PARIS: France’s stand on European plans for hedge fund regulation does not discriminate against funds from outside the EU, Paris has told the United States, and offshore funds should be subject to supervision by a European watchdog.
France, citing fears of insufficient regulation, refused with German backing a few weeks ago to back adoption of new hedge fund rules that would give funds outside of the EU area a licence or passport to do business across all 27 EU states.
In a letter to US counterpart Timothy Geithner, dated Oct. 8 and obtained by Reuters from French sources, French Economy Minister Christine Lagarde responds to recent US grievances, saying the system France supported was “neither protectionist ... nor discriminatory”.
But by also referring in the letter to a potential phasing-in of EU licenses for foreign funds to work across Europe, Lagarde could have been leaving the door open to a deal addressing Washington’s chief concern about the new EU rules.
“We believe that awarding a passport to offshore funds is not satisfactory as they would not be subject to the same regulatory provisions as EU funds on many issues ranging from the governing law and competent court, the capacity to obtain enforcement or a judgment, the professional requirements and financial liability of auditors to valuation rules,” it says. “If however a passport for offshore funds was to be adopted, France believes that such a passport should be truly European,” Lagarde says in the letter, adding it was important such funds register with and be supervised by a European body.
“This would also parallel the approach adopted under the Dodd-Frank act which requires funds advisers to be registered by the SEC (US watchdog),” Lagarde says in the letter.