US concerns over EU data protection rules are hindering the ability of European hedge funds to raise money from investors in America, say people familiar with the matter.
EU-based funds that have tried to register with the US Securities and Exchange Commission in recent months have not been able to gain approval because of the regulator’s concerns that the General Data Protection Regulation would stymie its attempts to obtain data from the companies.
Roughly two dozen EU managers had so far been caught up in the regulatory clash and none had been able to give the SEC the assurances it required, said one person familiar with the situation.
The stand-off is a sign of the growing divergence between US authorities’ requirements for information and the EU’s own tough rules on data protection.
The GDPR regime was introduced across the EU last year as a way of giving greater rights to individuals over how their data are used. The SEC, meanwhile, requires access to books and records as part of its remit to protect investors.
Companies that have tried to register with the SEC have been asked by the regulator to provide assurances that they can provide access to such information as trade records, financial statements or client profiles.
Law firms including Schulte Roth & Zabel and Dechert have been involved in trying to find wording that can satisfy the SEC’s requirements. As yet, these have not been accepted.
“We think there is a solution,” said Karen Anderberg, financial services partner at Dechert, who points to exemptions within the GDPR where the SEC could work with EU regulators to obtain data.
“A number of firms would definitely be taking steps to register but are holding back, as they don’t want to be caught up in this.”
The situation has left some EU-based managers unable to manage money for US clients that they have already signed up.
The hundreds of fund managers that had already registered with the SEC before the GDPR came into effect have so far not been asked whether the GDPR will hinder access to data. But the US regulator is considering whether to ask these groups for assurances, say people familiar with the matter.
The continuing US government shutdown, meanwhile, is also hampering funds’ ability to contact the SEC.
The stark differences between the GDPR and US regulations have already been causing friction. In November UK-based campaign group Privacy International asked European regulators to investigate several data brokers, including US software giant Oracle. Last month PI said some of the most popular apps for Android smartphones were transmitting data to Facebook, in a potential breach of the GDPR.
In October Facebook and Apple called on the US government to adopt laws equivalent to the GDPR.
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