Alternative Investment Management Association
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.”
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AIMA, the Alternative Investment Management Association, has over 1,280 corporate members worldwide, based in 47 countries. Members include leading hedge fund managers, fund of hedge funds managers, prime brokers, legal and accounting services and fund administrators. They all benefit from AIMA’s active influence in policy development, its leadership in industry initiatives, including education and sound practice manuals and its excellent reputation with regulators, worldwide.
AIMA is a dynamic organisation that reflects its membership’s interests and provides them with a vibrant global network. AIMA is committed to developing industry skills and education standards and is a co-founder of the Chartered Alternative Investment Analyst designation (CAIA) – the industry’s first and only specialised educational standard for alternative investment specialists. For further information, please visit AIMA’s website at www.aima.org