| Sally Dewar, Managing Director of the FSA's | | | | current business models) the actual benefit of this |
| Wholesale Markets Division, gave a speech on | | | | regime is likely to be limited, particularly for the |
| September 17th, 2009 outlining four key areas | | | | hedge fund industry." [emphasis added] |
| which need to be addressed in order to ensure | | | | I agree with Dewar, we all see value in "sensible |
| effective fund regulation and the regulatory | | | | and proportionate harmonization of regulatory |
| approach which ought to be adopted. | | | | standards", but pan-European nor global regulatory |
| Speaking at the FSA's Asset Management Sector | | | | harmony will be achieved by ignoring the |
| conference, Dewar said that "most of us can see | | | | geo-political realities of global markets and players |
| value to the European and global capital markets, | | | | therein (Dewar's last point). Under current |
| and the wider economy, in sensible and | | | | proposals, many US banks will fail the |
| proportionate harmonization of regulatory | | | | requirements but the UK and US appear to be |
| standards in the areas under discussion." | | | | accelerating down the road of cross-border |
| The four areas Dewar highlighted are: | | | | regulation (see this article on the FSA and SEC |
| - Correct identification of the weaknesses in the | | | | data share exchange agreement announced earlier |
| present regulatory arrangements and addressing | | | | this week) while many banks are looking to the |
| them in a proportionate way | | | | Far East as an alternative to London or New York |
| - Differentiation between types of alternative | | | | for establishing their operations. |
| investment fund management | | | | It is hubris to suggest London is "the" European |
| - Adoption of a risk-based approach - the scope | | | | financial market but it is far more disturbing hubris |
| and thresholds of the Directive need to strike the | | | | on the part of AIFM proponents to believe raising |
| correct balance between imposing additional costs | | | | barriers to entry for US players ( even when |
| and enabling regulators to identify and mitigate | | | | referred to as "non-EEA") is not going to be |
| systemic risks | | | | viewed as anything but anti-competitive in New |
| - The need to take a global approach that | | | | York or Washington DC. More unsettling than that, |
| recognises the global nature of the sector and | | | | practically every EU financial centre with hedge |
| does not impose unjustifiable geographical | | | | fund operations is aware that money flows and if |
| restrictions on firms' business models that would | | | | there are skilled personnel available in other world |
| significantly restrict investor choice | | | | financial centers, such as Hong Kong or Singapore |
| How serious the FSA are regarding AIFM can be | | | | (or New York or non-EU Switzerland), so will the |
| gauged by the fact that this year's Asset | | | | fund managers. |
| Management conference focused solely on AIFM. | | | | Perhaps the French and Germans will finally come |
| Also attending were Matts Odell (Swedish Finance | | | | to some understanding of how legislating without |
| Minister and Sweden currently holds the EU | | | | the consent of the regulated is rule making for |
| Presidency) and Lord Myners who set out the UK | | | | thin air. Societe Generale experienced one effect |
| Government view. | | | | of French bonus restraint this week; several key |
| Sally Dewar's final point is the lynchpin around | | | | players left the company to set up a hedge fund |
| which "proportionate harmonization" will revolve; | | | | with US funding and will now determine their own |
| AIFM in its current form is a deeply divisive piece | | | | remuneration. This underscores the US and UK |
| of legislation and as politically charged with | | | | approach that remuneration, and especially |
| short-term motivation as can be. As Dewar | | | | bonuses, are effectively non-issues in the overall |
| stated, "But if there are restrictions on funds not | | | | scheme of global and domestic regulation. |
| domiciled in the EEA [sic US], then (based on | | | | So much for bonus restraint President Sarkozy! |