November 26, 2006

Regulation In, Managers Out?

-- By Pushpa Sathish, Staff Writer

The assumption that more regulation will drive hedge funds out of the country is gaining more truth by the day. The European Union has now decided not to meddle with existing regulations that govern the continent’s hedge fund industry, as it does not want “an exodus of its hedge fund managers”, according to Charlie McCreevy, Commissioner of the Financial Services Authority.

This stand is a marked contrast to the scene on the other side of the Atlantic where US Treasury Secretary Henry Paulson and Senate Finance Committee Chairman Charles Grassley are seeking more transparency in the operations of hedge funds. Europe’s regulatory body said it was investigating how funds valued their assets following a request from former Chancellor of Germany, Gerhard Schroeder, to enforce international rules for hedge funds in the EU.

McCreevy says the inspection of hedge funds in Europe was better left at the country-level and that existent rules would limit the consequences of a collapse like that at Amaranth or Long-Term Capital Management.

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