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Abstract: 

In a Discussion Paper released in June, “Hedge Funds: A Discussion of Risk and Regulatory Engagement,” the UK’s Financial Services Authority looked at prospects for future regulation of hedge funds. Finding hedge funds “playing an increasingly important role in financial markets, significantly enhancing market liquidity and efficiency,” the FSA also believes that this role comes with inherent risks, but feels that an overly aggressive regulatory response could force the hedge fund industry to move to more lightly regulated jurisdictions. some hedge funds were found by the FSA to be testing the limits of acceptable practice as to “insider trading and market manipulation and, given their payment of significant commissions and close relations with counterparties, create incentives for others to commit market abuse.”

Keywords: Financial Services Authority, Discussion Paper 05/4 (June 2005)

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