We All Stand
A few months ago I wrote a blog about how the rules governing hedge funds should be kept simple. It was written in response to the ECs draft proposals on hedge fund activity and to de Larosieres proposals which recommended that UCITS funds should be regulated differently from hedge funds. My reasoning was that adoption of the same rules, by all market participants, for all types of funds, will ensure that investors interests are protected through the implementation of best practices. With this keep it simple point in mind, I was delighted to hear yesterday that the FSA and the SEC have agreed to ask hedge fund managers to report a common set of data to both countries. This deal represents another important milestone in the co-ordination of regulation and enforcement and will make it considerably easier to protect investors through widely adopted best practices.I am glad to say, that this drive to adopt common global practices doesnt stop with hedge funds. Collaboration, particularly between the US and UK is also beginning with initiatives in the OTC markets, the credit ratings agencies and other market participants with cross border operations. All these developments have one common denominator: to protect the interests of investors.Adopting shared practices across the financial markets has to be the panacea that we are all aiming for. A common set of rules or agreed protocols, makes it more difficult for wrongdoers to circumvent the system, while also creating a more efficient marketplace and both outcomes lead to the mitigation of operational risk. Addressing operational risk can go a long way towards reducing systemic risk.
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