The European Union is proposing new rules extending oversight for the €2 trillion hedge fund and private equity fund industry. The European Commission says the new rules will require registration for funds managing more than €100 million of assets. Under the directive’s proposals, the funds will be forced to meet new levels of transparency not just to regulators, as industry leaders had hoped, but also to “supervisors, investors and other key stakeholders”. The regulations will also extend to “all major sources of risks in the alternative investment value chain” including “key service providers... depositaries and administrators”. The directive says they will be “subject to robust regulatory standards”. The funds will also have to prove standards of governance including areas of risks, liquidity and conflicts of interest.
The European Commission on Wednesday set out guidelines on the bonuses of risk-taking staff in the financial services sector in response to the global financial crisis. The guidelines also cover the structure of pay, design and implementation of remuneration policies, and the role of supervisory authorities in reviewing these policies.
EU states and the European Parliament have joint final say on draft financial laws.
Predictably, the hedge fund industry is up in arms:
Florence Lombard, executive director of the London-based Alternative Investment Management Association, said: “This directive is not a proportionate regulatory response to any of the identified causes of the current crisis." She said that all of the major reports, including the de Larosiere report and the Turner Review, concluded that hedge funds neither caused nor played a significant role in the crisis.
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