McCreevy was asked by the economic affairs committee of European Parliament, whether the EU executive would act against Germany for planning to lower to 3 percent the threshold for notifying the market of a stake in a company. He said “My own view on hedge funds is I don’t see a compelling case for specific EU legislation.”

McCreevy said it was time for Germany to change the threshold, adding: “I don’t think we should necessarily start imposing any stance there. In the main, hedge funds … are a catalyst for change.”

The typical threshold in the EU is usually around 5 percent and the German step is seen by some shareholdes and companies as making it harder to mount a takeover.

Hedge funds have become especially controversial in Germany recently, as they were seen as key in engineering the departure of Werner Seifert as chief executive of Deutsche Boerse. Several hedge funds with stakes in the German exchange were unhappy with Seifert’s plan to buy the London Stock Exchange, saying it would destroy some of the shareholder value.

In the USA, under the Patriot Act, investment companies, including private investment funds, are subject to enhanced scrutiny, including a study on the potential use of investment companies for laundering money and mandating recommendations as to whether the reporting requirements of the Bank Secrecy Act, (the “BSA”), should be applied to investment companies and hedge funds.

The statutory definition of “financial institution” includes an “investment company.” However, in an interim rule issued by the Treasury Department, investment companies other than mutual funds were exempted from the AML program requirement contained in the Patriot Act.

Specifically, the regulations define the term “unregistered investment company,” which is a subset of the term “investment company,” to include investment vehicles such as hedge funds, private equity funds, venture capital funds, commodity pools and REITs. These companies are being required to establish an AML regulation program that includes, the development of internal policies, procedures, and controls, the designation of a compliance officer, an ongoing employee training program, and an independent audit function to test the program.

Alex Akesson
Contributing Writer
HedgeCo.Net
Email: Editor@hedgeco.net

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