discussed in depth here; I have to limit my remarks to the following aspects:

  • The authorization procedure, which is designed by the proposal, will provide the AIFM with a valid “single passport,” allowing them to operate without any further requirement throughout the Common Market. This is generally viewed as a benefit for the fund industry and its customers.84

  • The main purpose of the proposed Directive is—as we have seen85—to contain systemic risk. This is obviously an extremely relevant objective; today we know much more than three years ago about the costs of bailing out a financial system which operates at the brink of a global breakdown. However, we cannot argue with simple causal relationships, e.g., that without the Directive there will be another crisis which could be avoided if the proposal is enacted. It is much rather an issue of probabilities: what are the risks that we will experience another crisis of the system; to what extent could it be fueled by the strategies of alternative investment funds and how likely is it that their impact will be neutralized by the measures which the proposal suggests. All of this is beyond any precise forecast; the cost-benefit-analysis has to be applied in a much less direct—or much more speculative—way. First of all it is not conclusive that the AIFM industry cannot be blamed for the present financial crisis. The proposal looks into the future; and the next crisis will be different. What counts primarily are the elements of risk provided by an unregulated fund industry. They include—as we have seen—the “credit channel” which may affect systemically relevant banks and the “market channel” which may contribute to the depression of financial markets.86 Hedge funds have been and probably continue to be heavily engaged in the markets of risky derivatives like credit default swaps;87 some of them continue to be highly leveraged,88 and there is evidence that recently their strategies have become more risky.89 Another important factor is the costs of a crisis involving systemic risk.

    The most recent experience tells us that they are huge, in the range not only of billions but of trillions of dollars; and their negative impact on government debt will be a heavy burden for many years. By comparison, the costs for the safety and soundness measures suggested by the proposal of an AIFM Directive, primarily for authorization, supervision and capitalization, appear to stay in a range which is appropriate and reasonable. This is obvious for hedge funds.90 Private equity funds and venture capital funds will have to bear a slightly higher burden. However, they tend to be smaller; it can be assumed that many of them will be able to make use of the de minimis exception.91 All these reasons support the conclusion that the EU Commission should be encouraged to transform the safety and soundness elements of its proposal into a draft and present it to the European Parliament and the EU Council for adoption.

  • The objective to improve the protection of investors looks primarily to disclosure and transparency. The imposition of mandatory disclosure duties burdens the AIFM with additional costs,92 but at the same time it relieves the investors to gather information at their own expense; this can result in a net reduction of information costs. In addition, the argument, that big investors can and should look for themselves, is weakened by the “retailization” of the fund business,93 that is to say by the trend to allow smaller investments to be made into the funds. And, at the same time, mandated transparency can serve the safety and soundness concerns and support market discipline. It therefore appears that the costs for improved disclosure will be matched by several beneficial effects which will be generated by the regulation of information flows.

  • I am much more reluctant to recommend the adoption of rules designed to improve the efficiency and integrity of financial markets. As mentioned before, strategies of undesirable short selling can be used not only by hedge funds but also by many other market participants.94 This is equally true for “empty selling” of securities95 which may distort incentives by separating or “decoupling” decision making from the ownership interest.96 As far as these concerns are legitimate, they should be dealt with by legislation which is addressed to all market participants. This is equally true for the market for corporate control; the duty to disclose block acquisitions to the company and to other shareholders should be imposed upon all investors.

  • The final issue is corporate governance. In spite of the concerns expressed in the working paper of the EU Commission’s staff97 the proposal abstains from suggesting any rules. This should not be changed. The corporate governance systems of the Member States continue to differ greatly; the EU has for good reasons abandoned its original intention to harmonize the structures of stock corporations.98 This decision is to be applauded; the legislative powers to shape corporate law should stay with the Member States.


This brings me to the end of my remarks. I have not been able to discuss all the measures suggested in the proposal of an AIFM Directive. The emphasis is clearly on the safety and soundness of the financial system. It is generally agreed that AIF are likely to enlarge the risks affecting the globalized financial markets, and this includes systemic risk. I therefore recommend to enact at least those elements of the proposal which are designed to contain systemic risk.

On the European level, this is documented by the Annex to the Second Banking Directive. It enumerates the activities “integral to banking” which in the continental European tradition constitute the core of banking services.

Commission Proposal for a Directive of the European Parliament and of the Council on Alternative Investment Fund Managers and amending Directives, COM (2009), 207 final (Apr. 30 2009) [hereinafter COD 2009/0064].

4 COD 2009/0064 art. 2 para 2. (d), (f) and (c).

See “Where as” clause (6) to the proposed AIFMD.

Council Directive 85/611, 1985 O.J. (1375/03) as amended by Council Directive 88/220, 1988 O.J. (1100) (EC).

See COD 2009/0064, “Where as” clause (5).

See COD 2009/0064, pp.2 f.

See COD 2009/0064, p.3.

Commission Staff Working Document accompanying the Proposal for a Directive of the European Parliament and of The Council on Alternative Investment Fund Managers and amending Directives 2004/39/ EC and 2009/…/EC; Impact Assessment, COM (2009) 207 (Apr. 30, 2009).

COD 2009/0064: art. 10 para.3; 11 para.5; 12 para.3; 13; 16 para.4; 18 para.4; 24 para.2; 28 para.2.; 31 para.3.

D. Vitokova, “Level 3 of the Lamfalussy Process: An Effective Tool for Achieving Pan-European Regulatory Consistency,” Law & Fin. Market Rev., 158 (2008).

COD 2009/0064 art.2, para.1.

See COD 2009/0064, p.8.

COD 2009/0064 art. 2, para.2. (a).

See COD 2009/0064 clause 6, p.13.

COD 2009/0064 art. 4, para. 1.

COD 2009/0064 art. 5.

COD 2009/0064 art. 6, para. 1.

COD 2009/0064 art. 31 para. 1.

COD 2009/0064 art. 32 para. 1.

COD 2009/0064 art. 10

COD 2009/0064 art. 11.

COD 2009/0064 art. 12.

COD 2009/0064 art. 11 para. 1.

COD 2009/0064 art. 16 and 17.

COD 2009/0064 art. 18 para. 1.

COD 2009/0064 art. 20.

Directive 2003/71/EC of the European Parliament and of the Council on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC, 2003 O.J.{1345/64}.

COD 2009/0064 art. 21.

COD 2009/0064 art. 29.

COD/2009/0064 art. 22.

COD/2009/0064 art. 24.

COD/2009/0064 art. 25, paras. 1 and 2.

COD/2009/0064 art. 25, paras 3 and 4.

See D. Vitkova (supra note 11).

COD/2009/0064 art. 26-28.

COD 2009/0064 art. 31.

COD 2009/0064 art. 33.

COD 2009/0064 art. 35.

Josephine Moulds, Hedge Fund Coupland Cardiff Asset Management threatens to quit London over EU’s Directive on alternative Investment Fund Managers, Oct. 13, 2009;!6318583!Hedge-fund-Coupland-CardiffAsset-Management-threatens-to-guit-London-over-EUs-Directive-on-Alternative-Investment-Fund-Managers.html.

European Private Equity & Venture Capital Industry Response to the Proposed Directive of the European Parliament and Council on Alternative Investment Funds Managers (AIFM) (2009), ‥ ‘/2009-06-26-ResponsepaperAIFM.pdf.

James Abbot, City warns against ‘narrowly protectionist’ EU AIFM Directive, Sept. 11, 2009,

Tom Cahill, European Hedge fund ‘Bogeyman’ Rasmussen Says Fees Next Target, Sept. 11, 2009,

Lucia Quaglia, The ‘old’ and ‘new’ political economy of hedge fund regulation in the EU (2009),

Quaglia, supra note 44, at 5.

Moulds, supra note 40.

As threatened by Coupland Cardiff, supra note 40.

“McCreevy caught in the middle,” Financial Times, August 29, 2009. supra note 45.

Hedge Funds, May 5, 2009,

Impact Assessment, supra note 9.

Charles River Associates, Impact of the proposed AIFM Directive across Europe (2009),

Impact Assessment, supra note 9, at 7 and 64.

CRA, supra note 51, at 76.

CRA, supra note 51, at 88.

CRA supra note 51, at 7 and 64.

CRA supra note 51, at 79.

Impact Assessment, supra note 9, at 87.

Impact Assessment, supra note 9 at 19. The German Bundesbank has expressed similar concerns. See Financial Stability Report 2007, pp. 35 ft. and Financial Stability Report 2008 pp. 34ff. (both reports emphasize the need for more transparency and market discipline).

Directive, supra note 2, at 3.

Impact Assessment, supra note 9, at 19.

Impact Assessment, supra note 9, at 21.

Impact Assessment, supra note 8, at 28.

United Kingdom, Spain, Ireland, Germany.

Italy, Portugal.

Directive 2004/25/EC of the European Parliament and the Council of 21 April 2004 on takeover bids, 20040.J. (L142). The Directive requires the Member States to provide for a mandatory bid, but leaves it to their legislation to fix the threshold which will trigger the duty to make a bid. There are more specific rules for takeovers of financial institutions; See Directive 2007/44/EC, 2007 O. J. (1247).

Impact Assessment, supra note 9, at 28.

Directive Proposal, supra note 2, at 3 fn 2.

Impact Assessment, supra note 9, at 21.

Friedrich Kübler, “The Shifting Paradigm of European Company Law,” 11 Colum. J. Eur. L. (2005), 219, 229 ff.

See generally, Case C-212/97 Centros Ltd v Erhvervs, 1999 E.CR. 1-01459. Case C-208/00 Oberseering BV v. Nordic Construction Company, 2002 E.CR. 1-09919. Case C-167/01. Kramere Van Koophandel en Fabrieken VoorAmsterdam v. Inspire Art. LTD, 2003 O.J. (C 275) E.C.J.

This is explained in more details by Friedrich Kübler, supra note 70, at 235 ff.

CRA, supra note 51.

CRA, supra note 51, at 2.

Id. at 3.

Id. at 95. for hedge funds one-off 0.3 bp and ongoing 0.1 bp; somewhat higher figures for private equity and venture capital funds.

Id. at 98 and 10l.

Id. at 99. no burden for hedge funds; 1.5 bp for private equity and 1.9 bp for venture capital funds (all ongoing).

Id. Pp. 104 ff. (20 - 30 bp) and 107 ff. (64 bp).

Kübler, supra note 70.

CRA, supra note 51, at 42.

CRA, supra note 51, at 63.

Supra, III.

CRA, supra note 51, at 43.

Supra III. 1.

Supra, IV. 1.

S. M. Ishmael, “Fitch Warns of Negative ‘Hedge Fund Effect’ on Credit,” Financial Times, June 7, 2007.

A recent example is the Carlyle Capital Corp.; See Hal S. Scott, International Finance (16th ed., 2009), p. 879.

N. Chan, M. Getmansky, S. Haas, and A. Lo, “Systemic Risk and Hedge Funds,” NBER Working Paper 11200 (March 2005).

See the figures mentioned in VI. 1.

See supra note 15.

See supra note 76.

Scott, supra note 88 at 870.

See supra IV. 3.

H. T. C. Hu and B. S. Black, “The New Vote Buying: Empty Voting and Hidden (Morphable) Ownership,” 79 South Cal. l. Rev. (2006) at 876.

H. T. C. Hu and B. S. Black, “Hedge Funds, Insiders, and Decoupling of Economic and Voting Ownership: Equity Voting and Hidden (Morphable) Ownership,” 13 J. Corp. Fin. (2007) at 343.

See supra IV. 4.

Kübler, supra note 70.

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