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Regulatory Arbitrage
Arbitrage is the practice of taking
advantage of a difference (usually
price difference) between two or more markets.
In order to
have arbitrage opportunities, we need
to find a difference.
Regulatory Arbitrage is the practice of
taking advantage of a regulatory difference
between two or more markets.
Basel ii is a
mandatory framework which is full of
differences (different approaches, different deadlines,
different options, different national discretions etc. )
When we have all these different approaches and options
by design
(Basel ii is proud of that), we also have
"flexible" countries that create opportunities...
...
and "non-flexible" countries
(compliance is just an obligation).
Hedge Funds select the more favorable jurisdictions, playing one
government off against another. Is it
fair? Absolutely!
The
"flexible" countries know that. They have a plan, to retain or
attract foreign direct investments. They know that
hedge fund managers like shopping, especially
"regulator shopping". They try to find the friendliest regime
to do business.
The "non-flexible" countries complain.
They say that a general easing of regulations is a
"race to the bottom". And, they
continue to lose money, jobs, investments.
Basel ii is supposed to be the framework
that attempts to align economic and regulatory capital more closely to
reduce the scope for regulatory arbitrage.
At least, this is what they say.
But, you can
not have so many differences
(approaches, deadlines, options and national discretions)
and the same time to say that you try to
reduce the scope of regulatory arbitrage!!! This is an
oxymoron.
Example:
By providing at least three alternative capital calculation methods,
Basel II creates differences that do not exist in Basel I. The treatment of non-investment-grade credits under the standardized approach is so different from the treatment under the foundation or advanced internal ratings based (IRB) approach. Differences = regulatory arbitrage opportunities Our key goal is to generate alpha, "excess return" over market performance. "Alpha" has always to do with the skill of the hedge fund manager. Skill-based investing makes the real difference. Do you want to discuss Basel ii and Regulatory arbitrage opportunities? We can develop a tailor-made presentation, to meet your needs. Excellent Courses, Exceptional Venues The role that the environment plays in learning, solving problems and thinking out of the box is often ignored. 
In terms
of aesthetics and comfort, our venues are second to none.
Click
here
to see why
Compliance - Hedge Funds and Alternative Investments It is not easy to regulate Hedge Funds directly. They use an indirect approach. They establish laws, regulations, directives and best practices for the hedge funds’ counterparties and creditors, for banks and securities firms. Although indirect supervision can be very effective, it can also become a competitive disadvantage for a country or a region. They speak about the need of a robust internal risk management systems for the hedge funds’ counterparties. Working with a "Highly Leveraged Institutions (HLI)"is a risk. You need to stress test your exposure, to measure it, and to allocate more capital for this risk. They establish Accords like the Basel ii, which informs regulators and supervisors that they have to focus on the risks that come from Highly Leveraged Institutions like the liquidity risk, the concentration risk, the (fat) tail risk. They should ensure that the banks’ internal systems capture the full range of exposures to hedge funds. If not, banks can forget the "advanced" Basel ii approaches. They speak about market transparency, which is never adequate, ignoring that this is primary risk for hedge funds: There are many that are more than willing to copy the strategy, behavior, model etc. of VIP hedge fund managers. They speak about efficient oversight by banking and securities supervisors. They have new weapons, like Basel ii, MiFID, UCITS iii. They always speak about the "lessons learned" from the hedge fund Long-Term Capital Management (LTCM). Nobody is able to learn something from the top 50 performing hedge funds. Hedge Funds - Compliance Training and Presentations Fully tailored training, presented exclusively for your own people Compliance LLC is pleased to offer an exciting range of training and consulting services. We can help your organization understand better the compliance challenges for the Hedge Funds in the context of the UCITS iii directives, the Markets in Financial Instruments Directive (MiFID) and the Financial Services Action Plan (FSAP) of the European Union. What we can do for you: In-company Awareness, Training and Presentations. 1. Presentations for the Board of Directors and Executive Management 60 - 180 minutes 2. Overview of the directives and the new challenges and opportunities One day 3. Tailor made presentations and training Let us know what you need The courses are intended for:
For Hedge Funds and MiFID: Please visit www.markets-in-financial-instruments-directive.com www.mifid-training.com www.mifid-board-directors.com For Hedge Funds and UCITS: Please visit www.ucits-iii.com www.ucits-iii-training.com For Securitization after Basel ii: Please visit www.basel-ii-securitization.com Off Balance Sheet www.off-balance-sheet.com Legal Assistance  We
are proud to have the legal assistance of
John J. Maalouf, Chairman
of Maalouf Law Firm, which has offices in
New York City, London and Hong Kong.
He is named as
one of the US Top 10 Finance Lawyers
by US
Lawyer Rankings, 2006 and 2007
Editions.
Web:
www.maalouf.us
Address: 500 Fifth Avenue,
14th Fl. New York, New York 10110
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