EUROPE - The European Parliament's Committee on Economic and Monetary Affairs is set to debate whether the European Commission should provide guidelines for the regulation of hedge funds.

The proposal highlights "major concerns" over financial stability and investor protection.

A draft resolution put together by Dutch MEP Ieke van den Burg notes the "the extraordinarily steep growth in the volumes of assets managed through hedge funds and other collective savings products outside the scope of the UCITS directive".

The proposal - to be debated by the committee on February 1 - says the growth in hedge funds "gives rise to major concerns concerning financial stability and investor protection".

Van den Burg's draft notes the initiatives of the US Securities and Exchange Commission "and urges the Commission to put forward a proposal for EU-wide guidelines for the regulation of such funds".

The parliament adopted a so-called initiative report on the future of hedge funds and derivatives in 2004.

Meanwhile, van den Burg's proposed resolution has also put forward the concept of a "lead" or "consolidating" European financial supervisor. This would encompass pension committee CEIOPS, or the Committee of Insurance and Occupational Pension Supervisors - as well as banking and securities committees.

Van den Burg "is aware that convergence of regulatory powers and sanction systems is more complicated to achieve, owing to differing national traditions".

But she asks that the Commission and the various committees "to clearly identify where this diversity leads to problems, and if necessary to come up with proposals for harmonisation".