E.U. Hedge Fund Talks
European Union Hedge Fund Talks Break DownNegotiations between the European Union and national governments over hedge fund regulation has broken down. Last week, the Spanish presidency of the E.U. conceded that no rules would be made in June and the countries' leaders left for the G20 summit in Toronto without finishing talks on hedge funds.
The German Chancellor Angela Merkel and French President Nicolas Sarkozy want to champion Europe as a model for ambitious regulation, but an impasse over hedge funds and watchdogs means the European Union is struggling to draft laws, while President Barack Obama is expected to sign off on new rules to regulate finance within weeks.
At the heart of the disagreement is a passport or license for foreign hedge funds to do business throughout Europe. Lawmakers want to block the entry of foreign funds that fail to qualify for a license because they do not meet European Union standards on transparency, bonuses and the use of debt.
But Britain, home to nearly all European hedge funds, wants to give funds that fail the European Union passport test a second chance by letting them apply for a license to operate in individual countries. Criticism also has come from the United States, which has warned that the measures could be discriminatory. Source