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Book Title: Research Handbook on Hedge Funds, Private Equity and Alternative Investments
Editor(s): Athanassiou, Phoebus
Publisher: Edward Elgar Publishing
ISBN (hard cover): 9781849802789
Section: Chapter 10
Section Title: Hedge Fund Regulation through Competition Law Principles – Some Reflections
Author(s): Harrison, David
Number of pages: 23
Extract:
10. Hedge fund regulation through
competition law principles some
reflections
David Harrison* 51
The condition is easily diagnosed. Over the last half century, the rise of the
investment industry has created overwhelming incentives for investors to follow
one another into risks they often do not understand. As a result, world markets
are hopelessly synchronised. This obstructs rational pricing and, in a capitalist
world that relies on markets to set prices, endangers our prosperity. Finding a
cure, however, is more difficult. (John Authers, 2010, p.182)
INTRODUCTION
One could imagine a world where, by accident or design, for policy reasons
or because policy-makers cannot agree, there is no dedicated hedge fund
regulatory framework. In such a world there would remain the underly-
ing rules of the market economy, including those contained in competi-
tion law, to serve as instruments to control hedge funds and their market
activities.
In the European Union (EU), competition law applies to `undertak-
ings', i.e. to all entities engaged in the pursuit of an economic activity,
regardless of their nomenclature, their precise legal status or the manner
of their financing. Unlike, say, financial regulation or national taxation
rules, EU competition law is not concerned with the details of the legal
structure, or the precise physical location of an undertaking. Instead, the
effect on EU trade is the test of whether or not competition rules apply to
agreements between, or to the conduct of, undertakings (including those
that are located outside the EU). The extent to ...
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URL: http://www.austlii.edu.au/au/journals/ELECD/2012/245.html