Pittsburgh Post-Gazette – The popularity and high profile of hedge funds 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, who are smarting at the way hedge funds can use relatively small stakes in publicly listed companies to agitate for change.
The most notable example: last year’s ouster of the chairman and chief executive of German stock-exchange operator Deutsche Boerse AG after the executives disagreed over strategy with a group of U.K. and U.S. hedge funds that held shares in the firm. And hedge funds are playing a large role in the takeover dance among U.S. and European exchanges.
Historically, hedge funds have been lightly regulated because they were funds for ultrawealthy, sophisticated investors. But as more money flows in, the pressure to increase oversight has increased, both in Europe and in the U.S. In late 2004, the Securities and Exchange Commission pushed through a hotly contested rule that in February required most hedge-fund advisers to register, making them subject to examinations and new compliance procedures.
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.
