Some might say that an institutional investor should
understand what he (or she) is buying or at least pay someone
more expert to understand what he is buying. Surely an investor
can be deceived by fraud or misrepresentation, in which case
the traditional institutional investment maxim of caveat emptor
might be properly set aside by a court.
However, the caveat emptor principle, so long
undermined in the case of retail investment, has now been
wholly undercut for institutional investors by the Alternative
Investment Fund Manager directive (the AIFM directive).
This directive, on which the ink has not dried and may not
fully dry until 2013 (not least because there are a significant
number of items in the level one Directive that are postponed
into level two delegated legislation), is in a number of
important respects all about the regulator knowing better than
the institutional investor as to how that institutional...