Regulating Private Financial Institutions: How to Kill the Goose That Laid the Golden Eggs

Following the 2008 financial crisis, private financial institutions such as hedge funds and private equity funds have been faced with multiple calls for their regulation, both for consumer protection and systemic reasons.

Author(s):

Francois-Serge Lhabitant

Chief Investment Officer, Kedge Capital Fund Management LtdAffiliate Professor of Finance, EDHEC Business School

Various proposals for a new regulation have been made and are currently under discussion. The hedge fund community is also open to reasonable regulations. In this article, we discuss some of the key aspects of the SEC and the European Union proposals and argue that both of them suffer from severe shortcomings. An adoption in their current form would challenge the long-term viability of private financial institutions, particularly in Europe, and seriously reduce their benefits for investors and financial markets.

Type: Working paper
Date: le 09/11/2009
Research Cluster : Finance

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