Regulating capital markets – AIMA policy priciples

The Alternative Investment Management Association (AIMA), the global hedge fund industry association, has published an enhanced statement of policy principles, set out in a new paper, ‘Regulating Capital Markets: AIMA’s Policy Principles’.

The paper builds on the AIMA Policy Platform, the landmark 2009 document in which it offered its support for improved transparency, unified global standards, manager authorisation and supervision, aggregated short-position disclosure to regulators and new policies to reduce settlement failure.

The enhanced principles enshrine AIMA’s core set of beliefs in the broad areas of investor protection, regulatory consistency, systemic risk and market integrity.

AIMA’s principles for improving investor protection include robust rules around the segregation and protection of investor assets and collateral and a call for regulation that reflects the differentiation between retail and professional investors.

On regulatory consistency, AIMA says that policymakers globally should continue to seek a co-ordinated international framework that preserves the cross-border nature of financial markets. AIMA also warns about the dangers of extraterritoriality and regulatory overlap, which it says can lead to market fragmentation and regulatory arbitrage.

AIMA’s principles for understanding and mitigating systemic risk include maintaining a diversity of market participants and investment strategies and mechanisms to end the problem of “too big to fail”.

The AIMA paper also sets out a number of methods for improving market integrity, including clearly defined and internationally harmonised market-abuse rules and effective market-abuse sanctions.

AIMA chairperson Kathleen Casey said: “Capital markets are crucial in the financing of the economy and the hedge fund industry plays an ever-increasing role in the entire chain of investing and financial intermediation, contributing to market depth, sophistication, transparency and thus its ability to support growth.

“It is in the deepest interests of the global hedge fund industry that the financial markets on which it operates are well-functioning. This is why we have worked to develop our 2009 platform further, also addressing areas that have not been treated previously.

To download the paper click here.