Dan Waters looked at regulatory challenges for fund managers. He discussed current FSA thinking on hedge funds. He specified five components for hedge fund regulation:
- mandatory authorisation and supervision of all hedge fund managers and systemically important hedge fund counterparties by the relevant regulator in their home domicile;
- an enforcement regime in respect of fund managers, which creates credible deterrence, by the relevant regulator;
- regulatory powers to take remedial action where a hedge fund itself is domiciled offshore and poses a significant systemic risk direct regulation of the hedge fund manager and its counterparts cannot mitigate;
- collection and sharing of data; and
- convergence in industry good practice standards at a global level.
He explained why FSA does not think it necessary at the moment to try to extend prudential regulation to the funds themselves and discussed the problems of potential regulation of funds in popular offshore locations.