The Law of Private Investment Funds by Timothy Spangler

Author:Timothy Spangler
Language: eng
Format: epub
Publisher: Oxford University Press
Published: 2012-10-23T04:00:00+00:00

* * *

A. Introduction

9.01 As has been frequently observed, after a financial crisis, legislators and regulators have an opportunity to adopt significant and potentially far reaching reforms, regardless of whether the reforms actually address the real causes of the immediate crisis.1 Although the 2007–08 global financial meltdown was not a ‘hedge fund crisis’ or a ‘private equity crisis’,2 in 2010 both the US and the EU adopted significant expansions of their regulatory regimes to address perceived shortcomings in how private investment funds and their managers are regulated.3 The concerns underlying the new rules significantly pre-date the 2007–08 crisis and have been debated by industry members and commentators for some time.

9.02 The growth of private investment funds, and the debate over the appropriate response by financial regulators, had been a common feature of consultation papers and articles in the financial press for over a decade. However, the regulatory regime on both sides of the Atlantic remained largely static during these years, despite regular pronouncements from international organizations such as IOSCO and the Financial Stability Forum.4

9.03 Only in the aftermath of the 2007–09 crisis was momentum permitted to build5 in favour of new rules which would materially increase the ability of US and EU regulators to monitor and discipline private fund managers. Ultimately, persistent concern that private funds might comprise a ‘shadow banking system’ as well as the ramifications of the Madoffdebacle, were sufficient to see the passage of Dodd-Frank in the US and AIFMD in the EU.6

9.04 The desire to ‘rein in’ private funds, however, sits somewhat awkwardly in the academic debate over corporate governance. As one commentator has argued:

The irony of the hedge fund regulation movement is that financial economists have, for over seventy years, been decrying, first, the lack of independent shareholder involvement in the management of public firms and, second, the lack of swift capital reallocation in American industry. Hedge funds do both, more effectively, than any financial institutions in American history perhaps, and we should not recoil in fear over the innovation.7

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.