The Parliament's Committee for Economic and Monetary Affairs voted on Wednesday (10 September) in favour of a resolution recommending tougher regulation on hedge funds. The decision was almost unanimous, with just one vote against and one abstention.
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 before 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 private equity funds, based on the principles agreed by the MEPs.
In particular, it calls for capital requirements to imposed on such financial mechanisms, as already requested for other financial institutions such as banks or insurance companies. The report also calls for more transparency of 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" during takeovers by private equity investors or hedge funds. Excessive borrowing should also be avoided when it is used to cover leverage, MEPs said.
