AIMA Urges Hedge Fund Managers To Prioritise MiFID Compliance

by Ulrika Lomas, for LawandTax-News.com, Brussels

08 June 2006

The Alternative Investment Management Association (AIMA), has urged hedge fund managers not to drag their feet on implementing the Markets in Financial Instruments Directive (MiFID), and has warned that some hedge funds which do not meet the deadline may have to cease trading.

MiFID, which is due to be implemented in November 2007, will have a significant impact on hedge fund managers across the European Economic Area. The Directive is one of the cornerstones of the Financial Services Action Plan which seeks to create a single market for financial services in Europe, and is also a response to structural changes in the European securities markets.

The objective of the MiFID is to enable investors to invest and procure investment services across EU borders more easily, to remove obstacles to the use of the EU passport by investment firms, to foster competition and a level playing field between Europe’s trading venues, and to ensure appropriate levels of protection for investors and consumers of investment services across Europe.

However, AIMA, the global hedge fund trade association, warns that the volume and complexity of the new directive, in addition to a lack of some final pieces of information, will leave such managers and other regulated entities facing a very tight implementation schedule.

“Hedge fund managers need to start working on MiFID now," warned Matthew Jones, Regulatory and Legal Manager at AIMA.

“Although an 18 month run up period sounds adequate, experience shows, particularly after the experiences of N2 and A-Day, that there is an instinct to leave serious implementation work to the last possible minute. Realistically this will not be possible with the new Directive. It has the potential to have a major impact on our members’ business structures, systems and documentation," he added.

AIMA also warned that this heavy workload could become even more burdensome should the UK's Financial Services Authority introduce a single set of Conduct of Business rules, even for regulated firms that are outside the scope of MiFID.

“There are finite industry resources to carry out all the likely legal and structural work involved and these will become progressively scarcer as the industry approaches the November 2007 deadline," noted Mr Jones.

"In the worst case scenario, a hedge fund manager that does not have its arrangements in place by then may have to cease trading until they are MiFID compliant," he cautioned.

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