Hedge funds and Private Equity - PES

‘non-UCITS fund’ brand which would be a serious competitor to offshore and non-EU hedge
funds/private equity funds.
This proposal would take into account the fact that these funds are to be found largely outside
EU sovereign territory and so are not accessible to direct EU-regulation. However, although the
funds themselves are located offshore, the managers generally run their businesses in the large
financial centres (especially London and New York). It would be then possible to make managers
and their business partners – for example, prime brokers or hedge fund managers – the
addressee of such regulation. In fact, they are already partly covered by some directives. Nevertheless,
this does not deal with all the relevant potential consequences of alternative investment
strategies. More has to be done.
Before giving an overview of what exists in terms of regulation at EU level, one should keep in
mind the aims a regulation of alternative investment should pursue:
It can and should protect investors. This is the principal consideration of the EU Commission
and conventional regulatory methods. Rules serving this end are also directed towards the
auditability of the investment products on offer.
The object of the investment itself, in other words: how can we promote initiatives which can
improve the basis upon which the employer together with his employees and creditors can
sustain their legal environment, and thereby avoid negative eventualities (above all, leveraged
buy-outs, ‘asset stripping’).
It should be possible to register the investor or his business partner as a formal undertaking,
which is subject to the usual corporate standards.
The employees of the enterprise in question should be able to assert their social rights and
have them respected by alternative investment actors.
Typical risks pertaining to alternative investment should be framed in order to guarantee a
sound functioning of financial markets in the common interest.
3.1 The single financial market – basic principles and common rules
Right of establishment, (Articles 43-48 of the EU Treaty); Freedom to provide services (Article 49)
The right of establishment, set out in Article 43 of the Treaty and the freedom to provide cross
border services, set out in Article 49, are two of the “fundamental freedoms” which are central
to the effective functioning of the EU Internal Market.
Article 43
Within the framework of the provisions set out below, restrictions on the freedom of
establishment of nationals of a Member State in the territory of another Member State
shall be prohibited. Such prohibition shall also apply to restrictions on the setting-up of
agencies, branches or subsidiaries by nationals of any Member State established in the
territory of any Member State.
Freedom of establishment shall include the right to take up and pursue activities as selfemployed
persons and to set up and manage undertakings, in particular companies or
firms within the meaning of the second paragraph of Article 48, under the conditions laid
down for its own nationals by the law of the country where such establishment is
effected, subject to the provisions of the Chapter relating to capital.
Part I – Hedge funds and private equity funds – how they work
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