Regulatory obstacles #1: Lack of access to market funds in other EU countries
While we should focus on how to attract more capital to the European private equity and venture ecosystem, we have created a regulatory jungle for many fund managers. Regulations have become more extensive, increasingly complex and to a large extent working against the (good) intentions.
And unfortunately, it seems that things keep moving in the wrong direction. In this article, I’ll share my insights and highlight some of the regulatory obstacles for fund managers when raising funds.
Lack of access to market funds in other EU countries
Fund managers holding AIFM registration (sub-threshold managers) cannot market a fund in other EU countries.
If such managers were to market a fund in another EU country, it would require either:
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- AIFM approval, which is time-consuming, expensive and imposes a significant level of operational and compliance requirements, which is not well suited for most managers.
- EuVECA registration, which is less time-consuming and expensive than an AIFM approval (and is better designed to fit the setup for most VC and PE managers) but still imposes requirements that are seen as inconvenient for many managers until at least fund II or II.
- Compliance with local private placement rules, which in most jurisdictions is not an actual option, because it requires local compliance with AIFM.
- Reliance on reverse solicitation, which is a chapter for itself. At least from a legal perspective, the room for relying on reverse solicitation is very narrow and therefore in most situations not an advisable solution.
While I understand limitations on marketing of funds towards retail investors, it (in my view) lacks arguments to limit fund managers’ access to market a fund in other EU countries.
Looking at the recent report from the Danish FSA (see the Mazanti Pulse update here), it seems as if we are looking into further control rather than the opposite, so from a fundraising perspective things are moving in the wrong direction.
