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Henry Paulson |
The President's Working Group on Financial Markets (PWG) has released a set of principles and guidelines for US regulators in their handling of hedge funds and private equity organisations. These have moved away from the US norm of tight, formal regulations and are adopting the European-influenced light touch of principles-based regulation.
The PWG was created in 1988 by President Reagan, hence its name, to give recommendations for legislative solutions to enhance “the integrity, efficiency, orderliness, and competitiveness of our Nation's financial markets and maintaining investor confidence" and comprises the Secretary of the Treasury, Henry Paulson, and the Chairmen of the SEC, the Federal Reserve and the Commodity Futures Trading Commission.
"The President's Working Group believes that public policy toward private pools of capital should be governed by consistent principles that set out a uniform approach to specific policy objectives," said Paulson. "These principles demonstrate that U.S. regulators and policymakers have a unified perspective and are committed to providing forward-leaning guidance for the industry and its participants."
The principles provide a flexible principles-based approach to address the issues presented by the growth and of these investment vehicles, and contrast activities of six months ago, when US regulators were pressing for stricter regulation in the fear that hedge fund risk was creating a systemic risk situation in US markets.
This approach is supported by the EU and championed by the UK's Financial Services Authority. Last week, Charlie McCreevy, EU Internal Market Commissioner, welcomed the work of the PWG. He said "This agreement chimes with my own analysis of hedge funds and private equity. They are a powerful force for greater market efficiency. They are driving innovation and performance improvements right across the asset management business. This success should be cherished. The practices and business models which have underpinned this success should not fall victim to unfounded fears or theoretical risks".
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