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Don't interfere, Lord Turner FSA warns new European regulator - three European Supervision Authorities (ESA)

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Britain's top financial regulator has issued a warning to Europe not to interfere in the running of the UK's financial markets. Lord Turner, chariman of the Financial Services Authority (FSA), said it was "vitally important" that European financial supervisors did not intervene directly in the running of individual countries' markets. "We are clear the fundamental process of supervision has to occur where expertise is, with the national authorities," said Lord Turner.

His comments at the FSA's asset management conference follow an agreement earlier this month on the creation by the European Union of a set of regulators to oversee the region's banks, insurers, pension funds and broader financial markets.

The three European Supervision Authorities (ESA), which will come into being at the start of next year, will oversee the implementation of EU financial rules by regulators in individual member states and will have sweeping powers to intervene in the financial markets.

Fears have been raised of potential "mission creep", as the ESAs wield their powers and Lord Turner's comments are the first hint of tensions between the new regulators and existing domestic bodies.

His comments came as the EU looked to have reached a breakthrough on new regulation for the private equity and hedge fund industry.

Didier Reynders, finance minister of EU presidency holder Belgium, said he was "sure" of reaching an agreement on the alternative investment fund managers directive (AIFM). The directive is likely to place curbs on the way funds from outside the EU can market their products within the region, as well as introduce strict new disclosure rules.

Mr Reynders added that private equity firms could be subject to new asset stripping rules that would bar them from buying companies and then selling off parts of the businesses.

The UK, which is home to the vast majority of Europe's private equity firms and hedge funds, has been fighting a rear-guard action against the new directive, which it is feared could lead to a loss of business to other jurisdictions not effected by the rules.

Lord Turner noted the dangers to British interests, saying that it was important that the AIFM should recognise "the global nature of the industry" and allow professional investors based in Europe to continue putting their money into alternative investment funds.

The issue of a so-called "passport" for non-EU fund managers that would enable them to continue offering their products across Europe has become a central part of the negotiations on the directive. However, Mr Reynders did not offer any detail on the progress of those negotiations.

"The continued delay is certainly not helpful to the industry but the wrangling over the AIFM directive has been going on for so long now that fund managers are learning to live with the uncertainty," said Ronald Paterson, a partner at Eversheds.

"While many managers are generally supportive – and indeed already practice – a number of the more general principles and aims of the Code, many may find it difficult to implement some of the detail of the rules and do not believe that their businesses pose the same risks as the larger, more systemically important institutions.

Fund managers who are structured as limited liability partnerships are likely to face particular difficulties as a result of the rules," he said.

The FSA has already said it intends to apply the rules as broadly as possible. However, its ability to do this will to a large extent be determined by guidelines published next month by the Committee of European Banking Supervisors.

Source Telegraph


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