December 09, 2006
Regulators concerned over hedge funds
Okay I agree I’m doing the regulation thing a bit too much. But don’t blame me. If you notice the trend, every few months our regulators seem to wake up to the fact that, horror of horrors, the hedge fund market is still unregulated. So they get into this flurry of activity and announce a few meetings and decisions before they go quiet on us again. I’m just the messenger here.
So what’s up now? Well, we now have information that there’s going to be a US-UK collaboration once again. And this time, they go to war to protect the world from unregulated hedge funds. Regulators plan to meet with Wall Street securities firms to discuss whether too many loans to hedge funds leaves them overexposed to potential meltdowns.
Experts from SEC, Federal Reserve and the U.K.'s Financial Services Authority will meet with firms to discuss margin requirements and how banks can limit their credit risk to hedge funds. See, I’m not trying to be sarcastic here and definitely we do need some kind of meetings to take place before regulations can kick in – if at all they do. What I’m against is their knee-jerk reaction to this entire industry.
Agreed, they’ve been on the boil for some time now and have been threatening us with regulations for some time now. But what I don’t understand is if you do feel such an urgent need, why don’t you do something soon. You end up with endless rounds of talks while there may be another Amaranth brewing around the corner. It doesn’t help to worry once there is a meltdown. What the authorities need to do is act fast. For this they must create a consensus in the hedge fund industry and ensure that the regulations are acceptable to one and all. Then they must implement them at the earliest possible.
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