Magazine article European Social Policy

Financial Services : Meps Call for Transparency on Hedge Funds and Private Equity

Magazine article European Social Policy

Financial Services : Meps Call for Transparency on Hedge Funds and Private Equity

Article excerpt

The European Parliament's Legal Affairs Committee unanimously adopted,aon 26 June, a report by MEP Klaus-Heiner Lehne (EPP, Germany) to bring the dealings of hedge funds (HF) and private equity (PE) firms more into the open. The report calls on the Commission to bring forward legislation on the transparency of institutional investors - requiring companies to disclose their investment policies and associated risks. Such a formal call for legislation must be approved in plenary by an absolute majority (Rule 39 of Parliament rules).

The committee decision came despite some significant doubts about the proposal contained in the Economic and Monetary Affairs Committee's opinion, drafted by Sharon Bowles (ALDE, UK).

MEPs backed the idea that EU rules should compel HF and PE to disclose and explain the policies behind their investment strategies and the risks involved to all close parties, ie companies whose shares they own or acquire, their investors, brokers and financial supervisors. They also called for full transparency on pay and bonuses of fund managers. In an even bolder proposal, the report suggested the use of a contractual term setting a limitation of risk and conditions governing cancellation and termination. Whether this should be mandatory or optional was not specified. In her opinion, however, Ms Bowles warned against this as amounting to product regulation which could interfere with financial innovation and investor choice. …

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