Officials: EU Rules Will Block U.S. Hedge Funds

Jun 15 2010 | 1:17am ET

U.S. hedge funds may be shut out of Europe after all, a pair of regulators from both sides of the Atlantic is warning.

While the European Union is moving towards a compromise that is billed as watering down some of the more “protectionist” elements of its controversial proposed alternative investments rules, the U.S. will not meet the standards needed to give its hedge funds and private equity funds access to European markets.

While the European Parliament has been painted as the champion of opening Europe to foreign hedge funds—with restrictions—at U.S. and British prompting, the U.K. Financial Services Authority’s Dan Waters said the requirements proposed by the Parliament are draconian, Hedge Funds Review magazine reports. The Securities and Exchange Commission’s Robert Plaze, associate director for investment management regulation, told the InvestoRegulation conference in London that the U.S. cannot currently meet those requirements.

Contrary to popular perception, the European Commission’s plan would actually be best for foreign hedge funds, Waters said.

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