2007/2239(INI) | [ParlTrack]

Draft opinion
Paragraph -1 (new)

-1. Welcomes the findings of the studies on hedge funds, private equity and transparency commissioned by its Committee on Economic and Monetary Affairs;

Amendment 10 #

Draft opinion
Paragraph 2

2. States that purposive transparency is a prime tool for managing risk; stresses the need for a diversified level of transparency: for the general public, openness about objectives is important, for investors it is the detail of the nature, valuation and risk of investments and for supervisors a full view of positions and strategies, whilst observing the confidentiality of that information; thnegative effects of transparency ~~can be negative~~, such as herding where investment strategies are revealed to competitors, should be avoided and positive effects, including preventing the assumption of worse-than- actual scenarios, promoted;

Amendment 11 #

Draft opinion
Paragraph 2 a (new)

2a. Notes the experience of the United States where freedom of information legislation has been used by competitors to obtain fund investment details of a level intended for investors, which has compromised both the investors and the fund;

Amendment 12 #

Draft opinion
Paragraph 3

3. Considers that ~~standardisation of~~ over- the-counter (OTC) products ~~is a contradiction in terms: an OTC clear~~should be traded more using regular trading systems i~~s attractive in theory but would add to costs, so unless it is done on an international basis it could damage European competitiveness in a global market~~n order to increase mark-to-market valuation; considers also that, in order to ensure that there is a level playing field in the global context, any new system needs to be introduced on an international basis;

Amendment 13 #

Draft opinion
Paragraph 3

3. Considers that standardisation of over- the-counter (OTC) products ~~is a contradiction in terms: an OTC clearing system is attractive in theory but would add to costs, so unless it is done on an international basis it could damage~~would help to prevent systemic risks and an OTC clearing system would provide the transparency and oversight required for supervisors to assess such risks; considers that such a system, introduced on an international basis, would be preferable in order not to harm European competitiveness ~~in a global market~~;

Amendment 14 #

Draft opinion
Paragraph 3 a (new)

3a. Nevertheless considers that investigation of possible reporting or clearing arrangements and statistical information gathering for OTC instruments should be undertaken at both EU and international level;

Amendment 15 #

Draft opinion
Paragraph 3 b (new)

3b. Warns against the implementation of contractual terms to impose risk limitations, which would amount to product regulation and interfere with financial innovation as well as investor choice;

Amendment 16 #

Draft opinion
Paragraph 3 c (new)

3c. Underlines the necessity to overcome the fragmentation in the regulatory framework and hence the obstacles to cross-border distribution for alternative investments through the establishment of a European private placement regime;

Amendment 17 #

Draft opinion
Paragraph 3 d (new)

3d. Underlines that industry-wide monitoring and reporting has a role to play in addressing public concerns and in order to understand the economic impact of private equity, and that there is already a requirement on private and public companies to consult their employees on matters that affect their interests; emphasises that an imbalance should not be created between commercial disclosures required of private equity portfolio companies and those required by other private companies;

Amendment 18 #

Draft opinion
Paragraph 4

4. ~~Not~~Welcomes thate public attention wathat is drawn to hedge funds and private equity ~~following high-profile cases and activity in the context of well-known companies~~; recognises that both hedge funds and private equity are responding to criticism by way of self-regulatory proposals incorporating a 'comply or explain' principle; considers that those codes ~~need to be allowed sufficient time to operate, spread globally and for their effects be analysed~~are a step forward but not sufficient to prevent the sector from taking undue risks, which possibly negatively influence the macro economics; urges the Commission to put forward targeted legislation;

Amendment 19 #

Draft opinion
Paragraph 4

4. Notes that public attention was drawn to hedge funds and private equity following high-profile cases and activity in the context of well-known companies; recognises that both hedge funds and private equity are responding to criticism by way of self-regulatory proposals incorporating a 'comply or explain' principle; considers that those codes ~~need to be allowed sufficient time to operate, spread globally and for their effects be analysed~~, which exist as an autonomous supplement to legislation, need to be taken into account as soon as possible and to prove their effectiveness rapidly;

Amendment 2 #

Draft opinion
Paragraph 1

~~1. Observes that a lack of due diligence by investors cannot be counteracted by more transparency;~~deleted

Amendment 20 #

Draft opinion
Paragraph 4

4. Notes that public attention was drawn to hedge funds and private equity following high-profile cases and activity in the context of well-known companies; recognises that both hedge funds and private equity are responding to criticism by way of self-regulatory proposals incorporating a 'comply or explain' principle; considers that those codes need to spread globally and be allowed sufficient time ~~to operate, spread globally and~~ for their effects to be analysed;

Amendment 21 #

Draft opinion
Paragraph 4 a (new)

4a. Believes that tested voluntary guidelines can evolve into more formal structures with less risk of unforeseen consequences; recognises that formal regulations are not as adaptable, and that codes of conduct are better at adapting to innovative changes; suggests that a one- stop-shop website for codes of conduct be established for the European Union and promoted internationally; suggests that that website should include a register of those who comply with the codes of conduct, their disclosures, and explanations of non-compliance; observes that reasons for non-compliance can also be a learning tool;

Amendment 22 #

Draft opinion
Paragraph 4 a (new)

4a. Suggests that voluntary guidelines offer better scope for dealing with a wide range of complexities and circumstances, at least until they have been road-tested;

Amendment 23 #

Draft opinion
Paragraph 4 a (new)

4a. Is aware of the fact that adequate and effective monitoring of codes of conduct remains an open question that needs to be addressed;

Amendment 24 #

Draft opinion
Paragraph 4 b (new)

4b. Recognises that there is no uniform public disclosure of sovereign wealth funds (SWFs) and welcomes the initiative of the International Monetary Fund to establish a working group to draft an international code of conduct for SWFs; believes that such a code of conduct will go some way to demystifying SWF activities; calls on the Commission to take part in this process;

Amendment 25 #

Draft opinion
Paragraph 5

5. Recognises that EU onshore hedge funds, hedge fund managers and private equity firms are subject to existing legislation, notably concerning market abuse, and that indirect regulation applies to them through counterparties and when related investments in regulated products are sold; ~~notes that share holdings are subject to the usual disclosure requirements;~~ recalls, in particular, that the banks that finance hedge funds and private equity are themselves regulated under Community law as regards, inter alia, capital adequacy, conflicts of interest and systems and controls; observes also that the business relationship of banks with hedge funds and private equity houses affords them considerable influence to demand and receive as much information from their clients as they deem necessary to fulfil their role; notes that the linkage between hedge funds and their counterparties has been exhibited in enforced de-leveraging during the recent financial turmoil; notes that share holdings are subject to the usual disclosure requirements; recognises that investment managers have a fiduciary responsibility to investors and should exercise voting rights in the interest of such investors and in consideration of the investment mandate of the investment vehicle and that this may require so-called activism which may also be beneficial to the company; observes that institutions lending shares should have due regard to whether and how the shares might be used, including for voting;

Amendment 26 #

Draft opinion
Paragraph 5

5. Recognises that EU onshore hedge funds, hedge fund managers and private equity firms are subject to pieces of existing legislation, notably concerning market abuse, and that indirect regulation applies to them through counterparties and when related investments in regulated products are sold; notes that share holdings are subject to the usual disclosure requirements;

Amendment 27 #

Draft opinion
Paragraph 5 a (new)

5a. Is of the opinion that any investigation into the possibility of a system of EU-wide shareholder identification should include a cost-benefit analysis of additional reporting requirements with the aim of avoiding an overflow of information;

Amendment 28 #

Draft opinion
Paragraph 5 a (new)

5a. In the interests of ensuring that there is a level playing field, considers it inappropriate to discriminate between different investors;

Amendment 29 #

Draft opinion
Paragraph 6

~~6. Asserts that additional, especially frequent, reporting requirements can induce pressure for short-term returns rather than long-term stability;~~deleted

Amendment 3 #

Draft opinion
Paragraph 1

1. ~~Observes that a lack of due diligence by investors cannot be counteracted by more transparency~~Recognises that improvements in transparency, in particular to promote greater comprehension and better visibility of risks has a valuable role to play, but notes that transparency is an aid to, not a replacement for, due diligence;

Amendment 30 #

Draft opinion
Paragraph 6

6. AsIn the context of private equity, obsertves that ~~additional, especially~~introduction of more frequent, reporting requirements ~~can induc~~might create pressure for short-term returns ~~rather than long-term stability~~; in all contexts, believes that better linkage is needed between remuneration packages and long-term performance;

Amendment 31 #

Draft opinion
Paragraph 6

6. Asserts that the costs of additional, especially frequent, reporting requirements ~~can induce pressure for short-term returns rather~~should be defensible in proportion to their benefits, but thant l~~ong-term~~asting stability justifies additional efforts;

Amendment 32 #

Draft opinion
Paragraph 6

6. Asserts that additional~~, especially frequent,~~ reporting requirements ~~can induce pressure for short-term returns rather than long-term stability~~may be necessary to reveal information about strategies of hedge funds and private equity firms that are relevant for long-term stability, and urges the IASB to put forward assessments and proposals;

Amendment 33 #

Draft opinion
Paragraph 6 a (new)

6a. Welcomes the proposal of the International Organization of Securities Commissions for the valuation of hedge fund portfolios and looks forward to its widespread introduction; notes that valuing illiquid assets is currently a work in progress;

Amendment 34 #

Draft opinion
Paragraph 6 b (new)

6b. Recognises that neither hedge funds nor private equity are the cause of the current financial turmoil; supports the international consensus expressed by the Commission, Member States, the European Central Bank, the Financial Stability Forum, the International Organization of Securities Commissions and others that it will take time to understand the full causes and effects of the sub-prime turmoil and that a hasty legislative response would be a mistake; notes, however, that a lack of comprehension of complex products and ratings has been exposed and that measures to ensure better understanding, visibility of processes and notation for different types of risk, such as liquidity and complexity, as well as credit worthiness, should be developed as soon as possible;

Amendment 35 #

Draft opinion
Paragraph 6 c (new)

6c. Considers that, regarding new products, innovation is important and must not be unduly hampered; states that prudent person principles, supervisory and investor diligence and risk visibility are more important than a registration system that could be misused, as were credit ratings;

Amendment 36 #

Draft opinion
Paragraph 6 d (new)

6d. Notes that Member States have or can put in place measures to counter asset stripping, including the obligations of directors, and that there is no evidence that a Community measure would be more effective;

Amendment 37 #

Draft opinion
Paragraph 6 e (new)

6e. Does not support the development of stand-alone legislation targeting hedge funds and private equity but believes that the Commission should investigate appropriate adjustments to existing regulation; believes any changes must be universal and should not unfairly discriminate; is a strong supporter of better regulation and believes that harmonisation should occur only when there is evidence of market failure;

Amendment 38 #

Draft opinion
Paragraph 6 a (new)

6a. Considers it impractical and counterproductive in terms of encouraging investment to make an artificial differentiation between categories of private investors in equities;

Amendment 39 #

Draft opinion
Paragraph 6 b (new)

6b. Recommends that hedge funds which seek investment by retail investors should be required to commit themselves to a defined sector and to a formulaic risk profile and should be sold only through sales people who are specifically authorised as regards their technical qualifications, counselling ability and ethical probity;

Amendment 4 #

Draft opinion
Paragraph 1

1. Observes that ~~a lack of~~ due diligence byon the part of investors can~~not be counteracted by more transparency~~d transparency on the part of service providers are necessary in order to ensure the stability of the financial markets;

Amendment 40 #

Draft opinion
Paragraph 6 a (new)

6a. Notes that securities lending with the purpose of voting on borrowed shares is a bad practice; stresses that a long-term prospect of shareholders is preferable to borrowed shares for the short term; urges the Commission to put forward legislation that requires intermediaries to enable shareholders to vote and ensure that their voting instructions are implemented, and to ensure that voting policies of identified shareholders are disclosed;

Amendment 5 #

Draft opinion
Paragraph 1

1. Observes that a lack of due diligence by investors cannot be counteracted by more transparency alone; stresses that transparency contributes to a better understanding of complex financial products;

Amendment 6 #

Draft opinion
Paragraph 1 a (new)

1a. Notes that the international financial crisis has highlighted the lack of transparency as regards the markets concerned; recognises a need for more transparency;

Amendment 7 #

Draft opinion
Paragraph 1 a (new)

1a. Recognises that hedge funds and private equity are distinct investment vehicles that differ as regards the nature of investment and investment strategy;

Amendment 8 #

Draft opinion
Paragraph 2

2. States that purposive transparency is a prime tool for managing risk: for the general public, openness about objectives is important, for investors it is the detail of the nature, valuation and risk of investments and for supervisors a full view of positions ~~and strategi~~, strategies, risk management, market abuse controls and other compliance procedures, whilst observing ~~the~~an appropriate level of confidentiality of that information; the effects of transparency can be negative, such as herding where investment strategies are revealed to competitors, and positive, including preventing the assumption of worse-than- actual scenarios;

Amendment 9 #

Draft opinion
Paragraph 2

2. States that purposive transparency is a prime tool for managing risk: for the general public, openness about objectives is important, for investors it is the detail of the nature, valuation and risk of investments and for supervisors a full view of positions and strategies, whilst observing the confidentiality of that information; t~~he effects of transparency can be negative, such as herding where investment strategies are revea~~ransparency is of the greatest usefulness to all stakeholders, since it makes availabled to ~~competitors, and positive, including preventing the assumption of worse-than- actual scenar~~market participants the information needed to justify their decisions;

source: PE-404.743

2008/05/08 JURI 67 amendments...

Amendment 1 #

Sajjad KARIM

Motion for a resolution
Indent 1 a (new)

– having regard to the Second Council Directive 77/91/EEC of 31 January 1977 on coordination of safeguards which, for the protection of the interests of members and others, are required by Member States of companies within the meaning of the second paragraph of Article 58 of the Treaty, in respect of the formation of public limited liability companies and the maintenance and alteration of their capital, with a view to making such safeguards equivalent1,

Amendment 10 #

Motion for a resolution
Recital B

B. whereas EU-based hedge funds and private equity funds require an regulated environment which will respect their innovative strategies in order to enable them to remain internationally competitive while mitigating the effects of potential adverse market dynamics,

Amendment 11 #

Motion for a resolution
Recital B

B. whereas EU-based hedge funds and private equity funds require an environment which will respect their innovative strategies in order to enable them to remain internationally competitive while mitigating the effects of potential adverse market dynamics; is concerned that specific legislation would be inflexible and stifle innovation,

Amendment 12 #

Motion for a resolution
Recital B a (new)

Ba. whereas hedge funds and private equity funds which have their management company domiciled in the EU have to comply with existing and future Community legislation; whereas non-EU-based entities also have to comply with this legislation in the context of certain activity,

Amendment 13 #

Motion for a resolution
Recital C

C. whereas in some Member States hedge funds and private equity funds are subject to national regulatory regimes; whereas such divergent national rules give rise to the risk of regulatory fragmentation and arbitrage in the internal market, which may have the effect of impeding the cross- border development of this business in Europe, and also, and more importantly, may cause a race to the bottom resulting in weakening of the regulatory and supervisory regime necessary to prevent companies, employees and the real economy from being negatively affected,

Amendment 14 #

Motion for a resolution
Recital C

C. whereas in some Member States hedge funds and private equity funds are subject to national regulatory regimes and differing implementation of existing EU directives; whereas such divergent national rules give rise to the risk of regulatory fragmentation in the internal market, which may have the effect of impeding the cross-border development of this business in Europe,

Amendment 15 #

Motion for a resolution
Recital D

D. whereas directives ~~seem to be the appropriat~~have already been used as the legal instruments ~~with which~~ to address the ~~different issues related to~~issues of transparency, reporting and market manipulation and should be reviewed collectively for their impact on hedge funds and private equity funds,

Amendment 16 #

Motion for a resolution
Recital D

~~D. whereas directives seem to be the appropriate legal instruments with which to address the different issues related to hedge funds and private equity funds,~~deleted

Amendment 17 #

Kurt Joachim LAUK

Motion for a resolution
Recital D

D. whereas ~~directives seem to be the appropriate legal instruments with which to address the different issues related to hedge funds and private equity funds~~an analysis and assessment of legislation already in force in the Member States concerning hedge funds and private equity funds should precede a possible directive on the transparency thereof, and whereas such legislation should be the starting-point for harmonisation,

Amendment 18 #

Motion for a resolution
Recital D a (new)

Da. whereas the hedge fund and private equity industries could make concrete proposals on transparency issues and where these initiatives already exist they should be implemented accordingly, whereas only if this is not successful should legislative measures be considered as the appropriate instrument,

Amendment 19 #

Kurt Joachim LAUK

Motion for a resolution
Recital E

E. whereas it is recognised that one of the main issues is the need for transparency; whereas transparency has several facets, such as the transparency of hedge funds vis-à-vis the ~~companies whose shares they acquire or own, as well as vis-à-vis~~ir prime brokers, institutional investors such as pension funds or banks, retail investors, and business partners~~, regulators and authorities; whereas one of the main~~; whereas the complaint made by some parties that there is a transparency deficit~~s lies~~ in the relationship between a hedge fund and the companies whose shares it acquires or owns is not valid,

Amendment 2 #

Sajjad KARIM

Motion for a resolution
Indent 3 a (new)

~~1 OJ L 26, 31.1.1977, p. 1. 2 OJ L 178, 17.7.2000, p.1.~~– having regard to Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market2 ('Directive on electronic commerce'), Or. en

Amendment 20 #

Motion for a resolution
Recital E

E. whereas ~~it is recognised that one of the main issues is the need for transparency~~the current financial crisis has highlighted a lack of transparency and a need to enhance it at different levels is recognised; whereas transparency has several facets, such as the transparency of hedge funds and private equity funds vis- à-vis the companies whose shares they acquire or own, as well as vis-à-vis prime brokers, institutional investors such as pension funds or banks, retail investors, business partners, regulators and authorities; whereas one of the main transparency deficits lies in the relationship between a hedge fund or private equity fund and the companies whose shares it acquires or owns,

Amendment 21 #

Motion for a resolution
Recital E

E. whereas it is recognised that one of the main issues is the ~~need for~~analysis of transparency and where it can be enhanced; whereas transparency has several facets, such as the transparency of hedge funds vis-à-vis ~~the companies whose shares they acquire or own, as well as vis-à-vis~~ prime brokers, institutional investors such as pension funds or banks, ~~retail investors,~~ business partners, regulators and authorities; whereas ~~one of the main transparency deficits lies in the relationship~~a complaint made by some parties is of a transparency deficit between a hedge fund and the companies whose shares it acquires or owns,

Amendment 22 #

Piia-Noora KAUPPI

Motion for a resolution
Recital E a (new)

Ea. whereas inconsistent implementation of the Transparency Directive has led to an incoherent level of transparency throughout the EU and to high costs for investors,

Amendment 23 #

Motion for a resolution
Recital E a (new)

Ea. whereas transparency is an essential condition for investor confidence and the understanding of complex financial products, and thus favours the optimum functioning and stability of the financial markets,

Amendment 24 #