Hedge Fund Industry Supports Achieving Stability in Markets

Date: Friday, September 19, 2008
Author: AIMA.org

Hedge Fund Industry Supports Achieving Stability in Markets, Cautions
against Longer-Term Consequences of Short-selling Rules

London, 19 September 2008 - The Alternative Investment Management
Association (AIMA) - the leading global representative association for the
hedge fund industry - fully supports the intentions of governments and
financial regulators in the US and UK to find a solution for this
unprecedented crisis.

As clearly acknowledged by governments and financial regulators,
short-selling is a legitimate component of orderly financial markets, and
not to be confused with market abuse. Where regulators have evidence of
market abuse and malpractice, they should act on this evidence immediately
and bring charges.

AIMA regrets that the latest rules banning short-selling were implemented
without notice or consultation.

AIMA welcomes the temporary nature of the Financial Services Authority's
(FSA) measure and calls for the earliest possible review of its efficacy. In
the meantime, the association will provide whatever support is needed to its
members to ensure smooth implementation of the new rules.

AIMA is not alone in doubting whether the recent bans on short-selling of
financial stocks taken by financial regulators - the FSA in the United
Kingdom and the Securities and Exchange Commission (SEC) in the United
States - are likely to achieve the intended results over time.

These measures have the potential to create several unfortunate
consequences, including an increase in the cost of capital for banks, at a
time when it is most needed and incorrect pricing of index products, with
negative implications for mainstream retail products.

Florence Lombard, Chief Executive of AIMA said:

"We strongly support any measures put forward by regulators and policy
makers that will bring equilibrium to financial markets. It is our position,
however, that banning short-selling of financial stocks, while it may indeed
bring temporary relief, creates an artificial market. It will not
ultimately, on its own, bring back investor confidence in the banking
system.

AIMA will work with the FSA and other regulators, its counterpart in the
USA, and its members, to identify long term solutions. With these
misgivings in mind, we call for an early review of the efficacy of the
short- selling bans and their consequences."