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Aima calls for industry-wide registration

Date: Friday, October 9, 2009
Author: Wealth Bulletin, William Hutchings

Hedge fund managers across the board are willing to submit to greater scrutiny and should all be required to register with domestic regulators, according to the Alternative Investment Management Association. A move towards blanket registration would jar with conditions in the US, where hedge funds are free from such requirements.

Aima, which represents the industry globally, said hedge fund managers were willing to subject themselves to oversight and that all firms, no matter how small, should be regulated.

"Any entity which acts as an alternative investment fund manager, regardless of its legal form or structure, should be regulated in the same way as other alternative investment fund manager. This would create a level playing field between different market participants [and] ensure that regulators see the whole picture when assessing the risk posed to the financial system," Aima said.

Aima made its remarks in a just-published position paper on the European Union's proposed Alternative Investment Fund Managers Directive. It recommended that all other countries follow the model of the UK's Financial Services Authority in requiring registration and authorisation of all hedge fund managers

This stance contrasts the position set out in the proposed directive, which has set a minimum threshold of 100m ($147m) below which a hedge fund manager need not register with its country's regulator. It would break ground in the US, where a rule requiring registration with the Securities and Exchange Commission, which was put in place and then reversed in 2006, exempted managers with less than $25m (17m) of assets under management. At present, US hedge fund managers are not required to register with the SEC at all.

Aima said: "In respect of authorisation, there is no logical reason why alternative investment fund managers managing under 100m should not be subject to regulation while those above that level are. Any such threshold would... merely increase the possibility of misconduct going undetected. The threshold for authorisation should, therefore, be zero."

Registration to the standard of the FSA would require some disclosure of information to the regulator. Aima accepts this. However, it is against imposing additional disclosure requirements, designed to help regulators assess systemic risk, on all hedge fund managers.

It said: "We agree that regulators need to be provided with systemically relevant data from all applicable market participants, including hedge fund managers. [However,] they should take great care to avoid being inundated with information which they have requested, but which they may not have adequate resources or expertise to analyse."

The directive proposes a disclosure threshold of 100m. Aima said: "The vast majority of such managers cannot, by any reasonable assessment, be regarded as having any systemic importance. We believe the threshold, for disclosure purposes, should be raised to 1bn."