At times it seemed this day would never come: The oft-delayed and derailed European Union rules covering alternative investments are finally law—though it will be more than two years before any hedge fund or private equity firm feels the bloc’s new powers.
The European Parliament today overwhelmingly approved the Alternative Investments Directive, a year and a half after it was first proposed by the European Commission. Late last month, the EU’s 27 member states gave their approval to the regulations after the U.K. and France struck a deal on the so-called “passport” provision, which would give hedge funds that meet EU standards access to all EU markets.
Given the often turbulent, frequently changing nature of the negotiations, the Parliament vote was an anticlimactic finish to an almost always climactic process: The directive was approved by a vote of 513 to 92, with three abstentions, no surprise given that the final wording of the rules had already been agreed upon by parliamentary leaders and EU states last month.
The directive will impose strict new reporting and custody requirements on hedge funds and private equity funds, as well as placing them under the authority of the new European Securities and Markets Authority. Private equity funds will also face new asset-stripping rules.
The controversial passport will not come into effect for EU firms until 2013, and foreign funds will not be eligible until 2015. Until then, the current regime that allows each EU country to decide which funds will have access to their markets remains in place.