The EU proposals for regulating so-called alternative investment funds (AIFs) are intended to give investors more protection and to mitigate risks to the rest of the financial system, while further integrating markets inside the EU. Unfortunately, many of the provisions seem more likely to achieve the opposite of what is intended, reducing competition, reducing investor choice and increasing systemic risk. They also involve significant compliance costs. The proposals for regulating credit rating agencies seem unnecessary and are likely to be counterproductive. It would be far better to allow free competition by agencies of all kinds operating under a variety of different funding models.