Читать книгу Alternative Investments - Hossein Kazemi - Страница 35

Regulation of hedge funds in Europe centers on the concept of Undertakings for Collective Investment in Transferable Securities (UCITS). UCITS are carefully regulated European fund vehicles that allow retail access and marketing of hedge-fund-like investment pools. The concept of UCITS came into force in 1985 and was intended to create a pan-European regulated fund vehicle that could be offered to retail investors across the European Union (EU). In effect, a UCITS fund is a hedge-fund-like investment pool that conforms to European regulations such that the product can be sold throughout the various members of the EU. Because UCITS were intended for retail investors, they were subject to very strict investment restrictions and diversification requirements. Since 1985, additional directives have been made (UCITS II, UCITS III, and UCITS IV). The regulatory requirements for a UCITS include meeting minimum size requirements (net asset value) based on the fund's age; being authorized by the Commission de Surveillance du Secteur Financier (CSSF); being annually audited; and meeting standards involving the promoters and other parties related to the UCITS creation, distribution, and management. A UCITS must be authorized by the regulator in its home EU country. Unless the UCITS is self-managed, the external manager also needs to be approved. Authorization of a UCITS is refused if it does not comply with the numerous conditions set out in the most recent UCITS directive or if the directors are not deemed sufficiently experienced or reputable. A full prospectus must be prepared and approved by the regulator, as must a key investor information document: a summary of key terms of the prospectus, which is typically provided to retail investors. UCITS and their managers are subject to various requirements related to valuation of assets, appointment of depositaries, and conduct of business.

The Markets in Financial Instruments Directive (MiFID) is an EU law that establishes uniform regulation for investment managers in the European Economic Area (the EU plus Iceland, Norway, and Liechtenstein). The MiFID is one of the primary pieces of European legislation dealing with regulation of investment services, including management services. In the wake of the financial crisis that began in 2007, regulation of hedge funds began to increase throughout the world, and Europe was no exception. The MiFID II is a revision directed toward extending the reach of MiFID to cover gaps in the 2007 document as well as address emerging issues, such as lack of transparency in trading occurring in dark pools. A dark pool refers to non-exchange trading by large market participants that is hidden from the view of most market participants.

In July 2011, the Alternative Investment Fund Managers Directive (AIFMD) came into force. This directive applies to alternative investment fund managers (AIFMs) that are located in the EU or, if located outside the EU, manage either EU funds or market funds (whether EU or non-EU) in the EU. An AIFM includes any legal or natural person whose regular business is to manage one or more alternative investment funds (AIFs). An AIF is any collective investment that invests in accordance with a specified policy, except UCITS. This captures hedge funds, private equity funds, infrastructure funds, real estate funds, and non-UCITS retail funds, whether open ended or close ended and whether listed or not.

Hedge fund activity in Europe varies between nations. The FCA (Financial Conduct Authority) and the Prudential Regulatory Authority are the primary regulators of investments in the United Kingdom, which is the European center for hedge fund management, with perhaps 80 % of Europe's hedge fund assets.1 However, the FCA has not generally regulated hedge funds themselves as much as the investment advisers and related entities (e.g., banks) that provide outside services to hedge funds. The FCA most closely oversees the 40 largest hedge fund managers, but it also oversees smaller fund managers using visits and reviews.2 Hedge fund managers “are required to maintain minimum capital resources to ensure that, if necessary, they can wind up in an orderly manner” through the Capital Requirement Directive.3

France's Autorités des Marchés Financiers (AMF) regulates hedge funds, including net equity requirements.4 France has streamlined procedures that allow three types of hedge funds (funds of hedge funds, unleveraged funds, and leveraged hedge funds) known as ARIA funds (Agréé à Règles d’Investissement Allégées). Germany regulates hedge funds rather closely, with restrictions on funds of hedge funds, redemptions, subscriptions, disclosures, and custody. The Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) is the primary regulator. German regulations differentiate between single hedge funds and funds of hedge funds.5 For example, funds of hedge funds may be distributed publicly or privately. However, single hedge funds may be distributed only privately and only by a licensed financial institution.6 Switzerland, a major world banking center, plays a relatively modest role in single hedge fund management under the authority of the Swiss Financial Market Supervisory Authority (FINMA). However, “Swiss funds of hedge funds account for one third of the assets invested in funds of hedge funds worldwide” and are generally not afforded special regulatory oversight.7

During the financial crisis that began in 2007, some policy makers in Europe saw short selling as exacerbating turbulent market conditions. In particular, short selling was thought to have contributed to the sharp falls in value of stocks in financial sector companies. As a reaction to this, restrictions on short selling and disclosure of short positions have been imposed in various EU countries. More permanently, European regulators have been considering the creation of a specific regulatory regime for short selling.

Hedge fund activity and hedge fund regulation vary tremendously outside of the United States and the EU. For example, the Australian Securities and Investment Commission (ASIC) does not regulate hedge funds differently from other managed funds.8 Domestic hedge funds in Australia are usually organized as unit trusts, and foreign hedge funds are foreign investment funds (FIFs). Taxation is a relatively important and complex issue in Australian hedge fund ownership. Brazil's Securities Commission (CVM) regulates funds through a classification system and controls eligible investors, valuation standards, and reports.9

In Canada, most hedge funds are distributed as principal protected notes (PPNs), which can provide retail access to hedge funds. The Canadian Securities Administrators (CAS) regulates registration of advisers, registration of dealers who sell securities, accreditation standards of investors, disclosure requirements, and compliance reviews.10 Japanese hedge fund regulations are relatively loose under the Financial Services Agency (FSA), while Singapore's regulation and taxation regimes have been loosened in recent years by the Monetary Authority of Singapore (MAS).11

South Africa's Financial Services Board introduced specific regulations for hedge funds in 2008, including requirements for fund managers to register, although hedge funds may not be marketed to retail investors, and hedge fund products are not regulated. Taxation treatment of hedge funds has been unclear in South Africa.12 The United Arab Emirates (UAE) is part of the GCC (Gulf Cooperation Council), which also includes Bahrain, Kuwait, Oman, Qatar, and the Kingdom of Saudi Arabia. The GCC seeks cooperation and agreement among its member states to harmonize regulation and taxation. Two authorities within the UAE allow establishment of hedge funds: the UAE Central Bank (onshore) and the more often used Dubai Financial Services Authority (DFSA). Regulations include requirements for risk assessment and audits, as well as restrictions on marketing. Taxes, however, are generally zero.13

Many relatively small nations or jurisdictions play important roles in hedge fund regulation by providing tax-neutral locations in which funds may be quickly and inexpensively formed. Examples of popular locations for hedge fund domiciles are Bermuda, the Cayman Islands, and the Isle of Man.