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Tiner warns of hurdles in way of single market

Regulator’s chief executive points to dangers highlighted by retail hedge fund anomaly

FSA chief executive John Tiner has warned MPs that UK retail investors can now invest dir- ectly in the German hedge fund market despite the FSA restricting access in the UKTiner told the Treasury select committee that the e-commerce directive gives investors access to European funds and used the German hedge fund market as an example. He added that issues surround- ing compensation and access to the ombudsman have still to be clarified.

Challenged at the select committee meeting by LibDem MP Susan Kramer on whether current regulatory structures will be adequate to allow IFAs to deal with pan-European products, Tiner said that regime differences will have to be handled carefully. He used the example of retail hedge funds in Germany. He said compensation arrangements need to be made much clearer, with jurisdictional questions about both the Financial Ombudsman Service and the Financial Services Compensation Scheme in terms of who they can compensate, depending on where the original activities were undertaken. Tiner added that integration of prudential measures will be more straightforward than integratingconduct of business rules.

Tiner said: “In Germany, they have decided to open up the hedge fund market to the retail investor and, through the e-commerce directive, Ger- man hedge funds can now be sold to UK retail inves- tors. There are emerging anomalies like that which will have to be handled very carefully.”

Barings marketing director Ian Pascal says: “I think it is unlikely that there will be true consolidation or harmonisation in the short term because of issues such as those raised by Tiner. People should be able to access properly regulated products cross-border and it would be great if there was a level playing field but it is a very slow process.”

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