Top U.S. Lawmaker Proposes Retaliation For EU Hedge Fund Rules

Mar 24 2010 | 12:59pm ET

Turnabout is fair play, according to Sen. Charles Schumer (D-N.Y.)

The third-highest ranking Democrat in the U.S. Senate is threatening to block European alternative investment funds from marketing or raising money in the U.S. if the European Union adopts new regulations that have a similar effect on American funds in Europe.

In a letter to U.S. Treasury Sec. Timothy Geithner, Schumer blasted the proposed Alternative Investment Fund Managers directive as “protectionist rules that discriminate against U.S. firms and activities.” The EU rules would impose strict new reporting and custody requirements, as well as possible leverage limits. A draft of the legislation being hammered out by EU finance ministers would make it extremely difficult for foreign alternative investment funds to serve European clients; a version of the rules under consideration in the European Parliament would be somewhat less onerous.

Schumer’s own proposed legislation would mirror the EU, barring funds from outside the U.S. from marketing or raising money in the country, and mandating the use of U.S. banks for custody.

“Just as EU-based funds and custodian banks currently have full access to our market, U.S.-based funds and custodian banks should similarly not arbitrarily be denied access to the European market,” Schumer wrote.

EU officials have previously warned that they will not be bullied by Washington, and it is unclear what effect, if any, Schumer’s threat would have. The vast majority of European hedge funds and private equity firms are based in the U.K., which already opposes the proposed rules.


In Depth

Q&A: TCA Fund Management's Bob Press on Small-Cap Private Equity

Aug 25 2016 | 8:55pm ET

The emergence of private credit as a replacement for traditional bank financing...

Lifestyle

Kiawah: Island Reversal

Aug 24 2016 | 9:59pm ET

Looking for real estate investments but the typical real estate fare isn’t cutting...

Guest Contributor

Old Hill Partners: Embrace Illiquidity

Aug 9 2016 | 2:39pm ET

The age-old financial concept that higher yields are the result of higher risk and...