Proposed European Commission rules could mean headaches for US venture funds -- and not just those seeking European LP money. Proskauer Rose has issued an alert and commentary that describes the issue and implications well.  This proposed rule has a significant impact on EU-based firms as well as US based firms seeking to raise money from EU LPs. More important, this could be interpreted as requiring governing entities in the U.S. to cooperate with EU regulations for any U.S. firm to raise EU dollars.

Some background per Proskauer Rose:

The Parliament and the Council of the European Union have recently approved their separate compromise draft proposals of the Alternative Investment Fund Manager (AIFM) Directive originally proposed by the European Commission in April 2009. All three proposals contain provisions that have caused concern within the global fund management industry.

Why should U.S. fund managers care? The proposals could limit or prohibit the ability of U.S. fund managers to market interests in their funds to European investors. Compliance by a U.S. fund manager with the AIFM Directive may not even be sufficient unless the U.S. government agrees to cooperate with the EU in connection with the regulation.

What are the key dates? A compromise draft is expected to be voted on in early July 2010, although that could be pushed back to Autumn 2010 or early 2011. If passed, it is expected that EU member states will be required to implement the AIFM Directive under their national laws within 24 months.

What can US fund managers do now? At this point the U.S. Treasury Department is engaged and directly expressing concerns to the EU. The NVCA is monitoring those diplomatic discussions and will keep our community informed of developments and next steps.  Please stay tuned.

Update:  It has been reported that the Parliament's plenary vote on the AIFMD (originally scheduled for July 6) is now postponed to September 2010, allegedly due to the inability of Parliament and Council to agree on the third country provisions. You can read more here.