kaal:claim:3405660-001

Direct hedge fund regulation faces a two sided trap: strong direct rules push hedge funds offshore where they escape regulation altogether, while weak rules leave investors without adequate protection.

Yet, regulators are faced with the problem of jurisdictional arbitrage, i.e. if they regulate directly, hedge funds may relocate offshore and escape from regulation altogether. If regulators impose weak regulations, investors may not be afforded adequate protection.

Kaal, Indirect Regulation of Hedge Funds (2019), I. Introduction, p. 3
https://ssrn.com/abstract=3405660 · source PDF

Kaal, Indirect Regulation of Hedge Funds (2019). SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3405660

• regulators rely on national direct regulatory tools
• hedge funds retain the option to relocate offshore

failuresupport: arguedfailure: jurisdictional arbitrage trapfamily: regulatory-arbitrageprivate-fundslaw-and-legal-systems

• extends kaal:claim:1806252-034 Without the threat of systemic risk and without a clear delineation of the social externalities that hedge fun...
• extends kaal:claim:1806252-024 Legislators had disincentives to impose harsher requirements on the hedge fund industry before the crisis, bec...

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