08 March 2007

AP: McCreevy says additional Hedge Fund regulation not needed for Global Markets

In luncheon remarks to the U.S. Chamber of Commerce, Charlie McCreevy, said central banks and investment firms, such as Goldman Sachs Group Inc., already closely monitor hedge funds' impact on financial markets. He rejected calls for increased regulation of hedge funds in Europe, arguing that they have a positive effect on global capital markets.

'Do we really believe that any Joe Sixpack who shows up at Goldman Sachs, Morgan Stanley or UBS will be given a fat check to trade as a hedge fund?' he asked. 'No. That is not what happens.'

Instead, brokers are 'checking their hedge fund clients' positions twice a day,' McCreevy said, because it is 'their job to make sure that no element of the banking industry is overexposed' to high-risk investments.

Hedge funds invest hundreds of billions of dollars in everything from commodities and real estate to stocks, bonds, and exotic securities. Their investors are usually wealthy individuals although in recent years, pension funds and life insurance companies have become involved. Some hedge funds buy and hold companies; others buy and sell stocks like day traders, with huge amounts of money changing hands on a given trading session.

'The evidence that hedge funds have increased the efficiency of our capital markets and increased liquidity is indisputable,' McCreevy said.

McCreevy's comments came the same day that Anthony Ryan, assistant U.S. Treasury Secretary for financial markets, at a hedge fund conference in Connecticut, downplayed the need for additional U.S. regulation of hedge funds.

'If the solution were as simple as granting additional regulatory authority, regulators would have certainly asked for it,' Ryan told about 200 hedge fund managers and executives meeting in Greenwich, Conn.

Yet last month, worries over the largely unregulated and secretive investment pools led finance ministers from the G-7 to announce that they would ask the Financial Stability Forum, a task force of financial regulators, institutions and others, to reassess the impact of hedge funds on global markets.

Separately, McCreevy met earlier Tuesday with U.S. Public Company Accounting Oversight Board Chairman Mark Olson. They said they have launched 'roadmap discussions' on increasing cooperation between the PCAOB and EU auditing regulators.

The goal of the discussions is to allow auditing firms to have regulatory standing in both the U.S. and the EU by 2009 so that regulators could accept an audit whether the auditing firm is registered in the U.S. or the EU.

'As more countries around the world take steps to protect the integrity of their own capital markets by strengthening auditor oversight, regulators must find ways to rely reasonably on each other in accomplishing our shared objective,' Olson said in a prepared statement.

Olson and McCreevy plan to meet in October 2007 to discuss progress.

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