UPDATE: EU Parliament Study Blasts Proposed Hedge Fund Rules

The legislation would require most funds managing more than EUR100 million to register with the EU and disclose information about their positions. It would also impose minimum capital requirements, prompting an outcry from funds that often use leverage to juice their returns.

The study, written by the firm Europe Economics, claims the legislation will raise legal compliance costs more than anticipated by the Commission, disadvantage European funds compared with other funds in other regions, and set leverage levels so low that many funds would be forced out of business.

The study suggests an alternative approach to regulating leverage: require funds that are "systemically significant" to be regulated by European central banks, which would be required to set leverage limits for these funds.

Many of these rules may be unnecessary given the tougher regulation of banks that is expected to come into force in the coming years, the study says.

The parliament lawmaker who is leading debate over the legislation, Jean-Paul Gauzes, is holding a hearing Tuesday.

The parliament and European national governments at the European Council must approve the legislation before it can become law.

-By Matthew Dalton, Dow Jones Newswires; +32 2 741 1487; matthew.dalton@ dowjones.com

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