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European Commission conference on private equity says regulation can no longer be avoided







The conference program arranged by Commissioner of internal market and services, Charlie McCreevy lacked a balanced representation of private equity and hedge fund stakeholders. Although heavily stacked by anti regulation investment professionals, the address by private equity opponent MEP Poul Nyrup Rasmussen moved attendees to accept that regulation was on its way.



UNI Global Union believes we are in our strongest position to argue for regulation of private equity than we have ever been throughout the union campaign. The political climate is now supportive of this change in Europe.



UNI has been contributing to the European Commission process on investigating the need for regulation of hedge funds and private equity. UNI has recently supported submissions to the European Commission public consultation on hedge funds, made on behalf of trade unions by Trade Union Advisory Committee to the OECD (TUAC) and the European Trade Union Confederation (ETUC).



Submissions closed for the public consultation at the end of January. A follow up meeting was arranged by the European Commission to assist forming a proposal to submit to the European Parliament. This meeting was held at the end of February which UNI attended.



The overall message from the meeting was that voluntary codes of conduct for private equity and hedge funds would no longer be an acceptable solution to public concerns. Regulation has been demanded by the public and the European Commission will be expected to deliver. This was the resounding message from the two day meeting of industry, investors, regulators and unions.



The agenda arranged by the Commission, focused on the current state of hedge funds and private equity in markets and whether or not there was a need for regulation of private equity and hedge funds. The overwhelming majority of participants agreed a combination of self regulatory frameworks, combined with better indirect regulation of banks and limited direct regulation of hedge funds would be the way forward.



Private equity was not give as much time in the debate, however Members of the European Parliament (MEP) attending the meeting agreed that regulation was inevitable. Important union issues such as the use of excessive debt and tax avoidance were not addressed adequately in the debate. These issues were seen as not being unique to alternative investments.



The European Private Equity and Venture Capital Association (EVCA) used the meeting to launch a new set of guidelines for private equity in Europe. The document released goes some way to addressing concerns such as the lack of transparency in information sharing among stakeholders, which has been heavily criticized in public debate by unions and other organizations. However the voluntary code will not be enough to satisfy public demands. This point was reinforced by MEP Poul Nyrup Rasmussen, President of the Party of European Socialists (PES) who spoke forcefully at the meeting on this issue.



Rasmussen said “This is totally unacceptable and should be rejected outright and immediately by the European Commission. I can’t believe the industry is so complacent and insensitive to opinion that they propose nothing more than European-wide self regulation in a year from now.”



“Have they forgotten that we are in the deepest financial crisis since 1929, that this crisis has created a recession that puts at jeopardy the jobs of millions of people? They say they are not part of systemic risks but we have seen numerous cases of pro-cyclicality in their behaviour. Recent LBO financing activity seems very similar to what happened in the sub-prime mortgage market. And there are a lot of other problems - over-leveraging our companies, extreme use of debt, greedy fee structures, the weakening of our companies’ competitiveness.”



“It’s too late now that everyone – with the possible exception of Charlie McCreevy – agrees that self-regulation has failed and that binding legislation is needed. I am astonished that the EVCA think they can get away with self-regulation. They haven’t got the message have they? Maybe they have been badly advised by Mr McCreevy.”



“This unrealistic and inadequate proposal from the EVCA makes me more determined than ever to continue arguing and documenting the need or regulation. It’s a mater of urgency.”