McCreevy Doesn't Aim To Regulate Hedge Funds

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

18 July 2005

European hedge funds can breathe more easily after statements from the SEC's Campos and the EU's McCreevy (pictured) reduced fears of tighter regulation.

Securities and Exchange Commissioner Roel Campos, who voted with the majority to introduce hedge fund registration, said that US securities regulators are looking to take a light approach to regulating overseas hedge funds. Although the new rules require many hedge fund advisors to register with the US securities regulatory agency starting in February 2006, Campos told Managed Funds Association symposium in London: "I don't see a huge, in-your-face kind of regime. Many, if not most, offshore hedge funds will qualify for regulation lite."

Campos said US regulators will take a risk-based approach to hedge fund oversight, bringing the SEC's limited resources to bear on areas of greatest concern, including market manipulation. "Few examinations will be done of anyone in Europe," and chiefly "where there's evidence of substantial fraud," said Campos. He added that any US examinations of European hedge fund operators would involve " significant interaction and collaboration" with European regulators.

European Union Internal Market Commissioner Charlie McCreevy said that he was against the creation of new hedge fund rules, despite growing concerns about risk. Speaking while he unveiled a consultation period on how to streamline Europe's fragmented investment fund industry, McCreevy rejected a suggestion he was "chomping at the bit to regulate hedge funds". "I certainly am not," he told journalists.

However, McCreevy agrees that a debate on hedge funds is necessary. Current laws aimed at protecting consumers from risky deals forbid hedge funds or private equity funds from marketing to retail investors across the EU, although the UK, France, Germany and other countries have introduced easier national rules. Other types of investment fund can be marketed EU-wide under the UCITS rules (Undertakings for Collective Investment In Transferable Securities).

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