The decision by the US to enter the fray over the European Union's attempts to tighten hedge fund regulations is good for the UK, as single, global rules are the way forward.

I am delighted to see the US enter the European funds debate. It is clear that the UK government needs an ally in this debate as the rule-orientated approach taken by the European Commission over financial regulation could have significant impact on distorting an already imperfect market - which of course is the exact issue that the Commission is trying to rectify.

There must be a global solution to regulation as artificial borders created by politicians in different time zones are completely inconsistent with a global financial market. 

It is essential that London remains at the centre of the world’s financial operations and we can only do that if there continues to be an approach of light-touch regulation which has survived the test of time since the "Big Bang" deregulation of the 1980s.  Historically in Europe, we have complained about the extraterritorial rules that the US have been imposing on Europe, for example in relation to Sarbanes Oxley and the Foreign Corrupt Practices Act. But in the case of the proposed directive from the EU, which focuses particularly on alternative asset classes, it will have a direct effect on US private equity funds that are operating in Europe. 

The answer, as indeed with fair value accounting rules which has also been a major problem within the financial crisis, requires a global solution and a consistency of approach.  While in the short term, this is clearly a pipe dream, one of the consequences of the financial credit crisis may actually be an acceleration towards global consensus on regulation of cross border financial institutions.

The key in our view is transparency and disclosure rather than operational restrictions.  The onus should be put onto the fund managers that are actually investing in these funds to make sure they understand on behalf of their clients exactly what these funds are investing in.

Several bad apples have created a bad reputation for hedge funds, since the majority are run properly.  Artificially restricting leverage is not the way forward but investors must understand the consequences of investing in a high leveraged fund.

While regulation should be light, there is however a distinct role to look at in terms of the size and interdependency of a number of financial institutions on their own internal operations. 

While Big Bang broke down the old anti-competitive practices of brokers and jobbers etc, the multi disciplinary functions which now exist in these large financial institutions could in themselves be distorting the market and that is where the review of regulations should be at a macro strategic level rather than on a micro operational level. In that light, it is good that the US has entered the debate on how European rules take shape.