May 26, 2006
Europe puts hedge funds under scanner
Hedge funds’ popularity seems to have become their undoing. This popularity and high profile is prompting European governments to examine ways to curtail their rising power and to consider new rules for fund investors. The governments' efforts are being championed by influential European corporate executives. These executives are unhappy about the way hedge funds can use relatively small stakes in publicly listed companies to agitate for change.
Historically, hedge funds have been lightly regulated because they were funds for extremely wealthy, sophisticated investors. But now, as there is more money in the business, the pressure to increase oversight has increased. This pressure is visible in both Europe and in the U.S. Post-gazette.com reports:
Earlier this month, U.S. regulators said there isn't a need for further regulation of hedge funds at this time. Regulators from the Federal Reserve, Treasury Department, SEC, and Commodity Futures Trading Commission testified before a Senate subcommittee that they needed to better understand hedge funds before prescribing additional regulations, with some officials cautioning that the current way of regulating funds -- indirectly by focusing on counterparty risk -- is effective.
Read more: Hedge funds get Europe's scrutiny
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