BU Now » hedge funds

The weak link in bank reform

Dick Taffe — Thu, 08 Jul 2010 18:59:37 +0000

The financial regulatory reform legislation likely to be sent soon to President Obama calls for the biggest banks and hedge funds to put up some $20 billion in fees to pay the costs of additional oversight by regulators. But even that won’t help regulators don’t quickly upgrade the training and standards of rank-and-file examiners, says Mark Williams, a former Fed examiner who now teaches finance in the School of Management. In a Boston Globe op-ed, Williams — author of “Uncontrolled Risk” about the fall of Lehman Brothers — says if bank examiner performance over the last decade is an indicator, oversight may prove grossly inadequate unless the regulators become as financial sophisticated as those they’re supposed to regulate.

“Our entire financial system is dependent on strengthening regulator oversight and closing this sophistication gap.”

Contact Mark Williams 617-358-2789, williams@bu.edu

Tax hikes for investment partnerships

Dick Taffe — Wed, 09 Jun 2010 18:40:12 +0000

A long fight over how the federal government taxes investment partnerships is ending as Senate Democrats now plan to more than double taxes on private-equity, hedge-fund and certain real-estate managers. It would no longer let people running such partnerships pay the lower capital-gains taxes on what were basically wages. The tax hike on “carried interest” expected to raise $14.5 billion over 10 years. Law Professor Daniel Berman, director of the Graduate Tax Program and both a Treasury and Congressional tax counsel, says that any such compensation from investment performance is still fundamentally pay for services rendered.

“It is common to reinvest after-tax compensation for capital gains. But when the amounts subject to investment risk were awarded in exchange for services but have not yet been recognized as taxable income, those amounts should be taxed as compensation when paid.”

Contact Daniel Berman, 617-353-3105, bermand@bu.edu

Pequot Capital Management hedge fund closes

Dick Taffe — Thu, 28 May 2009 15:57:09 +0000

Under the shadow of an insider-trading probe, pioneering hedge fund Pequot Capital Management is shutting down forever. School of Law Professor Tamar Frankel, an authority on securities law and legal ethics, says this is another lesson in why hedge funds should not be exempt from regulation.

Contact Tamar Frankel, 617-353-3773, tfrankel@bu.edu

G-20 and international regulatory reform

Dick Taffe — Thu, 02 Apr 2009 20:38:53 +0000

Law Professor Cornelius Hurley, director of the Morin Center for Banking and Financial Law and former counsel to the Fed Board of Governors, says the G-20 communique outlining new international financial regulatory reforms marks a new era.

“The specificity of the G-20 pact signals a new era of cross-border cooperation on an array of regulatory matters. On a broad range of issues – from banking to hedge funds to systemic risk – look for U.S. hegemony to be replaced by international consultation and cooperation.”

Contact Cornelius Hurley, 617-353-5427, ckhurley@bu.edu