EU approves hedge-fund rules to restrict bonuses

HEDGE-fund and private-equity regulations that will restrict bonuses and require increased disclosure have been approved by European Union negotiators representing the European Parliament and 27 member states.

The accord will allow the rules for hedge-fund managers to become part of EU law as soon as next year.

Finance ministers from the EU agreed on a compromise at a meeting in Luxembourg last week to give the European Securities and Markets Authority powers over a so-called passport system for non-EU hedge-fund managers. The Brussels-based European Commission proposed the rules last year.

“The commission’s initial draft was a wrinkly shirt and we have managed to iron out many of the wrinkles,” Syed Kamall, a British Conservative member of the EU parliament, said.

The passport would give managers access to investors across the EU with a single registration, in return for complying with transparency rules.

“I am particularly pleased by the truly European character of this directive,” Michel Barnier, the EU’s financial services commissioner, said in an e-mail.

Private equity managers will face tougher rules on asset stripping as part of the law. The rules place limits on the selling of assets immediately following a corporate takeover.

Private investors will also be required to provide information on their strategic plans to employees of companies they control.

The rules stop short of preventing hedge-funds based outside the EU without a passport from taking EU investors’ money, a process called passive marketing.

“The deal reached today falls far short of what is required to effectively regulate hedge-funds,” Pascal Canfin, a French Green party lawmaker, said.