EU lawmakers to approve hedge fund controls

European lawmakers will approve tighter controls on hedge fund and private equity firms tomorrow as political leaders seek a clampdown on speculators following Greece's debt crisis.

The moves to control and monitor hedge funds' borrowing, investment and compensation are due to become law in 2012. They also need the blessing of European Union countries and remain mired in a dispute between Britain and France.

The European Parliament's approval will accelerate the introduction of controls on hedge funds and speed up a wider regulatory overhaul of European financial services.

It coincides with a summit of European leaders set to approve aid for debt-laden Greece and call for swift action against speculators. "It can't be that we come to put out the fire and speculators add oil to the flames," Austrian Chancellor Werner Faymann told reporters.

German Chancellor Angela Merkel also called for tougher rules for a financial sector that is blamed for triggering the worst global recession in a generation.

"The regulation of finance markets needs to be accelerated," she said. "We don't have any time any more. That must happen quickly."

Hedge funds have been blamed for exacerbating Greece's borrowing difficulties by betting against its debt, but there are few records to show who is active in these markets.

The new regime would change that, proponents say, making it easier for supervisors to see what is happening as well as intervene with bans on short selling, for example. European lawmakers will back curbs on pay at hedge funds, as well as limits on private equity investors trying to extract dividends from companies within the first four years of ownership.

"We want to have clear rules that these managers have to stick to," said Udo Bullmann, a German Socialist member of the European Parliament who plays a central role in deciding the law. "Hedge funds played a role in the Greek crisis."

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