British Regulators Find More Teeth To Pull From Already-Toothless Hedge Fund Pay Rules

Author:
Publish date:
Updated on

Your friends at the newly-minted Financial Conduct Authority have come up with a way to make sure that the European Union's nasty new hedge-fund pay restrictions will not actually restrict anyone's pay.

Hedge funds are set to benefit from more lenient rules governing pay than originally expected under new draft proposals from the UK regulator….

according to draft guidance from the FCA, companies with between £500m and £1.5bn of assets under management within alternative funds may be allowed to opt out of the pay restrictions….

Roughly half of hedge fund companies authorised in the UK could fall under the threshold and be exempt from the pay rules.

Groups with more than £1.5bn of assets under management could also escape the rules if they can prove that their organisational structure is simplistic.

Hedge funds with a high level of assets but operate in one territory, run non-exotic strategies or have straightforward governance processes could also be exempt….

Mr Wright added that national authorities across Europe were likely to follow the FCA’s lead in how they apply the AIFM rules.

Their colleagues in Washington are not having as easy a time with what looked on paper (legislative paper, to be sure, but paper all the same) to be a much more-straightforward little rule named for an angry old man.

Those working on it, including 22 officials who have a vote on the final outcome, have spent years jousting over everything from trading definitions to the location of meetings.

Those working on it, including 22 officials who have a vote on the final outcome, have spent years jousting over everything from trading definitions to the location of meetings.

One gathering of banking regulators and Securities and Exchange Commission officials involved a two-hour discussion of a single phrase relating to "market making," the buying and selling of securities on behalf of clients. Officials have tried to cut each other out of the process and have withheld documents. At one point, a group of regulators agreed to travel across Washington for a negotiating session only when tempted by fast-food fried chicken.

"It's ridiculous," said Paul Volcker, the former Federal Reserve chairman for whom the rule is named. He said there is "no reason why the Volcker rule should take three years" to write….

Just 40% of Dodd-Frank's nearly 400 provisions have been fleshed out with regulatory language and made final, the law firm Davis Polk & Wardwell LLP has estimated.

London hedge funds secure victory over pay [FT]
Volcker Rule to Curb Bank Trading Proves Hard to Write [WSJ]

Related