Protecting professional investors : an analysis of the alternative investment fund managers directive

Abstract

The Alternative Investment Fund Managers Directive (AIFMD) is a European Union (EU) Directive that is to come into force on July 22 2013. The scope of this regulation is to regulate Alternative Investment Funds (AIF) (funds that are not compliant with the Undertaking for Collective Investment in Transferable Securities – UCITS – Directive) so as to offer greater harmonisation of AIF regulation across the EU-bloc as well as enhanced protection for professional investors. Since Malta is a member of the EU, the developments concerning this Directive are relevant to the Maltese AIF sector. However, despite not yet coming into effect the AIFMD has already drawn much criticism for offering over-bearing protection to the professional investor. Generally, this type of investor benefits from a lighter touch of regulation due to their increased level of financial sophistication. Nonetheless, it is feared that this seemingly excessive protection will render the EU-AIF industry uncompetitive compared to other AIF jurisdictions outside the EU which would not be as tightly regulated. The scope of this study is to assess the AIFMD’s provisions in a manner that allows a conclusion on whether the increased levels of professional investor protection are warranted. However, given the broad scope of the Directive, the study focused on just the disclosure, remuneration and depositary requirements of the AIFMD. This dissertation analyses the AIFMD by considering two main types of research. The first of these is an analysis of the current literature on the Directive, with particular reference being made to the selected areas of requirements. The second section is the evaluation of results from a survey conducted among participants in the Maltese AIF sector. There is also a conclusion on these two sections on whether the added costs of the Directive do in fact outweigh their associated benefits.