CESR Procrastinates On Hedge Fund Index-Linked Products

by Ulrika Lomas, for LawandTax-News.com, Brussels

25 November 2005

Dealers have been dismayed to learn that the Committee Of European Securities Regulators has decided to postpone a decision on whether to allow hedge fund index-linked products to be sold as part of certain retail funds.

According to a report in the finance industry journal Derivatives Week, dealers had been expecting the CESR at a recent open meeting to make a final decision on the inclusion of hedge fund index-linked products. Instead, the CESR will continue its lengthy consultation for an additional twelve months, much to the disappointment of dealers who have already structured UCITS III funds with an underlying hedge fund index and had gained approval from regulators in the UK, Luxembourg and Dublin.

It is now unclear whether these funds will need to be restructured or closed, and national regulators have ceased authorising UCITS III funds while the CESR continues to procrastinate.

The article reports that dealers intend to pressure the CESR to reopen debate over hedge fund indices before the 12 months is up.

One official said that he plans to talk to the European Fund and Asset Management Association about setting up a working committee to address CESR's concerns about including hedge fund indices in the funds.

Since assuming responsibility in May 2004 for the regulation of the investment funds, which can be sold in more than one EU member state at a time, the CESR said that its "urgent priority" was the clarification of technical issues arising from uneven implementation of the UCITS III law governing the funds.

http://www.derivativesweek.com/default.asp?page=1&SID=599603&ISS=20991

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