Setting International Regulatory Standards for Hedge Funds – Part 1

Abstract

Financial services regulation is becoming increasingly globalised in response to the global nature of the industry. Firms, including hedge funds, are highly mobile. Each regulator must take into account global regulatory standards – if local regulation is below or above the international standard this can have great impact on the local market – either pushing firms offshore or encouraging disreputable firms to operate here.

This article explains why globalisation is a key issue for the regulation of hedge funds. It introduces the current literature on globalisation, regulatory theory, standard-setting and international regulatory cooperation.

The accompanying article will apply the existing literature to three case studies on transnational regulatory networks, being the standard setting bodies for the accounting, securities and banking sector. The theory is then applied to the regulation of hedge funds to show the rational for international standards in this area and to give some insight into what standards are likely to develop, how and where.

The following article will also examine the emerging international standards for hedge fund regulation. It will review the standards that have been published so far, and discuss the areas of further work to draw some conclusions about the likely final standards.