Proposed EU rules pose new risk to hedge funds

| 01/02/2011

(FT.com): European equity markets would lose liquidity and investors and be at riskof more manipulation, if Brussels pushed ahead with plans to increase public disclosure of “short selling activity” a study published on Tuesday will warn. The report, by consultant Oliver Wyman, was conducted for the Alternative Investment Management Association which represents the hedge fund industry, and sponsored by Germany’s Deutsche Bank. It comes as scrutiny of draft rules on short selling – selling a security to drive down its price – put forward by the European Commission in September intensifies among member states and European parliamentarians.

A key parliamentary committee vote could take place later this month.

Brussels drew up the proposed rules after the 2008 financial crisis and subsequent sovereign bond turmoil led member states to introduce a patchwork of restrictions on short selling.


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