Among many financial risks that were recognized as risks that triggered the latest financial crisis were alternative investment funds (further: AIF) and their managers. It was found that AIFs bear specific risks to creditors due to their leverage techniques, to investors who directly or through some other funds (e.g. funds of hedge funds, open ended real estate funds) invest in AIF, and consequently, to the stability of the global financial market for the reason that assets engaged in these funds are significant. AIFs primarily include hedge and private equity funds, but also real estate funds, commodity funds, infrastructure funds and other types of institutional funds, as long as these funds are not covered by UCITS Directive. Current regulation of AIF is primarily left to national level. Many European countries, including Croatia, already adopted regulatory framework for certain types of AIF and their managers. However, national regulation is fragmentary, primarily focused on domestic issues. The problem recognized by the European Union (further: EU) is the cross-border risk associated with the managers of AIFs. The main focus of EU efforts is to achieve better reporting by managers of AIFs to the competent authorities what will in turn allow more profound assessment of financial risks attachable to managers of AIFs and with AIFs which they manage. Also, by imposing authorization requirements for managers in EU financial market, proposed legislation aims to create European marketing passport for managers of AIF applicable in all Member States. However, not all proposed measures are welcomed. The most criticized issue is protectionism of EU managers towards non-EU managers and closure of the EU financial market. Authors shall investigate currently proposed legislation in EU as to scope of surveillance of managers of the AIFs by regulatory authorities, scope of regulatory supervision of the AIFs in Croatia.