EU Countries Strike Hedge Fund Deal After France Backs Down

Oct 19 2010 | 1:42pm ET

After more than a year of battling, bickering, negotiations and compromises, the European Union has finally agreed on sweeping new alternative investments regulations.

The 27-nation bloc's finance ministers today struck a deal on the new rules after an increasingly isolated France—which had angled for tougher rules and giving individual countries the right to shut out foreign funds—capitulated to British demands for far more industry-friendly terms. France last month announced it would oppose the so-called "passport" provision for third-country funds, which would give those that meet the tougher new European standards the right to operate across the EU.

Germany initially supported France's move, but the country's finance minister, Jörg Asmussen, became increasingly unhappy with France's refusal to compromise, especially after U.S. Treasury Sec. Timothy Geithner blasted France's opposition as protectionist.

The key concession was on the passport. France agreed to extend it to foreign hedge fund and private equity managers, and backed off its demand that it be issued by a new pan-EU financial regulator. In exchange, the U.K. agreed to delay the implementation of the passport for foreign funds until 2015.

French Finance Minister Christine Lagarde could barely disguise her contempt for the deal.

"It is indeed a compromise," she said. "We could have probably come up with something better."

The industry lobby, by contrast, could barely hide its delight.

"There is still much in the directive that will be difficult to implement and there will be a heavy compliance burden that the industry will have to bear," Andrew Baker of the Alternative Investment Management Association said. "But the impact will be far less severe than if something closer to the original proposal had been agreed."

Under the compromise, alternative investment firms will be placed under the supervision of new EU regulator. They will also face tougher reporting and custody requirements and will be subject to a summary bans on short selling.

The new language is set to be approved by the European Parliament next month.


In Depth

Change In 'Accredited Investor' Definition Could Hurt Crowdfunding Space

Jul 25 2014 | 8:14am ET

The Securities and Exchange Commission is considering changes to its 30-year-old...

Lifestyle

David Yarrow On Growing His Hedge Fund And Shooting The Animals And People Of Africa - As A Photographer

Jul 23 2014 | 6:44am ET

While he’s always been a photographer, recent expeditions to Iceland, Ethiopia...

Guest Contributor

The Truth About Track Record Portability

Jul 24 2014 | 5:55am ET

The number of private funds converting to mutual funds has increased significantly...

 

Sponsored Content

    Northern Trust Helps Hedge Funds Navigate Derivatives Regulations

    Jul 8 2014 | 10:48am ET

    The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…

Publisher's Note