Market to open to special funds

Author: | Published: 1 Dec 2005
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Advokatfirmaet Selmer DA

Address

Oslo

Telephone

+47 23 11 65 00

Fax

+47 23 11 65 01

The Norwegian Financial Supervisory Authority (FSA) proposes to amend the Act on Securities Funds to open up the establishment of special funds in Norway. These funds would become a new group of securities funds, through which investors would be offered participation in high-risk investment schemes. Special funds would create a new organization model for venture capital and private equity funds. If the proposition is adopted, hedge funds and derivative funds will be allowed to set up in Norway.

Proposal for establishment of special funds

In a green paper dated November 18 2004 to the Ministry of Finance, the Norwegian FSA proposed the introduction of special funds to Norway. The proposition opens up for establishment of so-called hedge funds, venture funds and private equity funds pursuant to the Norwegian Act on Securities Funds.

According to the proposal, units in special funds could be offered to professional investors. As to private persons, the proposal sets out a two requirements: (i) a gross financial wealth of minimum NOK5 million ($748,000), and (ii) a minimum subscription amount of NOK500,000.

The new funds would not be able to make direct investments in real property and raw materials (including derivatives). But the special funds will be allowed to make investments in companies involved in such activities.

Marketing of foreign special funds

If the Norwegian FSA's proposal is adopted, foreign special funds could be marketed in the same way as Norwegian special funds, subject to advance authorization by the FSA. A vital condition for such authorization is the existence of satisfactory supervisory cooperation between the supervisory authorities in the home jurisdiction of the foreign fund and the Norwegian FSA.

The Norwegian FSA's proposition is in line with the European Commission's work on a directive regulating advanced alternative investment methods.

A white paper is now being prepared by the Ministry of Finance and will most likely be brought before the parliament in February 2006. The new framework for special funds is expected to enter force in spring 2006.

Bernt Olav Steinland and Are Herrem