EU parliament demands more openness on hedge funds

MEPs have strongly backed a report which calls for EU legislation to force private equity groups and hedge funds to disclose unprecedented amounts of information about their activities.

On Tuesday, the European parliament voted overwhelmingly in favour of a report by Danish Socialist member Poul Nyrup Rasmussen, demanding what he calls “better regulation to isolate the bad guys.”

The report has been watered down since he originally drafted it 18 months ago at the height of public concern over the allegedly asset-stripping activities of the funds.

The proposals approved by deputies at their Brussels plenary now cover all financial market players and highlights the key role of such funds in providing capital, particularly to SMEs.

The plans also include mandatory capital requirements for all financial institutions and aligning reward packages with longer term outcomes, to reflect losses as well as profits.

Speaking at a news conference after the parliamentary vote, Rasmussen, a former Danish premier, said he was “delighted” that a "vast majority" of MEPs had endorsed his report.

He said, “We need new and better regulation, and we need it now. The proposals agreed today by parliament are a first step towards making future crises less likely."

Rasmussen, leader of the pan-European Party of European Socialists, added, "It is the first time that this parliament has ever demanded regulation of private equity and hedge funds."

He said EU internal market commissioner Charlie McCreevy “has got to respond, and respond positively.”

He added, “With millions of families worried about their savings and pensions he would be very unwise to remind us that until very recently he believed that self-regulation was best. The financial crisis has forced the conservatives in parliament to accept sensible reform, now it is the turn of the commission to prove that they no longer believe that the market alone knows best.”

However Scottish Nationalist MEP Alyn Smith was less enthusiastic, saying, "I reluctantly voted for this report, but have no enthusiasm for it.  The eventual compromise is muddled, and crucially could be taken to be a call for a massive increase in EU competence where in my view financial regulation, like tax, should remain firmly with the member states themselves.

"That said, the UK authorities have clearly failed, and failed the Halifax Bank of Scotland group in particular, so the many references in the report to greater transparency and accountability are to be welcomed."

Meanwhile, a petition signed by over 100,000 people has been submitted to parliament calling on European, US and world leaders to strengthen financial market rules.

Organised by the global internet movement Avaaz, the petition states "We urge you to take a lead in fixing the fundamental flaws and loopholes which made the global financial crisis possible, including basic problems of debt and risk, incentives and transparency.

“We need you to work together to protect the public good by framing stronger rules for all parts of the global financial system. Be bold, and we will support you."

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