US and European regulators have teamed up to investigate whether banks and securities firms have set strict enough limits on loans to hedge funds, according to Bloomberg.
In December the US Securities and Exchange Commission, the Federal Reserve Bank of New York and the Financial Services Authority in London met with the largest lenders to the hedge-fund industry to collect information before deciding the amount of collateral, says Annette Nazareth, commissioner of the SEC. Swiss and German authorities were also involved in the fact finding mission.
The regulators results may raise margins and crimp fees, concerning some.
Securities firms collect an average of $8 billion a year in fees for providing prime-brokerage services to hedge funds. As one of the three largest prime brokers, approximately 30 percent of Bear Stearns’ profit is from catering to hedge funds, says Brad Hintz, an analyst at at Sanford C. Bernstein & Co.