EUROPEAN Union lawmakers are close to introducing fresh new hedge fund legislation that would make it harder for offshore funds to raise money from EU investors.
Under the new legislation, European investors would be prevented from sending money to countries that fail to meet strict criteria set out by the EU politicians.
According to Jean Paul Gauzes, the French politician leading the debate at the EU Parliament, countries such as the Cayman Islands have a lot of work to do if they want to avoid being blacklisted. The legislation is set to come into play by 2012.
Britain has been vocal in its defence of the hedge fund industry and wants lighter legislation, while Germany and France are seeking a heavier clampdown.
Washington is not happy about the proposed laws either. US Treasury Secretary Timothy Geithner has complained that the controls could discriminate against American firms because the regulations would not give a passport or licence to operate in Europe to foreign firms.