Hedge Fund Reader : Will Persuasion Work where Force Fails?

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January 13, 2007

Will Persuasion Work where Force Fails?

-- Pushpa Sathish, Staff Writer

Even as the U.S. Securities and Exchange Commission (SEC) tries every trick up its sleeve to bring hedge funds under its regulatory boundaries, its counterparts across the ocean are taking alternative routes to accomplish the same objective. The Bank of England has proposed a voluntary code of conduct for hedge funds, according to which the latter disclose practices and governance issues of their own accord. The fear of financial instability brought on by hedge funds is very real, and the Bank of England, though no longer the nation’s financial services regulatory authority, is responsible for the stability of the financial system.

Of late, analysts of the $1.3 trillion industry have treaded with caution in regulation issues for fear that too much control will only push the funds and the money they bring in to far-off foreign shores. The European Central Bank and Germany are urging the creation of an international register that will list hedge funds and a ranking of their investment strategies, to ensure a modicum of transparency in their operations and decrease investors’ risk.

But the Bank of England sees no reason for such strong measures as investment positions of hedge funds tend to change on a daily basis. A code of good practices driven by the hedge fund industry itself will be enough to push out the adverse activities, according to the Alastair Clark, adviser to the Bank governor, Mervyn King.

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January 13, 2007 in Regulation | Permalink