BRUSSELS, April 29 – EU Internal Market Commissioner Charlie McCreevy on Wednesday proposed a clampdown on currently lightly regulated hedge funds and private equity firms.
The proposal urges managers of such EU-domiciled funds to get authorisation from their home country in order to operate and market their products to professional investors.
In particular, funds with assets under management greater than 100 million euros (133 million dollars) would have to make detailed disclosures on their activities in order to be authorised.
They will also have to keep a minimum amount of capital on their books.
In addition to hedge funds and private equity firms, the rules would also apply to other so-called alternative investment managers, such as commodity, real estate and infrastructure funds.
Funds that lock in investors for at least five years and do not invest borrowed money would only have to adhere to the rules once they have assets under management greater than 500 million euros.
In addition to tightening controls, the proposals would also grant managers the right not only to market their funds in their home state but throughout the 27-nation European Union.
While banks have been at the centre of the current financial crisis, it has also focused the spotlight on alternative investment fund industry, which had two trillion euros under management last year, according to the commission.
McCreevy has come under fierce fire from some lawmakers at the European Parliament for dragging his feet on tougher rules for hedge funds and private equity in the face of the current crisis.
Meanwile, the industry is concerned about more red tape as it struggles with the worst market conditions in generations.
"I believe that this proposal strikes the right balance. Our aim is not to drive the industry out of Europe and beyond the reach of European supervisors or to create burdens out of proportion to the risks," he told a news conference.