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26 Oct 2006

MPs warned against Over-regulation of Hedge Funds

MPs warned against Over-regulation of Hedge Funds
FSA Chief executive John Tiner warned the House of Commons Treasury Committee in London that the over-regulation of hedge funds would drive firms based in the UK offshore. He told the Committee that the current regulatory regime helped the City to compete directly with New York.

US hedge funds have been opening offices in London to gain access to European investors and increase their trading in the region’s capital markets. Mr Tiner told the MPs: “Our worry would be that, if we had a disproportionate effect on these companies, they would take their business offshore.”

Mr Tiner’s comments come six weeks after it emerged that star trader Philippe Jabre will set up a hedge fund in Geneva next year, away from the FSA, who fined the two hedge fund managers GLG Partners and Jabre 750,000 pounds each “for market abuse and breaching FSA principles.”

A new report also found that the London market needs to do more to develop business relations with China and India. The report, by risk analysts Sami Consulting and Oxford Analytica, said that London was not achieving its potential, the specialist monitoring team follows about 30 hedge funds “that comprise a major part of the market”.

The sudy showed that despite London’s status as a major financial hub, Indian companies have been establishing more links with the United States and Dubai, and Chinese companies with the United States, Singapore and Hong Kong, the report said.

“To counter this threat,” it said, “City companies will need to seek out and develop long-term relationships with people at all relevant levels within the Indian and Chinese financial and business communities.”

It noted that “both countries are rich with opportunity – but also with risk.”

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