They don't care and they don't believe (you)!

Last night I attended a reception for Syed Kamall, London MEP and member of the European Economic and Monetary Affairs Committee, the influential body which sets the regulatory framework for financial services.

The event was hosted by Cummings Law and Grant Thornton and had a focus on the Alternative Investment Fund Management Directive (AIFMD), but also looked forward to coming regualtion, eg UCITS V (VI and VII?), AIFMD 2, etc.

Having explained the European process for formulating regulations there were a number of questions from the floor including some I posed. Without going into the specifics my high level takeaways were:-

Most European Politicians

• "Don't care" if it is hard or painful for the industry and participants to comply. The facts that there is a load of other unco-ordinated regulation being placed on the industry from many sources and there is a growing history of slipped regulatory implementation dates is of no concern - they just want it done.
• Are bored with AIFMD - they have done their work and just want to leave it to others to implement - they are now looking at new, more interesting things so there is no appetite to revisit the core of AIFMD
• Saw is was an opportunity for other interest groups in Europe ( I choose my words carefully! ) to stick it to the UK and London. Syed's analogy is that when a bar fight breaks out, you generally don't hit the person who started it, but have a go at the person you have long wanted to hit!
• See European union as about political union and not about unifying the markets into one. The psychological blow that losing and EU member state would be so great that the politicians will do pretty much anything to prevent it!
• Will strongly resist attempts by individual regulators to implement a "lighter touch" on aspects like remuneration. Syed thought that is anyone broke rank it would be to impose tougher, not lighter conditions.
• Don't believe the complaints about the costs involved AND even if they did believe them they don't care

Syed's contention os that what we have is a lot better than the early intentions of certain groups that would wanted to restrict

European investors to investing in
European funds managed by
European fund managers with assets protected by
European depositories

This would have been very forward looking.........not! He also thought that some politicians believed that the business would move within the EU, from London to Paris or Frankfurt, rather than fly the EU entirely. That would seem to be a rather naive expectation.

With this perspective I will admit that what we have in AIFMD does indeed seem better, but it seems that it will not get much better than what we see now. The warning though was that there will be more coming as UCITSX, AIFMDX , etc.

The Banking sector, which is where Syed believes the regulatory focus should be, is much more organised and better resourced to lobby the politicians from early stages. In contrast the fragmented nature of the European hedge fund /alternative investment industry has not helped with AIFMD and unless as an industry it starts resourcing and organising a more effective set of lobbying, they are likely be done over again in the future.

Not very encouraging, but it sounds like this regulatory train will keep a lot of people, starting with the politicians, busy for a long while.