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FESE understands that the Call for Evidence arises from the White Paper and primarily in relation to investment funds (e.g. private equity funds, hedge funds) but also notes that the Call for Evidence is very broad in scope and extends well beyond investment funds into securities markets more generally. FESE members are not aware of any significant problems or market failures as a result of there not being a private placement regime in European securities markets and therefore our initial view is that there does not appear to be a need to create such a regime at this point. Any specific problems identified in relation to investment funds should be dealt with specifically in that context.
Many types of investment funds are already subject to PD, MiFID as well as the Market Abuse and Transparency Obligations Directives. The biggest bulk of the primary and secondary market rules applicable to investment funds already take into account the special case of ‘sophisticated’ investors who are the target of a private placement regime.
We understand that there is a concern that distributors of certain funds (such as private equity funds and hedge funds) currently have to comply with retail type disclosure requirements even when they are seeking to sell only to professional clients but are convinced that many of these problems may well be resolved once MiFID enters into force.
If the outcome of the Call for Evidence suggests that some type of private placement regime is necessary, it is extremely important that the scope of such a regime be defined carefully in order to avoid unintended consequences for securities and funds operating efficiently in the market. FESE considers it absolutely essential that the scope of any private placement regime does not cover securities or funds that are admitted to trading on Regulated Markets and on MTFs.
It should be noted that the European economy derives significant benefit from the complementary functioning of RMs and MTFs, both of which are subject to clear and transparent rules aimed at protecting investors and enhancing market integrity. If the Commission establishes any benefit in having an exclusive open-ended fund regime that is harmonised across Europe, any such framework should be on a designated product basis only. Once the need for action is identified, the Commission should look into a broad range of options to deliver the desired outcome, including self-regulatory means.
