European lawmakers are set to approve tighter controls on hedge funds and private equity firms on Monday as political pressure builds to rein in the speculators accused of fuelling the flames of financial crisis.The European Parliament's approval, on the eve of a meeting of the region's finance ministers, will accelerate the introduction of controls on hedge funds and speed up a wider regulatory overhaul of financial services.But pushing through the law could widen a rift between Britain, which wants softer rules for the industry, and Germany and France, which demand a tougher clampdown.With Berlin and Paris now prepared to force through the law by 2012 against Britain's wishes if necessary, a row over an industry many see as of marginal importance to London's financial centre could magnify in political significance.The rules need the blessing of the European Union's 27 countries, however, and opting for this last resort would break an unwritten rule of Brussels diplomacy that no country should be bullied into accepting a law with which it disagrees.And it would risk upsetting delicate relations between the EU and Britain's new ruling party, the eurosceptic Conservatives.Hedge funds have been accused of exacerbating Greece's borrowing difficulties by betting against its debt, but there are few records to show who is active in those markets.The planned regime would change that, proponents say, making it easier for supervisors to see what is happening as well as intervene with bans on short-selling, for example.European lawmakers will back curbs on pay at hedge funds, parliamentarians say, and may establish limits on private equity investors trying to extract dividends from companies within the first four years of ownership.Most importantly for the sector, parliamentarians want to place private equity and hedge funds under closer scrutiny by supervisors and give watchdogs the power to impose limits on borrowing.CLOSE EYESupervisors will demand hedge funds disclose how they are investing, breaking an industry taboo. This information, which can give hedge funds an edge over rivals betting on the markets, is closely guarded.Britain, home to eight out of 10 European hedge funds and most of the region's private equity, has fought hard to water down the rules, concerned that tough new measures could prompt funds to move to Switzerland or elsewhere.The proposed law has also led to disagreement between Washington and Brussels. U.S. Treasury Secretary Timothy Geithner complains the rules could discriminate against American firms.Washington is worried the rules would make it harder for a New York hedge fund, for example, to find investors in Europe.Lawmakers in Brussels will address these concerns by giving foreign funds a license to do business across all 27 EU countries if they meet European standards.(Reporting by John O'Donnell, editing by Dale Hudson)News posted by www.newsinfoline.com
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