Mark Spinner, partner and Head of Private Equity at international law firm Eversheds, comments on the European Parliament approval of tighter controls on private equity firms and hedge funds.
The European clampdown on hedge funds will have wider reaching implications for the UK financial services industry as in addition to regulating hedge funds, the new rules will extend to other parts of the industry including the private equity sector.
The British Venture Capital Association has referred to the proposed legislation as being, some of the least thought out to be proposed in recent times. Many commentators believe that the new Tory/Lib Dem coalition government was handed a real hospital pass by the former Labour government since the opportunity to properly articulate the UK’s opposition to this piece of legislation was lost as a result of the timing of Monday’s decision.
If enacted in anything like the form currently being proposed, the AIFM Directive will increase the regulatory burden on both the hedge fund and private equity industries making Europe a much less attractive place to be established and/or to do business.
Combined with the threat to bring rates of capital gains tax into line with the highest rates of income tax this is a very worrying development for the future of the financial services industry in the UK.
