As Chapter V of the Commission's proposal deals with the treatment of private equity funds, I assume the Deputy is referring to Chapter VII which sets down the specific rules in relation to third countries.
This proposal has been the subject of much debate over the past 12 months and text has evolved considerably since the Commission's proposal was published on 30 April 2009. At Ecofin yesterday, the EU's Finance Ministers unanimously agreed upon a proposal from the Spanish Presidency which will now form the basis for negotiations with the European Parliament under the co-decision process. The Spanish Presidency agrees that, notwithstanding Ecofin's unanimous agreement, a number of issues, which are problematic for Member States, remain to be resolved in the discussions with the European Parliament.
The treatment of fund managers established outside the EU, so-called "third country managers", was one of the most difficult issues that arose with this dossier and a number of issues arose in relation to this. On the one hand, there was a view that third country managers should be allowed to operate within the EU without restriction. On the other hand, there were concerns that such an approach would not be consistent with the objectives of the Directive and would leave EU fund managers at a competitive disadvantage in relation to non-EU managers.
In view of the range of complex issues associated with this, the Spanish Presidency proposed a draft compromise text whereby these third country managers, would have to comply with certain reporting and disclosure requirements before they could operate in a particular Member State, but that they could not avail of the "passport" to operate throughout the EU, without establishing a physical presence in a Member State. The proposal requires that appropriate co-operation agreements should be in place between the relevant Member State and third country. Of course, any entity that wishes to establish its headquarters in the EU would be free to do so, but there would be no obligation on them in this regard. On balance, I believe the proposed approach is the best option available in the circumstances.
Effective and efficient financial market regulation and supervision is central to the safeguarding of consumer interests, ensuring that financial markets and financial institutions operate in an open and transparent manner consistent with their stability and the stability of the financial system as a whole. It is also important that the legislative and policy framework for financial services supports the competitiveness of the sector and maintains in an appropriate way a level playing field among market participants. It is an important priority in formulating legislative proposals at EU level to strike an appropriate balance between these objectives.
The funds industry is a valuable sector of the economy which provides direct employment to approximately 12,500 people with many more indirectly employed. The proposal, like all other measures aimed at improving the internal market, has the potential to impact on the financial services industry in Ireland, but equally it offers opportunities for developing new business practices aligned with the new regulatory regime as it evolves in the period ahead.
