Michael D Higgins (Galway West, Labour)
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Question 125: To ask the Minister for Finance his views on the overt, and covert, actions of unaccountable but publicly registered finance companies whose actions have led to the undermining of the sovereignty of member countries of the EU in financial matters and given that some of these companies have paid large fines to the federal system in the United States, if the control of such companies is being discussed at diplomatic level [43133/10]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
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I understand that the Deputy's question relates to large, globally active, investment firms. It would not be appropriate for me to comment directly on the Deputy's concerns as set out in his question in the absence of more specific information on the issues to which it might relate.

However, I would like to advise the Deputy of a number of important initiatives that have taken place at EU and international level to strengthen the regulatory and supervisory framework for international financial firms and in particular in relation to the regulation of hedge funds and proposed restrictions on short-selling in light of some of the lessons learned from the international financial crisis. The Deputy may be aware that the G20 agreed on a range of measures to tackle the financial crisis. Among those measures was a commitment to better regulate the activities of hedge funds. At EU-level, the European Commission's proposal for a Directive on Alternative Investment Fund Managers (the AIFMD) has recently been agreed by the European Parliament and the Council. This Directive sets down rules with which the managers of hedge funds, as well as private equity and other alternative funds, must comply.

As well as increasing the level of transparency of fund managers towards investors, the AIFMD will also require greater transparency with supervisors. This will ensure that supervisors will be in a much better position to monitor and respond to any possible financial stability risks which might be generated by hedge funds. Similar steps have been taken in the United States where the Dodd-Frank Act imposed substantive regulatory and reporting requirements on hedge fund managers. The AIFMD will also provide greater safeguards for employees of firms which are acquired by private equity funds. The timely disclosure of, for instance, the financing of the acquisition as well as strategic plans for the acquired firm, will be required. Specific rules to limit the effects of "asset stripping" will also apply.

Another significant proposal which is also being considered at EU level is in relation to restrictions on "short selling". On 15 September last, the European Commission adopted a formal proposal for a Regulation on short selling and certain aspects of Credit Default Swaps. This proposal is currently being discussed by the relevant working parties in the Council and the European Parliament.

Many Member States had already introduced measures aimed at banning or restricting short-selling. The Commission have identified that a much more consistent approach is required to minimise divergences between Member States in their treatment of this issue. The Commission's draft Regulation is their response to address this issue. In Ireland, the Central Bank maintains a ban on the short-selling of shares in financial institutions.

While national competent authorities will have powers to implement bans or restrictions in emergency situations, the proposal envisages a strong role for the soon-to-be-established European Securities and Markets Authority (ESMA) in co-ordinating situations where bans are being contemplated. Full details of the comprehensive EU programme of financial sector reforms are set out in the European Commission's Communication on Financial Services 2010-11 which is available at http://ec.europa.eu/internal_market/finances/index_en.htm