THE IRISH Venture Capital Association has begun lobbying at an Irish and European level to exempt the industry from new European regulations designed to tightly regulate hedge funds.

The proposal requires registration of all investment funds with assets of over €500 million and would place caps on their executives’ pay.

Although the Alternative Investment Fund Managers Directive was withdrawn from the agenda at a meeting of European finance ministers last month, it is understood the Spanish EU presidency is keen to bring it into law before the end of its term in June.

A key committee of MEPs will vote on Monday on what text should be considered by the parliament.

The association argues that the regulations are designed to “limit and control the potential systemic risk” posed by private equity and hedge funds. Its submission on the directive, sent to Minister for Finance Brian Lenihan, Ireland’s European commissioner Marie Geoghegan-Quinn and Irish MEPs, says such systemic risk arises from the use of leverage, which is not a factor in venture capital funding.

The paper calls for venture capital to be “de-coupled” from private equity and to class venture capital funds as exempt investment schemes that play an important role in supporting innovation.

The first draft directive would apply to all funds worth €500 million or more, but the association wants this to be increased to €1 billion. This would exempt all Irish venture capitalists as their funds are typically about €100 million or less.

The association also argues that article 29 of the directive, which requires companies effectively controlled by fund managers to report financial and operational details, would place European start-up firms at a disadvantage. It says an exemption for companies with turnover of less than €50 million must be retained.