FSAthrows its weight behind the bid to save hedgies from European crackdown

CITY regulator the Financial Services Authority (FSA) yesterday gave its support to hedge funds and called on the European Union (EU) to rethink its plans for a crackdown on the industry.<br /><br />Managing director of the FSA&rsquo;s risk division, Sally Dewar, said the EU must address weaknesses in the current rules in a &ldquo;proportionate&rdquo; way in its draft directive on alternative investment funds.<br /><br />The directive is threatening new reporting rules that will damage the performance of the UK hedge fund industry &ndash; the biggest in Europe &ndash; as well as capital requirements and leverage limits.<br /><br />Dewar said the directive must adopt a risk-based approach, striking the correct balance between imposing additional costs on the funds and enabling regulators to identify and mitigate systemic risks.<br /><br />And it needs to take an approach that recognises the global nature of the sector, rather than imposing unjustifiable geographical restrictions that would significantly restrict investor choice, she added.<br /><br />The FSA move follows visits by London Mayor Boris Johnson and City minister Lord Myners to Brussels in recent weeks to urge EU bureaucrats to remove the most damaging proposals from the directive.