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Source: Reuters -
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EU plans for regulating the hedge fund industry still carry "significant risks", warned Britain's Financial Services Authority (FSA), even though many of the stricter rules have been toned down.
"I would not underestimate the significant risks that still exist in this draft directive. It could still go badly wrong in some important areas," Dan Waters, sector leader for asset management at the FSA, said at the EDHEC-Risk Summit on Monday.
The draft directive, which is highly unpopular in Britain, Europe's hedge fund hub, was introduced last April and proposes such measures as controls on leverage, more data being submitted to regulators, and managers in non-EU countries meeting certain requirements before they can sell funds in the European Union.
After more than nine months of intense lobbying and debate, concessions have been made in some areas, including to let individual member states decide whether non-EU managers can sell their funds in that country.
The European Parliament and EU states have joint say on the draft law. Waters said the assembly's version of the directive contained dangers, even though several thousand amendments to the text had been put forward. "The parliamentary text is very far away from an acceptable position from the UK's point of view," he said.
He also said changes put forward last week by the EU's Spanish presidency, which include reintroducing limits on hedge fund marketing, were unjustified.
"We are not on safe ground yet. It is incumbent upon regulators and investors to stay very active in this debate," he said. The directive also covers managers of a wide range of alternative investment funds such as private equity and real estate.
