Monday, February 13, 2012

Hedge Fund Industry Assn. Chair Discusses Hedge Fund Directive and MiFID II at EU Forum

Speaking on behalf of the members of the global alternative investment community at the 10th Annual Financial Services Conference in Brussels, Managed Funds Association Chair William Goodell discussed the industry's views on a number of relevant public policy initiatives and participated in a panel discussion with Verena Ross, Executive Director of the newly formed European Securities and Markets Authority, and Markus Ferber, a Member of the European Parliament who will play a lead role in drafting the legislation and conducting the negotiations for the amended Markets in Financial Instruments Directive (MiFID II).

Regarding MiFID II, Mr. Goodell noted that the alternative investment community shared the goal of European policy makers in promoting enhanced transparency, investor protection and market structure reforms that would enable investors to more effectively seek out industry participants, and capital markets, as a source of safe, stable returns and reliable risk management.

The institutions and individuals that invest in hedge funds support a regulatory framework that will reduce systemic risk, provide enhanced transparency, strengthen investor safeguards, and bolster legal certainty for investors, said the MFA Chair, who added that the MFA will work constructively with policy makers around the globe to accomplish these shared policy objectives in an intelligent, thoughtful manner.

The MFA has encouraged regulators to be consistent in the implementation of reforms so as to avoid fragmentation and the risk of regulatory arbitrage. The MFA supports the proposal in MiFID II that provides for non-discriminatory access to central counter parties and trading venues, and encourages greater coordination with the access provisions included in the European Market Infrastructure Regulation to prohibit discriminatory practices and dismantle barriers that may prevent competition.

While noting that the hedge fund industry has consistently supported the reduction of systemic risk, the MFA Chair expressed concern that the Alternative Investment Fund Manager Directive’s reporting requirements go beyond the systemic risk template created by IOSCO and differ from reporting requirements in the UK and the U.S. Such a lack of international coordination will limit the comparability of the different reports, he said, making global systemic risk monitoring more difficult for regulators and creating unnecessary, significant burdens for global managers. In a post financial crisis world, where policy makers and regulators are concerned about reducing systemic and trading risk, he reasoned, it is critical to implement measures that can be useful for regulators across the globe as they seek to assess potential systemic risk.