In These New Times

A new paradigm for a post-imperial world

Gordon Brown intervenes to delay EU hedge funds rules

Posted by seumasach on March 16, 2010

US fund managers being unfairly discriminated against sounds like a classic New Labour cause, something to get passionate about, a question of shared values. And indeed it is, but that isn’t good enough for the opposition who complain that the government isn’t sufficiently committed to the financier cause. This, in a nutshell, is Britain.


16th March, 2010

Gordon Brown delayed EU proposals for tighter rules covering hedge funds and private equity groups after he intervened to block a discussion by finance ministers meeting in Spain.

A debate in the EU parliament is scheduled to go ahead tomorrow, but MEPs will discuss the Alternative Investment Fund Managers’s (AIFM) directive without a recommendation from the finance ministers’ group, Ecofin.

It is understood the prime minister telephoned his Spanish counterpart, José Luis Rodríguez Zapatero, who holds the European Union presidency, to call for more time to debate the rules.

The compromise directive was due to be hammered out at a meeting of finance ministers, but the item was dropped from the agenda. A spokesman for Brown welcomed the move. He said: “The fact that it has been postponed is good news. More time is needed.”

Britain, home to four out of five hedge funds in Europe and about a third of all private equity firms, had been concerned that the proposed rules would damage Europe’s competitiveness.

Most of the debate has focused on rules for non-EU funds and managers, which the UK government believes unfairly discriminates against US fund managers as well as those in offshore jurisdictions, many of them with offices in London.

Private equity firms have lobbied intensely to block plans for greater disclosure and hedge funds have protested at limits on borrowing under AIFM rules.

The US treasury secretary, Tim Geithner, has also accused the EU of adopting a protectionist agenda.

Simon Havers, chairman of the British Venture Capital and Private Equity Association, said recently the new rules would encourage firms to locate outside the EU in Dubai, Zurich and New York. “Europe would be less shooting itself in the foot than squarely in the temple,” he said.

Britain is expected to push for the G20 to bypass EU plans and agree rules covering private equity and hedge funds.

French and German politicians have pressed the French president, Nicolas Sarkozy, and the chancellor, Angela Merkel, to take a tough line. They believe there should be strict curbs on the high levels of debt adopted by private equity firms and what they see as the destabilising impact of hedge fund investment strategies.

The Tories’ City spokesman, Mark Hoban, accused the government of failing to stand up for London’s financial sector.”The decision to drop the AIFM directive from Ecofin’s agenda hides the fundamental weakness in the government’s position. If the debate had gone ahead, the government’s failure to build alliances to block damaging parts of the directive would have been obvious for all to see.

“The government has had to play up throughout the debate on AIFM because it failed to provide leadership when the directive was being drafted. This mess reinforces the argument we have made for a senior Treasury minister to spend as much time as is necessary in Brussels and other European capitals to shape directives and build alliances with other member states to make sure that the voice of London’s financial services sector is heard,” he said.

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