European regulation is damaging to the UK economy, the country’s fund association says.
Speaking at a funds conference last week Richard Saunders, chief executive of the Investment Management Association (IMA), said that although some of the legislation – such as the Packaged Retail Investment Products initiative – was good, others will have “unintended consequences and will not achieve their objectives”. Saunders said the European Commission is not giving itself enough time to get each measure right.
He also said that the consumer protection issue has been mis-used as the basis for some of the measures. For example, in response to the Madoff scandal, the Alternative Investment Fund Managers Directive sought to impose stricter liability on depositories, instead of asking why investors’ money was invested in the funds in question in the first place.
He also added that policy-makers’ “less than perfect understanding” of the markets had led to ill-judged proposals, not least of which is the current proposal for a Financial Transactions Tax.
“Although the stated intention behind the [Financial Transactions Tax] is to increase taxation of financial institutions it will miss its targets. It will be customers, not banks, who will bear the cost. And it risks a flight of trading out of the EU,” said Saunders.
Summing up, he said: “Much of what is now on the table would be damaging to the EU economy as a whole. It would impact the UK particularly hard, but I for one do not buy the theory that it is a concerted plan to undermine London as a financial centre. Rather I believe that the problems arise from too much haste and insufficient consultation. The need for reform should not be ignored. But it should be appropriate and proportionate. Education of and engagement with policy-makers therefore remains critical.”
©2011 funds europe