A day after proposed tax changes in the U.K. fired up speculation that they would prompt hedge funds to move to friendlier locales, the head of the country’s Financial Services Authority has stoked fears that unbalanced regulation of hedge funds could likewise lead to flight offshore and create new problems. Speaking to the House of Commons, FSA Chief Executive John Tiner warned that “if we had a disproportionate effect” on hedge funds, that they would “take their business offshore, but they would still trade the markets in London, so then in a way we would lose touch and lose ability to actually intervene.” Tiner seemed to suggest that the current regime, which involves a specialist team monitoring the biggest players in the industry, would make more stringent controls were not necessary. He did express concern, however, that hedge funds seem almost “too keen” to be regulated, as if “there is some sense that we are a badge of respectability and we just have to wary of that.” Tiner said that the FSA’s lighter touch does not mean the agency will go easy on hedge funds; just last week FSA enforcement director Margaret Cole in New York suggested that it would in fact be prosecuting more insider-trading and market-abuse cases involving hedge funds. The FSA appears to feel it is setting the tone for other countries. “Other regulators around the world are watching what we are doing with great interest.”
