14.1.2010   

EN

Official Journal of the European Union

CE 8/26

A.

whereas there is at present national and EU regulation concerning financial markets that directly or indirectly, though not exclusively, applies to hedge funds and private equity,

B.

whereas the Member States and the Commission should ensure the consistent implementation and application of that regulation; whereas all further adjustments to existing legislation should be the subject of a proper cost/benefit analysis and should be non-discriminatory,

C.

whereas the Commission has not responded positively to all aspects of Parliament's earlier requests, including those made in its abovementioned resolutions of 15 January 2004, 27 April 2006, 11 July 2007, 13 December 2007,

D.

whereas hedge funds and private equity have very different characteristics and no unambiguous definition of either exists but both are investment vehicles used by sophisticated rather than retail consumers; whereas they cannot be appropriately treated as a single category for product-specific regulation,

E.

whereas hedge funds and private equity are increasingly important alternative investment vehicles that not only have a significant and increasing share in global assets under management, but also improve the efficiency of financial markets, by creating new investment opportunities,

F.

whereas several global, EU and national institutions have, long before the current financial crisis, analysed potential concerns in relation to hedge funds and private equity as regards financial stability, risk management standards, excessive debt (leverage) and the valuation of illiquid and complex financial instruments,

G.

whereas an analysis conducted by the Financial Stability Forum in 2007 concluded that financial stability concerns were best addressed through enhanced supervision of all actors,

H.

whereas in its Global Financial Stability Report of April 2008, the International Monetary Fund (IMF) concluded that there is a ‘collective failure to appreciate the extent of leverage taken on by a wide range of institutions — bank, monoline insurers, government-sponsored entities, hedge funds — and the associated risks of a disorderly unwinding’,

I.

whereas realising the Lisbon Agenda requires long-term investment in growth and jobs,

J.

whereas such long-term investment requires well-functioning stable financial markets in the EU and globally, contributing to the real economy, which can be achieved only by ensuring the presence in the EU of a competitive and innovative financial industry,

K.

whereas hedge funds and private equity in many cases provide liquidity, foster market diversification and market efficiency by creating demand for innovative products, and aid price discovery,

L.

whereas financial stability also requires better supervisory cooperation, including at global level, which logically requires, continuing improvements of current EU supervisory arrangements including regular exchanges of information and enhanced transparency of institutional investors,

M.

whereas the Commission should investigate the possibilities of regulating off-shore market players globally,

N.

whereas appropriate levels of transparency towards investors and supervisory authorities are crucial to ensure such well-functioning and stable financial markets as well as for promoting competition between market actors and products,

O.

whereas the Commission should monitor and analyse the effects of the operations of hedge funds and private equity and to consider putting forward a directive on minimum transparency rules on how investments are financed in the future, risk management, methods of assessment, managers’ qualifications, possible conflicts of interest as well as the disclosure of ownership structures and the registration of hedge funds,

P.

whereas in order to satisfy the need to monitor market activity for supervisory purposes, information on hedge fund exposures and lending should be made available to competent supervisory authorities without excessive burdens,

Q.

whereas the fund industry is expected to move further towards binding measures on corporate governance with a view to achieving greater transparency which must also be made public; calls for an improvement of controlling mechanisms,

R.

whereas Member States should use best practice to ensure that company pensions acquired by employees are shielded from bankruptcies;

S.

whereas the Commission should consider including in the definition of the prudent person principle, whenever that principle is incorporated in the existing Community legislation, the requirement for investors to verify that the alternative investment funds in which they invest comply with appropriate legislation and the industry's best practice standards,

T.

whereas the current diversity of private placement definitions in the Member States constitutes an obstacle to the internal market and creates an incentive for the leakage of high risk products onto the retail market,

U.

whereas a one-stop-shop website for codes of conduct should be established, including a register of those who comply, their disclosure and explanations of non-compliance; observes that reasons for non-compliance can also be a learning tool; whereas that website should be established for the EU and promoted internationally,

V.

whereas in its Global Financial Stability Report of April 2008, the IMF warned that ‘corporate debt market appears vulnerable as default rates are set to rise, owing to both macroeconomic and structural factors’,

W.

whereas the recent increase in private equity transactions has significantly increased the number of employees whose jobs are ultimately controlled by equity funds, and, therefore, due regard should be paid to existing national employment laws as well as Community employment law (in particular Directive 2001/23/EC), which was formulated when this was not so; whereas national and Community employment law should apply on a non-discriminatory basis, including fair and appropriate treatment of all economic actors with similar responsibilities towards employees,

X.

whereas under many legal systems, hedge funds and private equity that own and control companies are not regarded as employers and are therefore exempt from employers’ legal obligations,

Y.

whereas in the event of extreme debt loads companies present a higher risk profile,

Z.

whereas, as with other entities, there may be conflicts of interest either arising from the business model of private equity or hedge funds or from the relationships between those vehicles and other actors in financial markets; efforts to enhance existing Community legislation should not be restricted to hedge funds and private equity and should be in line with global standards such as the IOSCO principles for the management of conflicts of interest by collective investment schemes and market intermediaries;

AA.

whereas the remuneration systems for managers of hedge funds and private equity may give rise to inappropriate incentives leading to irresponsible risk taking,

AB.

whereas hedge funds were amongst the investors in the complex structured products that were subject to the credit crisis, and thus incurred losses as did other investors.,

AC.

whereas in order to minimise the risk of future financial crises and given the strong interactions across markets and between market participants as well as the objective of a level playing field across borders and between regulated and unregulated market participants, several initiatives in the EU and at global level are under way, including a review of the Capital Requirements and Capital Adequacy Directives and a proposal for a directive on Credit Rating Agencies, in order to secure more coherent and harmonised regulation across the board,

AD.

whereas principle-based regulation is an appropriate approach to regulating financial markets as it is better able to keep up with market developments,

AE.

whereas there is need for action at EU level on the basis of the following seven principles for financial institutions and markets:

AF.

whereas such action would provide a legal basis, universal and comprehensive, encompassing all financial institutions above a certain size, mutually taking into account international supervisory and regulatory practices,

1.

Requests the Commission to submit to Parliament by the end of 2008, on the basis of Article 44, Article 47(2), or Article 95 of the EC Treaty, a legislative proposal or proposals covering all relevant actors and financial market participants, including hedge funds and private equity, responding to the seven principles outlined in Recital AE and following the detailed recommendations below;

2.

Confirms that the recommendations respect the principle of subsidiarity and the fundamental rights of citizens;

3.

Considers that the financial implications of the requested proposal or proposals should be covered by EU budgetary allocation;

4.

Instructs its President to forward this resolution and the accompanying detailed recommendations to the Commission, the Council and the governments and parliaments of the Member States.