“Order, order, order” is the cry coming out of the European Parliament meetings in recent days. The Europeans, in their infinite wisdom, have decided that by imposing a transparency standard on hedge fund managers, all will be right in the world. A panel of EU lawmakers earlier this week approved a proposal that would impose transparency standards on hedge funds. The lawmakers’ intent, they say, is to bring order to what one must assume is an industry in disorder. Of course when one assumes, well, we all know what happens…
Dear readers, you and I both know that this law which will be voted on in July, if enacted, it is not going to solve anything, because as we all know the hedge fund industry is not in disorder. In fact, I believe it may make things worse, because it will send a false message of security to investors and potential investors about the hedge fund industry. It may cause people to complete even less due diligence and research into investments because the industry is now “in order.”
Believing that transparency will save the day is, well, a little like believing – hmm, pick any well-known myth, and you’ll be right on target! Giving people data is great – teaching them what to do it with it is even better! The European Unionlawmakers have not addressed this issue yet.
Understanding how your money is managed is what is most important. The increased regulation does nothing more then set the stage for future problems for managers, investors and market participants, because it does not address the real problem – investor education. But this is something nobody seems to want to address. The powers that be both here and abroad are hell-bent on imposing regulations about what managers can and cannot do, without addressing the needs of investors.
Investors need to know what is going on with their money at all times. The lessons of the credit crisis and multiple Ponzi schemes are that investors need to ask questions and demand answers. Getting information is a good first step, but does not address what really needs to be done to make sure the events of the past don’t occur in the future. Investor education is the only solution. Increased regulation that will bury investors in data is not.
My question is what happens when the new laws are put in place, the regulators make sure that the laws are enforced and still the markets collapse or a fund turns out to fraudulent? How are the regulators going to deal with those problems – maybe then they will address the needs for education at that time – but at that time it will be too late.
THINGS THAT DRIVE ME CRAZY
Enough about Lost and Law & Order; I mean, come on, these are television shows. I am sick and tired about hearing about how Lost is going to end and what a shame it is thatLaw & Order got canceled. There many important issues of the day that we should be talking about, and television is not one of them!
Separately, the Red Sox / Yankees rivalry is just nuts. I can’t handle the pressure. It seems like ever game is game 7 of the ALCS or World Series. I am glad that after this week, the two teams do not meet until August; I need a break!