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26 October 2009

ECB warns Brussels about hedge fund rules

According to the Financial Times, the ECB opposes the proposed European regulation on alternative assets, arguing that rules need to be harmonized to avoid regulatory arbitrage which might damage the alternative investment management market.


The Financial Times reports that the ECB is acting clearly beyond its legal mandate, in protection of institutions with which the ECB does not even have direct relationship.
The opposition voiced by the ECB, which feared a go-it-alone approach in Europe would backfire, is likely to be seized upon by the alternative investment fund sector – and influence the extensive re-writing of the proposals that is already under way.
The ECB said it supported “the intention to provide a harmonised regulatory and supervisory framework” for alternative investment fund managers in the European Union. But it urged the Commission “to continue the dialogue with its international partners, in particular the US, to ensure a globally coherent regulatory and supervisory framework”.
In a legal opinion published on its website, the ECB warned that funds could simply shop around to find a country where the policing of the sector was less stringent. “An internationally co-ordinated response is necessary given the highly international nature of the industry and the consequent risks of regulatory arbitrage and evasion,” it said.
It also warned that some of the provisions of the proposed legislation – for instance on so-called “short selling” – could unfairly penalise hedge and private equity funds unless they were applied across the financial services sector.

© Financial Times

Documents associated with this article

ECB opinion on AIFM en_con_2009_81_f_sign.pdf

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