Abstract
M.Comm.
2008 and 2009 have been characterised by a credit crunch, slowing of economic
growth, high unemployment, and the period has been dubbed as one of the harshest
financial eras to hit the global financial markets.
The crunch undermined the existing financial regulations, including the Basil
requirements and other prudential structures, and necessitated a re-evaluation and
revamp of the entire financial sector regulations. This has also called for the
consolidation of the market regulations which would close gaps created by the
fragmentation of the current legislation.
The G20 recommendations together with the IOSCO have cast a new regulatory regime
that takes into account all aspects as have been unveiled by the recent global financial
crisis.
It has been concluded in a study undertaken in Europe in April 2009, that regulation
focussed at hedge fund manager level is more effective than the legislation focussed at
funds level. The study viewed hedge funds as just legal entities for the pooling of funds,
and they (funds) have no economic life of their own. On the other hand, hedge fund
managers are responsible for all key decisions in relation to the management of the
funds.
The South African’s fund-manager-level-focused-FAIS Act 37 of 2002 was implemented
late in 2007 and managers had to abide by it by February 2008.
The National Treasury of South Africa, as well as the Financial Services Board is
currently working on a legislation that will seek to regulate hedge funds in addition to
the current hedge fund manager regulation. The discussions are ongoing.
The results of the survey indicate that the South African hedge fund managers view the
cost associated with compliance to be far greater than the benefits of regulations.
Nevertheless, they view regulation as crucial. The behaviour of the fund managers
seem not to have changed after regulation, however, according to Smith (2008:1), it is
possible that hedge fund managers could have factored in their expectations of
regulation long before the FAIS Act became law.