Spain tightens proposed hedge fund rules

February 16, 2010

SPAIN    By Huw Jones
   LONDON, Feb 16 (Reuters) – European Union president Spain tightened proposed rules to regulate hedge funds and private equity groups, prompting accusations of protectionism from within the industry but potentially speeding up moves towards a deal.
   Spain recommended non-EU funds should only be marketed in a member state if “appropriate cooperation agreements” are in place between regulators of the countries involved.
   The presidency’s previous proposal had maintained the status quo by saying EU states should be allowed to have third country funds on their turf unhindered.
   The amendment would modify a broader EU blueprint for the industry, under which managers of alternative investment funds would have to obtain authorisation and make regular disclosures to supervisors in return for being able to offer their services across the 27-nation bloc under strict conditions.
   The blueprint dovetails with global efforts to shine a light on all parts of the financial system by applying lessons from the credit crunch.
   EU states and the European Parliament have the final say on the law authored by the bloc’s executive European Commission.
   Britain is likely to oppose Spain’s amendment as it wants to continue with existing national approval regimes, seen as a preferable option to tough pan-EU marketing rules.
   EU states will discuss the new compromise this week and next. If backed by member states, it would put them in line with Jean-Paul Gauzes, the French centre-right lawmaker who is steering the bill through parliament.
   Gauzes has proposed that third country funds can be marketed in a member state if a manager’s head office is in the EU or information exchange cooperation agreements are in place between the relevant regulators.
   Andrew Baker, chief executive of the Alternative Investment Management Association, said Spain was proposing a more intrusive approach and cooperation arrangements were open to wide interpretation.
   “You either have EU rules or you have national rules. The idea of something in between is a bad one,” Baker told Reuters.
   “We are concerned that the original text of the directive, which is protectionist in nature where it came to third countries, could be drifting back,” Baker said.
   Baker said any curbs on investors in Europe would hit asset managers in the United States, Canada, Switzerland, Hong Kong, Singapore, Japan, Australia and South Africa.
   Spain has also proposed that individual EU states be allowed not to apply planned thresholds that bring fund managers under the rules.
   “It’s edging towards the idea that yet more funds can be included. It’s offering the lure that there is more to be gained by not having a threshold or carve-out for smaller firms,” Baker said.
   (Additional reporting by Julien Toyer in Brussels, editing by John Stonestreet)
   ((Reuters messaging:; + 44 207 542 3326;
Tuesday, 16 February 2010 14:27:53RTRS [nLDE61F120] {C}ENDS

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