MFA Paper Outlines Problems with Dual Citizenship (Double Regulation) of Funds (with Lofchie Comment)

The Managed Funds Association ("MFA") finalized a discussion paper on Article 13(3) of EMIR. The paper explains what the MFA considers to be the key issue regarding the European Commission's adoption of an implementing act on equivalence with respect to the United States.

The MFA stated that certain alternative investment funds ("AIFs") which are legally incorporated outside the United States, but are either managed by a U.S.-based manager or majority-owned by U.S. persons, are thus considered "U.S. persons" subject to CFTC derivatives rules. If the European regulators do not regard AIFs as being "established" in the United States for the purposes of Article 13, however, then AIFs and their EU counterparts will need to comply with both the CFTC rules and EMIR.

Lofchie Comment: The best result would be if European and U.S. regulators would allow such funds (those that have contacts with both the United States and Europe) to decide whether they prefer to be treated as American or European. Since both regulators overregulate the swaps business and private funds, they should allow private funds to pick their poison.

See: MFA Discussion Paper; MFA Press Release.