France Says EU Members Should Be Allowed To Bar Offshore Hedge Funds

Sep 18 2009 | 12:02pm ET

France seems unlikely to get its way when it comes to the European Union’s strict new hedge fund rules. But the great Gallic enemies of the alternative investment industry aren’t giving up without a fight.

The head of France’s market regulator told a London conference sponsored by the U.K. Financial Services Authority that his country opposed the European Union-wide “passport” that would be offered to hedge funds and other investment firms as part of the EU’s proposal to regulate the industry. Instead, Jean-Pierre Jouyet of the Autorité des Marches Financiers said that each member state should have the authority to exclude offshore hedge funds.

“We firmly and strongly oppose the passport for offshore alternative funds,” Jouyet said yesterday. “While it is perfectly normal that every member of the EU family should have freedom of the house, it is common sense to protect ourselves by carefully controlling who comes through the front and back doors.”

Jouyet’s words are likely to inflame many in the U.S., who say the proposed EU regulations would bar them from doing business in Europe.

The EU regulations would impose strict new reporting requirements and leverage limits on alternative investment firms. But they would also grant any firm that registers in Europe free rein to market their products throughout the region.

Much to France’s chagrin—the country’s leaders, alongside those of Germany, have blasted the EU proposal as too weak—the hedge fund rules are likely to get weaker, rather than stronger, before becoming law.

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