Alternative Investment Management Association
28 June 2010
“AIMA, as the global hedge fund association, has worked throughout the past two years with U.S. and other national and international policy officials and supported efforts to develop regulatory reforms designed to improve financial stability in light of the financial crisis. Our industry did not cause the crisis, and was as negatively impacted as any sector. Nevertheless, as a mature industry, representing investment managers and other professionals throughout this global industry, we have acted to support improvements in our regulatory framework and in financial stability.
“In our policy platform of February 2009, we expressed support for the registration of hedge fund managers and the reporting by managers of systemically relevant information to supervisors in the interests of helping public authorities better assess financial stability. The G20 later endorsed this approach, and has repeatedly called for a consistent and coordinated regulatory agenda.
“The agreement on Friday by U.S. legislators on financial reform, the Dodd-Frank Bill, is a very significant step in the evolving and broader international regulatory framework. This is a landmark piece of legislation that, once passed, will represent an important part of the global system of supervision for the financial services industry.
“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. This is not because any individual hedge fund is likely to be deemed systemically important, or because the sector in any way increases financial stability risk; it does not. In fact, the diversity of our industry’s activities serves to reduce pro-cyclicality in financial markets, and thereby supports financial stability. Through a more informed supervisory relationship, we expect supervisors and other public authorities to obtain a better understanding of our industry, as we contribute to their efforts to identify market stresses and vulnerabilities.
“We also welcome the continued involvement and limited sponsorship of hedge fund activities by traditional financial institutions, pursuant to the revised “Volcker Rule.” We support the financial stability benefits of central clearing for OTC derivatives, and call on authorities to ensure broad and fair access by non-banks to central clearing counterparties. Policymakers should seek a coordinated and consistent regulatory framework, and in doing so avoid unnecessary costs related to multiple registrations and inconsistent reporting regimes, as well as possibly duplicative capital and margin requirements related to swap and derivative activities.
“AIMA is 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.
“The inclusion of hedge funds in this financial tax suggests that our industry has been singled out for more onerous treatment. If this tax is targeted at perceived wrongdoers or those who caused the crisis, hedge funds had nothing to do with the cause of the crisis, and there has been no finding before, during or since the crisis that hedge funds cause increased risk to financial stability. On the other hand, if the tax is meant to finance the public goal of improved financial stability, then all market participants should be made to contribute, not just hedge funds and banks. There is no reason to single out our industry in this manner.
“We look forward to continuing our active engagement with U.S. regulators as they seek to implement this important legislation, and we will continue to seek a coordinated and consistent global approach to the development of the new regulatory structure for financial services. In this regard, AIMA is pleased that the G-20 this weekend continued its call for a “consistent and non-discriminatory” regulatory framework, including with regard to hedge fund and other alternative investment activities. We too continue to ask that policymakers avoid unnecessary fragmentation along national or regional lines.”
Todd Groome, Chairman, AIMA