Hedge fund reform plans criticised

The European Union’s plan to overhaul the regulation of hedge funds and private equity managers is unworkable, the Committee of European Securities Regulators (CESR) has claimed.

Under the Alternative Investment Fund Managers (AIFM) directive, managers of alternative investment funds would be required to register, submit data on their operations and limit leverage.

However, the draft proposal has so far proved unpopular in the UK, where the majority of the EU’s hedge funds and private equity firms are based.

Now the CESR has joined the debate by claiming that the AIFM proposal needs to be completely reappraised.

’It really doesn’t work. They have pooled everything together, the scope is absolutely too wide, everything is caught,’ CESR chairman Eddy Wymeersch told Reuters.

However, he also claimed that European policymakers will be unwilling to ’start from zero’ on the directive.

Peter Mills, managing director of Kleinwort Benson (Channel Islands) Fund Services Limited, said: ’There is a common agreement amongst the finance services industry that the proposed directive has been drafted in a hurry, and is consequently capable of vast improvement.

’Some of the proposals, like authorising alternative investment fund managers, are sensible and improve investor protection, but others create unnecessary and costly bureaucracy and reduce investor freedom.’

Last month, a survey conducted by the Alternative Investment Management Association revealed that the hedge fund and private equity industries currently contribute £7.9 billion to EU governments in tax revenues.
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