The Committee for Economic and Monetary Affairs of the European Parliament voted on Wednesday (10 September) almost unanimously (one vote against and one abstention) in favour of a resolution recommending tougher regulation on hedge funds.
The report, drafted by former Danish Prime Minister Poul Nyrup Rasmussen, was negotiated until the last minute by MEPs, with over 200 amendments brought to the original. It is widely expected to be confirmed when it is brought to the Parliament’s plenary for a final vote on 23 September.
The revised text, although non-binding from a legal standpoint, carries significant political weight. It asks the European Commission to present a legislative proposal by the end of the year to regulate hedge funds and equity funds, based on the principles agreed by the MEPs.
In particular, it calls for imposing capital requirements on those financial actors, as already requested for other financial institutions such as banks or insurances. The report also calls for more transparency on so-called alternative funds, which MEPs said should be required to disclose their debt exposure and their investment strategies.
The report also calls for measures "to avoid unreasonable asset stripping in target companies" when they are being taken over by private equity investors or hedge funds. Excessive borrowing should also be avoided when it is used to cover leverage, MEPs said.
