[ParlTrack]

Motion for a resolution
Recital A

A. whereas there is at present ~~insufficient~~national and EU regulation concerning financial markets that directly or indirectly apply tof hedge funds and private equity,

2008/05/19
Committee: ECON

Kurt Joachim LAUK

Motion for a resolution
Recital E

E. whereas several global, EU and national institutions have, long before the current financial crisis, voiced their concerns in relation to hedge funds and private equity about financial stability, inadequate risk management, excessive debt (leverage) and the valuation of illiquid and complex financial instruments,deleted

2008/05/19
Committee: ECON

Kurt Joachim LAUK

Motion for a resolution
Recital F

~~F. whereas there is empirical evidence that hedge funds engage in herding in times of market turmoil, thus giving rise to financial stability concerns,~~deleted

2008/05/19
Committee: ECON

Kurt Joachim LAUK

Motion for a resolution
Recital H

H. whereas such long-term investment requires well-functioning financial markets in the EU and globally, contributing to the real economy, which can be only achieved by ensuring the presence in the European Union of a competitive and innovative financial industry,

2008/05/19
Committee: ECON

Kurt Joachim LAUK

Motion for a resolution
Recital I

I. whereas hedge funds and private equity in many cases provide liquidity ~~and demand for innovative products~~help to meet pension liabilities through their returns, provide aid price discovery, provide market diversification, market efficiency, cushion volatile markets, provide absolute returns and demand for innovative products and thereby contributes positively to meeting the objectives of the Lisbon Agenda,

2008/05/19
Committee: ECON

Kurt Joachim LAUK

Motion for a resolution
Recital K

K. whereas ~~enhanced~~ appropriate levels of transparency towards the public, investors and supervisory authorities, ~~including, in future, any new EU supervisory body,~~ are crucial to ensure such well-functioning and stable financial markets as well as for promoting competition between market actors and products,

2008/05/19
Committee: ECON

Kurt Joachim LAUK

Motion for a resolution
Recital L

L. whereas excessive debt required by much of the activities of hedge funds and private equity threatens financial stability, prejudices the realisation of the long-term investment, growth and jobs agenda and is, moreover, unfairly favoured in national tax regimes,deleted

2008/05/19
Committee: ECON

Kurt Joachim LAUK

Motion for a resolution
Recital M

M. whereas the recent increase in private equity transactions has significantly increased the number of employees, ~~whose jobs are ultimately controlled by equity funds, and Community employment law (in particular, Directive 2001/23/EC) was formulated when this was not so,~~

2008/05/19
Committee: ECON

Kurt Joachim LAUK

Motion for a resolution
Recital N

N. whereas in the event of extreme debt loads, ~~private equity leveraged buy-outs affect the viability of the target companies~~companies present a higher risk profile,

2008/05/19
Committee: ECON

Kurt Joachim LAUK

Motion for a resolution
Recital O

O. whereas there are many conflicts of interest either arising from the business model of private equity or hedge funds or from the relationships between those vehicles and other actors in financial markets,deleted

2008/05/19
Committee: ECON

Kurt Joachim LAUK

Motion for a resolution
Recital P

P. whereas whilst there is no evidence that those vehicles caused the current financial crisis, they have been involved in the business of non-regulated and highly complex structured products; whereas not being adequately capitalised and thus volatile to turbulences, those vehicles enhanced the crisis,deleted

2008/05/19
Committee: ECON

Kurt Joachim LAUK

Motion for a resolution
Recital Q a (new)

Qa. whereas there has been a movement from a commercial bank centred, highly regulated financial system, to an enormously more complicated and highly engineered system,

2008/05/19
Committee: ECON

Kurt Joachim LAUK

Motion for a resolution
Recital Q b (new)

Qb. whereas financial crisis typically emerge after a self-reinforcing process of market exuberance marked by too much lending and too much borrowing, which in turn develop in response to underlying economic imbalances,

2008/05/19
Committee: ECON

Kurt Joachim LAUK

Motion for a resolution
Recital Q c (new)

Qc. whereas any return to heavily regulated, bank dominated, nationally insulated markets is not possible in this world of an international system with sophisticated financial techniques,

2008/05/19
Committee: ECON

Kurt Joachim LAUK

Motion for a resolution
Recital Q d (new)

Qd. whereas due to international markets, business and individuals regulation and supervision must take into account practices elsewhere,

2008/05/19
Committee: ECON

Kurt Joachim LAUK

Motion for a resolution
Recital Q e (new)

Qe. whereas the liquidity of active open markets also encouraged thin capital positions and high leverage,

2008/05/19
Committee: ECON

Kurt Joachim LAUK

Motion for a resolution
Recital Q f (new)

Qf. whereas the rating agencies have a strong reputation to protect; however, it appears that their approach towards rating complex packages of mortgages and loans has suffered not only from the appearance of conflicts of interests, but also from the common difficulty of much financial engineering,

2008/05/19
Committee: ECON

Kurt Joachim LAUK

Motion for a resolution
Recital Q g (new)

Qg. whereas the ECB has the basic responsibility to protect its value and resist chronic pressures towards inflation; granted a high degree of independence in pursuing that responsibility, the ECB should be removed from, and be seen to be removed from, decisions that seem biased to favour particular institutions or politically sensitive constituencies,

2008/05/19
Committee: ECON

Kurt Joachim LAUK

Motion for a resolution
Recital Q h (new)

Qh. whereas the ECB, by reason of its mandate, its prestige, its perceived competence, and most importantly because it is called upon to lend to troubled banks, is advantageously placed to exercise strong and effective oversight of the financial system,

2008/05/19
Committee: ECON

Kurt Joachim LAUK

Motion for a resolution
Recital Q i (new)

Qi. whereas a lack of information, asymmetric information and uncertainty are inherent in financial activities,

2008/05/19
Committee: ECON

Kurt Joachim LAUK

Motion for a resolution
Paragraph 1

1. Requests the Commission to submit to Parliament by 30 November 2008, on the basis of Article 44, Article 47(2), or Article 95 of the EC Treaty, a legislative proposal or proposals oncovering all significant financial market participants and relevant actors including hedge funds, and private equity ~~and other relevant actors,~~with regard to regulatory completeness, equity requirement across the entire financial system, continued participation of the originators of securitised loans, non-cyclical accounting rules, increase transparency of rating agencies including disclosure of the conflicts of interests, derivative trading on open exchange and the alignment of compensation of actors of the financial system in times of profit as in times of loss following the detailed recommendations below;

2008/05/19
Committee: ECON

Kurt Joachim LAUK

Motion for a resolution
Paragraph 3

3. Considers that thpossible financial implications of the requested proposal or proposals should be covered by EU budgetary allocations ~~for (i) the establishment of any EU supervisory authority, (ii) the EU public credit rating agency, and (iii) the EU public certification body for structured products~~;

2008/05/19
Committee: ECON

Kurt Joachim LAUK

Motion for a resolution
Annex – recommendation 1

1. Recommendation 1 on Financial Stability and Better Functioning Financial Markets Measures The European Parliament considers that the legislative act to be adopted should aim to regulate: (a) Capital requirements Investment firms, insurance companies, credit institutions, conventional funds (such as UCITS and pension funds/IORPs) have to comply with capital requirements. Whatever the legal structure of hedge fund and private equity vehicles, including limited partnerships, the Commission should ensure that an appropriate capital requirement is introduced at the level of the entity that controls the investment of the fund or funds concerned (i.e. management firm), covering all funds regardless of their place of registration. (b) EU public credit rating agency The Commission should establish an EU Public Credit Rating Agency in order to foster competition and improve transparency in that sector. The Commission should also, in its revision of the Directive 2006/48/EC, introduce a provision that, where a credit assessment of an External Credit Assessment Institution (ECAI) is required for the calculation of a credit institution's risk- weighted exposure, the credit assessment of the EU Public Credit Rating Agency will also be required. (c) Liquidity The Commission should introduce risk-weighted capital adequacy requirements in respect of liquidity risk in its revision of the Directive 2006/48/EC. (d) Valuation The Commission should propose precise rules on the valuation of illiquid financial instruments in order better to protect investors and the stability of financial markets. (e) Prime brokers The capital requirement of any institution providing prime brokerage services should be increased in line with the complexity and opacity of the structure or nature of the exposures, to which their dealings with hedge funds and private equity expose them. In particular, the provisions of Directives 2006/48/EC and 2006/49/EC should be amended to achieve that result. (f) Venture capital The Commission should implement, without delay, the policy proposals set out in its communication on Removing obstacles to cross-border investments by venture capital funds, including proposing legislation to provide a harmonised EU- wide framework for venture capital and so to ensure cross-border access to such capital for the SME sector in line with the Lisbon Agenda. (g) EU supervisory authority The Commission should establish a European supervisor covering all financial services sectors: capital markets, securities, insurance and banking sectors. It should further be established whether there should be two such European supervisors: one for prudential regulation and another for conduct of business regulation.deleted

2008/05/19
Committee: ECON

Kurt Joachim LAUK

Motion for a resolution
Annex – recommendation 2

2. Recommendation 2 on Transparency Measures The European Parliament considers that the legislative act to be adopted should aim to regulate: (a) Registration and authorisation of management companies and funds' managers The Commission should establish an EU framework for the registration and authorisation of entities that control the investment of hedge funds or private equity (i.e. management firms), which should function on a single entry point basis: once authorised, the entities concerned should have access to undertake business throughout the EU. In order to promote a well-functioning single European financial market, the Commission should ensure that management firms disclose the following: - the name and domicile of funds they control, - the identity of managers, - corporate earnings and bonuses, - remuneration of directors, senior executives and other staff with investment responsibilities, and - relationships with prime brokers. That information should be set out in a uniform format (also to facilitate the proposal for a database below). (b) Notification (i.e. approval) of wholesale investment vehicles In order to encourage funds to be located onshore in the EU, the Commission should propose a separate directive along the lines of the EU-wide private placement regime, currently under discussion, to apply to the marketing and distribution in the EU of hedge funds and private equity funds. Such a regime should function on a single entry point basis: once authorised, it should be possible to offer those wholesale investment vehicles to professional, institutional investors throughout the EU. In order to promote a well-functioning single European financial market, the Commission should ensure the investment vehicle discloses the following: - general investment strategy and immediate information on any changes thereto, - leverage/debt exposure, - overall fees as well as breakdown of fees (including any stock options awarded to employees), - source and amount of funds raised, - past performance, - risk-management system and portfolio valuation methods, - information on the administrator of the fund, and - share of the fund contributed by the management company and its staff. That information should be set out in a uniform format (also to facilitate the database proposal below). (c) Database The Commission should, with the help of Level 3 Committees, establish an EU-wide registration/authorisation database recording the information on both management firms and investment vehicles as specified above. The supervisory authorities of all Member States should have unlimited access. Relevant categories of the database should be public. (d) Investors The Commission and supervisory authorities should ensure that investors in those vehicles receive not only sufficient but also relevant and comparable information (e.g. the simplified prospectus/fact sheet for UCITS). (e) Private equity and protection of employees The Commission should propose amendments to Directive 2001/23/EC so that the same protections afforded employees by that Directive, including the right to be informed and consulted, apply whenever control of the undertaking or business concerned is transferred by means of a private equity transaction.deleted

2008/05/19
Committee: ECON

Kurt Joachim LAUK

Motion for a resolution
Annex – recommendation 3

3. Recommendation 3 on Excessive Debt Measures The European Parliament considers that the legislative act to be adopted should aim to regulate: (a) Limits on leverage for private equity The Commission should amend Directive 77/91/EEC on capital to introduce rules to specify the appropriate level of debt at any given time in relation to the target company bearing in mind the legitimate rights of important stakeholders (including employees); in conjunction with such level, the Commission should request the Member States to introduce taxation consequences for private equity funds in cases of excessive debt; such taxation consequences could include eliminating or reducing the tax deductibility of interest payments on the debt concerned in line with best practices in Member States. (b) Capital depletion The Commission should amend Directive 77/91/EEC on capital to set minimum capital levels for the target company by reference to the long-term interests of the target company. The Commission should also, without delay, propose rules to harmonise requirements for directors of the target company (i.e. management and supervisory board members), to certify that capital outflow (including any fees paid) is in the best long-term interests of the target company, including its long- term growth and R&D needs. In particular, EU corporate governance requirements, such as the provisions of the Directive 1978/660/EEC, might be amended to achieve that result. (c) Limits on leverage for hedge funds The Commission should devise the upper limit in the debt of hedge funds in relation to preserving the stability of the EU financial system. (d) EU Registration for structured products The Commission should establish a public register of structured products in the EU.deleted

2008/05/19
Committee: ECON

Kurt Joachim LAUK

Motion for a resolution
Annex – recommendation 4

4. Recommendation 4 on Conflicts of Interest Measures The European Parliament considers that the legislative act to be adopted should aim to regulate: (a) Investment banks (prime brokers) - hedge funds and private equity The Commission should assess whether the strengthening of capital requirements for prime brokers (Recommendation 1) deals appropriately with the inherent conflicts of interest between: - the prime brokers and hedge funds, where the former's credit (lending) decisions are often contaminated by the prospect of earning fees from latter (via trading services), and - investment banks and private equity, where the former's credit (lending) decisions are often contaminated by the prospect of earning fees from latter (via deal related services). (b) The Commission should also introduce rules to ensure effective Chinese walls between services that investment firms provide for their clients (such as prime brokerage) and all their other business units (including asset management services, proprietary trading etc). - Private equity The Commission should formulate rules by which to deal with the conflicts of interest between the private equity partners and the management of the target company (and any others who stand to gain from the deal). Those rules should include a requirement of public disclosure of any fees or other incentives received by directors (i.e. management board and supervisory board members) or employees of the target company. - Credit Rating Agencies (CRAs) The Commission should formulate rules by which to deal with the conflicts of interest inherent in their current business models, and arising from the interplay among actors in today's financial markets. - Market access and concentration: the Directorate General for Competition of the Commission should launch an inquiry into market concentration in the following financial services industry sectors: hedge funds, private equity, investment banks (with focus on prime brokerage services) and CRAs.deleted

2008/05/19
Committee: ECON

Kurt Joachim LAUK

Motion for a resolution
Annex – recommendation 4 a (new)

The European Parliament considers that the legislative act to be adopted should aim to regulate: a) Regulatory completeness: Regulatory coverage must be complete. All leveraged financial institutions above a certain size must be inside a harmonised EU-net; the Member States and the Commission should ensure the consistent implementation and application of the body of Community legislation concerning financial markets, that directly or indirectly applies to hedge funds and private equity; b) Capital Requirements: Capital requirements must be the same across the entire financial system, against any given class of risks. But there must also be greater attention to liquidity. c) Continued participation: Originators should be required to hold portions of securitised loans on their balance sheets. d) Non-cyclical accounting: It is necessary to differentiate between target levels of capital and a lower minimum level; institutions that have minimum capital in bad times would only be required to aim for the higher target level over an extended period. e) Transparency: Rating agencies should be required to eliminate/ mitigate the lack of information, asymmetric information and uncertainty and disclose the conflicts of interest under which they operate without destroying the transaction oriented financial system. f) Derivate Trading: The European Commission should evaluate the possibility to insist that all derivatives be traded on open exchange. g) Incentives and compensation: The European Parliament asks the Commission to require the relevant corporate governance boards to ensure that rewards for trading and transaction origination are commensurate in times of profit the same way as in times of loss.

2008/05/19
Committee: ECON

27 Amendments of Kurt Joachim LAUK related to 2007/2238(INI)

ParlTrack - 2011-2024