Extending the EU Financial Regulatory Framework to AIFM, Credit Derivatives, and Short Selling

The European Commission followed the impulse from G20 for a coordinate response to the financial crisis by adopting a proposal for a Directive to mandate the clearing of suitable classes of OTC derivatives (the so-called EMIR proposal) and a proposal on alternative investment funds (AIFMD). However, the Commission further enlarged the regulatory perimeter by including in the AIFMD proposal also private equity funds and by adopting a proposal for Regulation on short selling.In particular, the EMIR proposal, currently (March 2011) under discussion at the Council and the European Parliament, follows closely the multilateral regulatory efforts by providing mandatory clearing for suitable OTC contracts, penalisations for the remaining contracts, and disclosure requirements for all kinds of derivative contracts. The AIFMD proposal, on which the European Parliament and the Council reached a political agreement in October 2010, besides introducing authorization requirements and disciplining operating conditions, reporting requirements and a passport regime for all the non-UCITS funds, contains a chapter specifically devoted to private equity funds which introduces, among other things, a differential treatment for private equity funds vis-à-vis other shareholders as regards special notification requirements and limitations to shareholder rights. Finally, the Short Selling proposal, also under negotiation at the Council and the Parliament, adopts a more restrictive stance with respect to the recommendations of multilateral fora and of the Commission appointed experts group, and does not seem to be comforted by the available empirical studies on the effects of the limitations to short selling adopted around the world during the recent financial crisis