HEDGE fund industry body the Alternative Investment Management Association (AIMA) is set to clash with the FSA over proposed rules on pay.
AIMA is furious that new European rules designed to prevent reckless behaviour in the banking industry will affect its members.
AIMA said yesterday it will meet with the FSA to suggest ways to water down the EU regulations. These rules, which will take effect in January, will apply to many asset managers in the 27-country bloc, as well as banks and brokers, as part of the global effort by regulators and policy-makers to guard against a repeat of 2008’s financial crisis.
In a strongly worded email sent to the watchdog, AIMA pointed out the fundamental differences between hedge fund managers and bankers and called for clarity over the implementation of the rules.
AIMA points out the FSA has already determined that no individual firm poses a systemic risk of the type the EU rules are meant to help prevent.
The email, written by AIMA chief executive Andrew Baker, said: “Remuneration in the hedge fund sector does not encourage the reckless and short-termist behaviour the ‘bonus culture’ has created elsewhere – quite the opposite. Performance fees help to align the interests of manager and investor. And they do not reward failure, which was another criticism of the ‘bonus culture’ at large financial institutions.”
The FSA is consulting with the industry until 8 October on how it might apply the measures, as each EU country regulator has some discretion. The FSA consultation paper Revising the Remuneration Code currently applies to 27 of the largest banks, building societies and broker dealers. Proposed amendments would roll it out to around 2,500 firms.