Deloitte has warned that proposals in the European Commission’s alternative investment fund managers (AIFM) directive to bring investment trusts under the FSA’s approved persons’ regime could harm diversity on trusts’ boards.
The directive aims to bring alternative investment fund managers operating within the EU under one regulatory framework. EU member states must implement the directive into law by July 2013.
Currently, investment companies are regulated by company law rather than the FSA. Under the directive, if the investment company itself elects to be the alternative investment fund manager, rather than appointing an external manager, directors will have to be approved by the FSA.
Stuart McLaren, partner at Deloitte, says: “Directors will have to provide details of their experience and background and the FSA will have the ability to reject them.
“It would make most people nervous to apply for authorisation from the FSA, especially when they have not done so before. It could harm the diversity of opinion on boards if they are limited to those directors approved by the FSA.”
Toby Hogbin, head of product development at Martin Currie, says: “Bringing investment trust directors inside the FSA’s approved persons’ regime will incur additional cost and effort for investment trusts and the benefit to investors is questionable as there are already significant oversight obligations imposed by the UK Listing Authority’s listing regime.”