Opalesque Industry Update – The Singapore Branch of the Alternative Investment Management Association (“AIMA”), the industry trade association for hedge funds, sees the agreement finalised last Friday by U.S. legislators on financial reform, the Dodd-Frank Bill, as an important milestone in the regulation of the U.S. financial services industry. |
The agreement finalised last Friday by U.S. legislators included provisions relating to the registration of hedge fund managers and the periodic reporting by managers to supervisors in the interests of improving their ability to assess financial stability. The agreement also touched on the continued involvement and limited sponsorship of hedge fund activities by traditional financial institutions, pursuant to the revised “Volcker Rule.”
However, parts of the Dodd-Frank Bill also included concerns on imposing taxes on larger US hedge fund managers to finance the estimated costs of this legislation.
Todd Groome, Chairman of the Alternative Investment Fund Managers Association, a trade body representing hedge fund managers globally, said: “While some details and definitions remain to be clarified, AIMA supports those parts of the bill relating to the registration of hedge fund managers and the periodic reporting by managers to supervisors in the interests of improving their ability to assess financial stability. We also welcome the revised Volcker Rule.”
Todd added: “AIMA is, however, concerned with parts of the Dodd-Frank Bill, and we will seek to work with US regulators and the to be formed Financial Stability Oversight Council to address areas of the legislation in order to clarify the application of certain provisions and to mitigate provisions we believe are unfair or inappropriate to our members and the industry. Chief among these concerns, this bill would tax larger US hedge fund managers to finance the estimated costs of this legislation, despite the fact that no hedge fund received public funds or caused any financial stress to a banking institution or other counterparty during the crisis.”
Michael Coleman, the Chairman of the Singapore branch of AIMA, commented: “This piece of legislation, if passed, will represent a milestone in the global system of supervision for the financial services industry. The revised “Volcker Rule” is welcomed by many as it to allow banks and other financial institutions to invest up to a certain limit in hedge funds. This will be positive for the Singapore hedge fund industry as it removes the initial uncertainty surrounding the investment banks from running hedge funds and possibly prevent a fallout of investment banks having to liquidate these often highly profitable businesses.”
Ho Han Ming, the Vice-chairman of the Singapore branch of AIMA, added: “There have been various regulatory proposals pertaining to the hedge fund industry globally. In Singapore we have regulatory proposals to adopt a multi-tiered fund management category for managers based on their client profile as well as total assets under management. Each category of fund managers will have varying regulatory requirements tailored and adopted for relevance to their business models. In Europe, the Alternative Investment Fund Manager Directive (“AIFMD”) is undergoing intense debate and discussion prior of it being passed as legislation. And now we have the latest agreement by U.S. legislators on financial reform.”
“As such, on a global basis, the pace of regulatory reform for the hedge fund industry is gaining further momentum and does not seem to display any sign of slowing down. The common objective for the regulators is undoubtedly, to support financial stability and minimize systemic risks in the global financial system. However, we also urge policymakers to avoid instituting onerous and sweeping "one size fits all" measures which might potentially result in the fragmentation of the hedge fund industry along regional blocs or national lines.”