According to various news sources, Senator Charles Schumer, Democratic U.S. Senator, is threatening to block European alternative investment funds from marketing or raising money in the U.S. if the European Union (EU) adopts new regulations that have a similar effect on American funds in Europe.
The EU rules would impose strict new reporting and custody requirements, as well as possible leverage limits. A draft of the legislation is under review by EU finance ministers. If passed, the legislation would make it extremely difficult for foreign alternative investment funds to serve European clients. A version of the rules under consideration in the European Parliament would be somewhat less burdensome.
Schumer’s own proposed legislation would be very similar to the EU, barring funds from outside the U.S. from marketing or raising money in the country, and mandating the use of U.S. banks for custody. Schumer stated that “just as EU-based funds and custodian banks currently have full access to our market, U.S.-based funds and custodian banks should similarly not arbitrarily be denied access to the European market.”
EU officials have previously warned that they will not be bullied by Washington, and it is unclear what effect, if any, Schumer’s threat would have. The vast majority of European hedge funds and private equity firms are based in the U.K., which already opposes the proposed rules. It is still unclear what effect, if any, Schumer’s threats would have.
