IOSCO underlines that the regulatory and systemic risks arising from hedge funds need to be appropriately addressed through global action. IOSCO, therefore, recommends the application of six high level principles for all securities regulators.
The report contains six high level principles that will enable securities regulators to address, in a collective and effective way, the regulatory and systemic risks posed by hedge funds in their own jurisdictions while supporting a globally consistent approach. The principles are:
1. Hedge funds and/or hedge fund managers/advisers should be subject to mandatory registration.
2. Hedge fund managers/advisers which are required to register should also be subject to appropriate ongoing regulatory requirements relating to:
a. Organisational and operational standards;
b. Conflicts of interest and other conduct of business rules;
c. Disclosure to investors; and
d. Prudential regulation.
3. Prime brokers and banks which provide funding to hedge funds should be subject to mandatory registration/regulation and supervision.
4. Hedge fund managers/advisers and prime brokers should provide to the relevant regulator information for systemic risk purposes.
5. Regulators should encourage and take account of the development, implementation and convergence of industry good practices, where appropriate.
6. Regulators should have the authority to co-operate and share information with each other, in order to facilitate efficient and effective oversight of globally active managers/advisers and/or funds and to help identify systemic risks, market integrity and other risks arising from the activities or exposures of hedge funds with a view to mitigating such risks across borders.
© IOSCO
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