Euro Parliament demands greater transparency

MEPs are demanding tough new regulations to force greater transparency from hedge funds and private equity groups.

A report produced by Poul Nyrup Rasmussen, president of the European Socialist party bloc, is currently being debated in the European Parliament in Brussels. The report by the former Danish prime minister calls for substantial reforms of the entire EU financial market, designed to step up investor safeguards by enforcing major shareholder registration and full transparency of the pay and bonus packages of company bosses.

The proposals were initially drafted more than 18 months ago and have been significantly scaled down since the onset of the turmoil in the financial markets, though they still go substantially beyond the voluntary code of conduct put forward by the Walker report last year. The report's focus has been widened to cover all financial market players and it now highlights the key role of private equity and hedge funds in providing capital to small- and mid-sized companies. Despite this, however, many European venture capitalists have warned that the regulations could go too far, which could further dampen liquidity and stagnate the economy.

Under the proposals, the funds and others would be required to disclose their leverage/debt exposure, their sources of capital and amount of funds raised, and larger shareholders for their investment products. Remuneration packages of senior executives and fund managers would also have to be set out in full detail. The report also demands consultation with employees during takeovers, including leveraged buyouts, and that representatives of pension funds be informed of how their funds are invested and the associated risks.

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