Global regulators are heading toward creating a set of international regulatory guidelines that would end offshore havens of loose regulation and low taxes for hedge funds, Martin Cornish, partner at the international law firm Katten Muchin Rosenman Cornish, said last month at a client seminar.
Although no proposals have been brought forward, “my reading of the tea leaves is that whatever regulations (the International Organization of Securities Commissions) come up with (for onshore funds) ... the same rules will be implemented offshore,” Mr. Cornish said at the seminar in London.
“The whole idea here is that, globally, regulators will be able to add up what you're doing,” he said.
Mr. Cornish said the IOSCO has been asked to flesh out regulatory proposals that were agreed upon by Group of 20 leaders at its London summit last month, and he based his comments on recommendations IOSCO made before the summit.
Large hedge funds or those that lend or take significant counterparty positions could come under bank-like regulations covering capital, liquidity and risk controls.
Also, potential regulations on compensation would not likely be spared from large, complex hedge funds, although the “devil will be in the detail” as to how regulations might be applied, Mr. Cornish said. — Drew Carter
