Newsletter Jul/Aug 2005: Debate over hedge fund regulation hots up

LONDON – The debate over the degree that hedge funds should be regulated in Europe hots up with the publication of discussion papers from both Britain’s regulator, the Financial Services Authority (FSA), and the European Commission, in Brussels. While the papers reveal a reluctance to tighten regulation, there are strong pressures for some move in that direction. This is because of the rapid growth of hedge funds and their increasing appeal to a wider range of investors. The question regulators are struggling with is: if investor access to these types of fund is liberalised, should there be a corresponding strengthening of investor protection?