EU deal good news for CI

| 20/10/2010

(CNS): News from Europe that hedge funds will be regulated via a “passport system” rather than individual registration is good news for the Cayman Islands fund industry, which is back on the up and up. Mark Lewis, managing partner at Walkers, said it was “extremely good news”. He explained that not only was the passport system preferable but he also noted that the new system would be phased in over the next four years, giving Cayman plenty of time to ensure its compliance with whatever the parameters of the system will be. With fund registrations increasing again, the removal of the uncertainty over European hedge fund regulation will be good for the market, Lewis predicted.

He pointed out that the deal that has finally emerged over European hedge fund regulation showed Europe’s ministers had recognised that it was inappropriate to exclude non-Euro based funds, which would have been contrary to the G20 principles of competition. EU finance ministers agreed on Tuesday (19 October) to regulate the sector under the eye of the European Securities and Markets Authority via a passport system. Although the full details have not yet been revealed of how the system will work, Lewis said indications are that this will be beneficial to the local industry, which is enjoying resurgence.

“It really is extremely good news,” Lewis told CNS. “Combined with the recent news that only a few funds have migrated from the jurisdictions and that registrations are growing at some 60 funds a month (100 new against 40 closures) we can be confident now that we are likely to see the high mark of 10,000 registered funds in Cayman passed again early next year.”

The long and protracted argument in Europe about how it would deal with funds registered outside the union had created uncertainty, which Lewis said has now been addressed. “This removes a considerable hurdle and uncertainty for the industry’s immediate future,” the Walkers boss revealed. “We hope it will translate into greater confidence in the market.”

Ingrid Pierce, partner with the global fund group at Walkers, said that the industry would now be watching closely for the details of how the European Securities and Markets Authority would work but she said the industry would welcome organised oversight.

“It is yet unclear how this organization will operate; we have yet to hear the details, but oversight is what the hedge fund industry is used to,” she said, dispelling ideas of the industry being opaque and unregulated. Pierce also said she believed Cayman would be well placed to meet whatever the requirements will be. Importantly, she noted, the phased process would ensure there was plenty of time for the requirements of the regulation under the passport system to be met, allowing Cayman to continue doing business in Europe.

The new oversight for the industry and the regulation of hedge funds in the European Union has been in dispute for several months, with the UK locked in a long-running battle with France over how to regulate the multi-trillion-dollar sector.

Under the new regime, the EMSA will manage a ‘passport’ system for hedge fund managers from outside the EU, giving them access to investors from all 27 member states, so long as they are registered in one country instead of having to register with every country, which is what French officials had hoped for. London, which is, home to 80 percent of the world’s hedge funds, fought against the idea, suggesting that would send funds to other jurisdictions.

Managers will now only have to register in one European country to gain the passport for the rest of the European bloc. The new rules, however, increase the amount of information that funds will need to provide, including which products they are investing in.

Although the French finance minister was not entirely supportive of the deal that was reached on Tuesday, Christine Lagarde said at least it delivered "genuine supervision and regulation of actors who were to-date not at all controlled".

The deal now goes to the European Parliament for approval.

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  1. Anonymous says:

    you people are idiots.

    Each Hedge Fund is worth at least $10k a year in government and CIMA fees alone and probably more.  Plus work for lawyers, administrators, auditors, corporate services, bankers etc. 

    All that gets paid out of the assets of the fund- that means most of the money being spent at happy hour every Friday comes from the accounts of those billionaires you are so derisive of.

    100 new funds equates to $1m in additional government revenue every month and much more injected into the local economy.

  2. Dagny says:

    It saddens me to realise that despite our financial services industry’s transparency, credibility and integrity, (all based on our substantial legal and regulatory structure and quality professionals) our biggest problems comes from the misinformed viewpoints of members of our local community who are given a vehicle to spread these uneducated commentaries to the world through this website and therefore perpetuating the undeserved reputational damage that we experience.

    I could call the negative posts above blatent lies, except for the fact that I honestly think it is just simple parroting of what people read in trashy press. 

    To be clear, and listing just the facts, so that there is no room for subjectivity in this argument, I make the following points:

    Cayman has one of the most advance anti-money laundering legislation in the world – far superior to many that of most OECD countries, which has been documented by the IMF.   With the amount of due diligence conducted on every Cayman client we can be quite certain that money laundering is not an issue, but yet there are often claims of people ‘hiding’ their money here, which brings me to my second point.

    Investors are not ‘hiding’ their money in Cayman.  The funds that are invested through Cayman vehicles do not stay in Cayman.  Cayman is a platform for gathering foreign direct investment which is then channelled back into both developed and developing nations:  increasing capital flows, making multi-national companies competitive in the global market, creating jobs, creating better returns on pension funds and overall making everyone better off. 

    This may be a hard pill to swallow, but globalisation is here to stay and if a country’s companies are not able to compete in the global market, you can kiss those companies (and the jobs they create and the taxes thereby generated) good-bye.

    But, to bring the point back home to Cayman, it must be made clear that Cayman without a financial services industry would be a very different place than it is now.  If you do not like the conditions of the roads, or you worry about the state of the government infrastructure, just think about what would happen to these things without the $500 million of annual government revenue contributed to by financial services alone.  This industry contributes to 54% of the local GDP.  That means that if the industry were not here, or if it were not able to compete in a highy competitive and a highly mobile financial market (because of, for example, increased fees as implied by one poster) half of the money that currently fuels this economy would be non-existent.   The tourism industry here is fantastic – Cayman has a lot to offer – but it is never going to keep Caymanins in jobs and is not going to provide for the future on its own.

    One of the biggest current urban myths in Cayman is that the reduction in the number of work permit holders and the increase in the number of unemployed Caymanians are two isolated incidents.  Please do not make a mistake about this – the second is a direct result of the first.  Removal of a job for an expat does not create a job for a Caymanian – in many cases the Caymanian has lost a job as well because awhole business has shut down or has moved away.

  3. Anonymous says:

    When are the people of the Cayman Islands going to finally realise that the hedge fund industry does not and has NEVER acted in your best interests? They don’t give a rats arse about Cayman. What’s more, their high flying days are over; the UK, the US and the EU will no longer permit billionaires to hide their money here. So this island should start to seriously promote its other industries. For too long all the diry money that has been parked here has stained this island. These are the simple facts. Look at our shabby roads, our tin-roofed school buildings, our tiny police force.  Hundreds of billions parked here for 30 years for a few thousand dollars per fund, and so none of it trickled down to the people, only to the absurdly high salaries of a handful of politicians who have always done the bidding of the "so called" financial industry.

  4. Scrooge McDuck says:

    60 new Hedge Funds per month!!!!  Which means exactly…what??

    Jolly Green Giant Hedge Fund, ABSEA Hedge Fund, I Can C U Can U See Me Hedge Fund, etc. it means new office furniture and phones/faxes. Hedge Funds. Here in a flash. And gone just as fast.

    And if some of the temporary managers move here temporarily it means housekeepers, nannies, domestic helpers, pool cleaners, and… registration for a new Mercedes.

    Let’s not confuse what is good for the wealthy is necessarily good for us. As George Bush once said Fool us once….but fool us twice…

    Never mind.


    • Hedgehog says:

      You obviously have no idea what you are talking about.

    • Anonymouse says:

      Well!   Our Heritage is based on Piracy and Pirates moved around. Like you say, Here today and gone tommorow.

      I dont see a problem if its just maintaining a tradition that we are accustomed to.

      OK, so I am begining to think and sound like our Politicians, problem is, "who is’nt in these hard times?????????.

    • Pending says:

      Scrooge next time you have a brain fart keep it to yourself. You have absolutely no idea of what you are talking about.


  5. Anonymous says:

    Argghh! Methinks the Eurocrats struck their colors without even smelling the powder. Plunder and pillage for all! …..but it’s swell for Cayman