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Hector Sants |
The UK’s supervisor, the Financial Services Authority (FSA), said last week that it did not see the need for more regulation of hedge funds, that it did not see the hedge funds as being responsible for the current financial crisis, and that it believed most funds had so far weathered the recent financial turmoil fairly well.
Speaking at Hedge 2008, the global hedge fund conference, in London last week, Hector Sants, the FSA’s Chief Executive Officer, welcomed the publication earlier this year of the self-regulatory standards produced by the Hedge Fund Standards Board (HFSB). He said that, although the compliance of hedge funds with existing FSA regulations was of first importance, the FSA would be looking at compliance with the HFSB standards when it came to making supervisory judgements.
“There is a lot of pressure for more regulation at the moment, given the recent events, however, you can be assured, we intend to stick to our guiding principles of proportionality, and outcome-focused regulation”, Sants told the conference.
The comments come after a number of industry commentators, and, in particular, trade union bodies, have called for extensive regulation of hedge funds holding them responsible for many of the contributory causes of the current crisis.
However Sants did call for more rigour in areas such as valuation and transparency. Of particular concern to him was the disclosure of contracts for difference (CfDs). Sants said, “We are not against the use of CfDs, which provide valuable liquidity to the market. But we do want to, and need to, address the problems caused by their use on an undisclosed basis in ways that the disclosure rules were designed to prevent.”
The following day the FSA published its feedback statement on disclosure for CfDs and announced it was to implement a general disclosure regime for long CfD positions, this being the most effective way of addressing concerns in relation to voting rights and corporate influence.
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