The Alternative Investment Management Association (AIMA), the global hedge fund industry association, has published an enhanced statement of policy principles.
The principles are set out in a new AIMA paper, Regulating Capital Markets: AIMA’s Policy Principles.
The paper builds on the AIMA Policy Platform, the landmark 2009 document in which AIMA offered its support for improved transparency, unified global standards, manager authorisation and supervision, aggregated short position disclosure to regulators and new policies to reduce settlement failure.
The enhanced principles enshrine AIMA’s core set of beliefs in the broad areas of investor protection, regulatory consistency, systemic risk and market integrity.
AIMA’s principles for improving investor protection include robust rules around the segregation and protection of investor assets and collateral and a call for regulation that reflects the differentiation between retail and professional investors.
On regulatory consistency, AIMA says that policymakers globally should continue to seek a co-ordinated international framework which preserves the cross-border nature of financial markets. In the paper, AIMA also warns about the dangers of extraterritoriality and regulatory overlap, which it says can lead to market fragmentation and regulatory arbitrage.
AIMA’s principles for understanding and mitigating systemic risk include the maintenance of a diversity of market participants and investment strategies and mechanisms to end the problem of “too big to fail”.
The AIMA paper also sets out a number of methods for improving market integrity, including clearly-defined and internationally-harmonised market abuse rules and effective market abuse sanctions.
Kathleen Casey (pictured), chair, AIMA, says: “Capital markets are crucial in the financing of the economy and the hedge fund industry plays an ever increasing role in the entire chain of investing and financial intermediation, contributing to market depth, sophistication, transparency and thus its ability to support growth.
“AIMA therefore wishes to participate actively in the elaboration of policies in the areas of asset management and financial markets regulation with the aim of improving investor protection, market transparency and financial stability overall.
“It is in the deepest interests of the global hedge fund industry that the financial markets on which it operates are well-functioning. This is why we have worked to develop our 2009 platform further, also addressing areas which have not been treated previously.
“This paper therefore presents an enhanced list of principles which AIMA supports as part of its overall policy on key issues facing the global hedge fund industry and financial markets in general. It endeavours to explain, not only to the official sector but also to the industry as a whole, our core set of beliefs.”