Pressure On UK Government To Challenge Directive

by Phillip Morton, Investors Offshore.com

23 June 2009

With hedge fund associations, investors, economists, and now the UK’s House of Lords bearing down on it, will the British Government act to challenge the European Union’s directive on Alternative Investment, observers ask? Since the announcement of the directive, dubbed ‘the French plot against London’, the alternative investment industry and its extensive shareholders have warned that the directive could be disastrous for London's status as a financial centre.

The House of Lords’ EU Committee, whilst welcoming the EU's proposals to regulate the financial services industry, denounced the UK government’s attitude to the directive. It expressed concern that the directive was created on a rushed basis ‘with insufficient consultation and a weak assessment of likely impacts,’ and called upon the government to ‘remedy [the situation]’ in order to ‘influence the final decisions in the coming months.’

Lord Woolmer, who chaired the Committee for the inquiry, said: "The government is right to enter discussions on EU efforts to strengthen EU-wide macro- and micro-level supervision over the financial sector. But there are concerns.”

"Financial services are a key, strategic industry for the UK. London operates in a global marketplace as well as in Europe. Many other EU member states do not share this perspective. The UK government must ensure these national interests are properly reflected in new regulations or in structural reforms.”

"There are some worrying signs. The timing and pace of Commission proposals appeared dictated by the timetable of the European Parliament elections and the twilight days of the old Commission. The content of some proposals, especially those on regulation of alternative investment funds, was rushed with insufficient consultation and a weak assessment of likely impacts. The UK government has appeared to be behind the ball game at times. Getting things done right is now more important than getting things done fast."

Hedge funds have warned that the EU’s directive will impose devastating regulation on hedge funds, which will send the industry into turmoil and could lead to a mass hedge fund exile from 27-member bloc.

The EU’s alternative investment directive is to be tabled during the second half of 2009.

Recommended