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Europe's Hedge Funds Will Face More Scrutiny; Google Under Fire

Aired May 18, 2010 - 14:00:00   ET


RICHARD QUEST, HOST, QUEST MEANS BUSINESS: Lifting the fig leaves, a secret world exposed as hedge funds face more scrutiny.

The accidental spy, Google under fire for snooping.

And laughter and tears, why being a stand up comedian is no joke. It is part of our world at work.

I'm Richard Quest. We have an hour together because I mean business.

Good evening. Tonight, controversial regulation of the hedge fund industry is one step closer in Europe. The United Kingdom doesn't want it. But that didn't matter in Brussels today as Europe's finance ministers agreed on more scrutiny of a sector that is best known for being relatively free of rules. It is a draft proposal that the European economic finance ministers were looking at, but none the less it is on that has the industry hot under the collar. Come and join me over in the library and I'll explain exactly what's involved.

Under the proposed regulations hedge fund managers will be required to register with regulators. Not only that, they will have to register with many regulators in different countries and those outside the jurisdiction will also have to individually register. There will be new capital requirements that will make hedge funds behave in many ways much more like banks, in having to have deep pockets to prevent-just in case things turn nasty. And there will be no passport for those outside the union, the EU, who want to so business across all 27 members. Instead, fund managers, as I outlined, would have to register with national regulators.

So, that is what you have. You have a European parliament law. You now have the Eco Fin, the finance ministers and the commission, with their own proposals. And now they have to be reconciled. So that is what happens next. Talks are due to start on May the 31st, between to try and reconcile the proposal of the European parliament and those of the European economic-or the finance ministers, Econ Fin, and the commission itself. And getting that balance right, of course, will be what finally comes out as the law.

But countries like the United Kingdom, under its new prime minister, David Cameron, are very much against this. They are not against regulation per se, but they are beginning to believe-they do believe that these regulations go too far. And this is why the British backlash believes that the funds, the bankers association says 80 percent of European hedge fund managers are based in London. Managing the funds based outside the U.K. and they say that it is Britain that will be most affected, if indeed, things-these new rules came into force.

The EU finance commissioner has been fairly clear, though, new regulation is on the cards, but they will take account of British opposition.


MICHEL BARNIER, EU FINANCIAL SERVICES COMMISSIONER (through translator): There is a need to ensure parallels between the EU and (UNINTELLIGIBLE). I just spent three days in Washington and New York, and the IMF (UNINTELLIGIBLE) the need for convergence. We have to deliver operational measures and global measures to deal with the impact of the debt crisis. So, we should look at parallels (UNINTELLIGIBLE) same tools and the same measures (ph), but they should be the (UNINTELLIGIBLE) the same objectives. (UNINTELLIGIBLE).


QUEST: Now, earlier I spoke to Sweden's finance minister and Anders Borg. He was at the meeting today in Brussels. And last week it was Mr. Borg who coined the phrase that investors were behaving like a wolf pack, tearing apart weaker economies within the Euro Zone. I asked minister Borg what was going through their minds when they agreed on today's proposals and how he thinks they will square the requirements and the opposition of the U.K.

Well, I think it is very important that we don't build protectionist walls. I think third country investments are very, very important for the EU. So, I think basically if we can find a broad agreement where the U.K. comes on board, that would be very, very good. And it would be good for the European economy.

QUEST: But if you can't find an agreement, by virtue of the fact this is for majority vote, the U.K., which has the largest financial industry is going to be scuppered by it.

BORG: No, I think that is a very, very strong argument to try to find a common agreement. We should not run over the financial center of Europe. I mean, a long list (ph) the financial center of Europe, so I think it is very important that we would find a compromise that would include the U.K.

QUEST: And if you can't find that compromise then because it is majority voting they will move on regardless. The laws will come in.

BORG: Well, I mean, we haven't really tried hard enough to find a compromise according to my mind. I think we have a new administration now, in the U.K. coming in. They would really prefer an effort to finding a way forward here. And I think we all should listen to them. I think it should be a good start between the corporation with the new government. So, I would really hope that we would not opt for financial protectionism, but find a stable, strong regulatory framework that we can agree on.

QUEST: The United States doesn't like the proposals either. Timothy Geithner the U.S. Treasury secretary has warned that this is protectionism. So I'm wondering, what are some of your fellow ministers thinking?

BORG: Well, I mean, we would like to have a very stringent regulatory framework. We do not need more financial instability and that's why it is important we find the right balance here, but stringency and stability cannot be an argument for protectionism. So, I would support a broad-based compromise.

QUEST: Right. Let's move to the other big story, of course. The euro seems to have settled down somewhat with its large bailout package. The money has gone to Greece which will refinance it's bonds, 10-year bonds tomorrow. Do you think we can say the euro is just going-is out of the woods, but will just trade weakly now for the future?

BORG: Well, I do think there are some risks remaining. I think the big threat to this recovery is that we're doing too little and too late when it comes to fiscal conservation (ph). So this has been a great effort to stabilize the situation and I think the we need to see further movement, but if we are going to come out of this in a strong recovery we need also a very strong fiscal policy.

QUEST: And that, of course, is where differences now lie isn't it? When to cut? How much to cut? But in some cases, countries really have no choice but to make the most stringent (ph) cuts.

BORG: Yes, countries with a high debt level, they really must start to become serious on fiscal policy. Otherwise that would be a risk not only to the recovery in Europe, but also a global financial instability. So, countries with high deficits and high debt really must become serious about fiscal policy.

QUEST: Finally, Minister, how disappointed, or how shocked-or whatever adjective we want to say-are ministers at the speed and the ferocity with which the euro just about nearly collapsed?

BORG: Well, I think market, especially currency markets tend to overreact, but obviously there was a very severe situation. And in the roots, the cause of this, is basically that fiscal policy has not been responsible enough. And that is what we need to correct. A strong currency must be build on a strong fiscal policy.


QUEST: Sweden's Finance Minister Anders Borg talking to me earlier.

Let's stick with this question of the hedge funds and the work that they do-or the damage that they wreak, according to some. If you are not familiar with what a hedge fund is well, our Jim Boulden has been exploring the hidden world, and as he discovered it is a story with many twists and turns.


JIM BOULDEN, CNN INT'L. CORRESPONDENT (voice over): Secretive, exclusive, and notoriously unregulated, a maze of complexity, allow me to cut hedge funds down to size. The term is tricky to define because it covers a huge range of risk levels and strategies for investing in just about anything, companies, bonds, commodities, aircraft, even the outcome of the baseball game.

The hedge fund industry was born on Wall Street in 1949, by pioneer Alfred Winslow Jones. He worked for nearly two decades in almost total obscurity before his success was made public by "Forbes" magazine. Jones' original strategy was simple compared to the more complex ones you find today. But he did forever change the financial landscape.

Fund managers have become big players. They shift huge sums of money around the world to take positions that anticipate market changes. In case you feel like a like a flutter, hedge funds are not for the man on the streets. The huge sums of money involved can generate astronomical profits. But beware, hedging investments are often made with a high degree of borrowed money or leverage and the risks are great when it all goes terribly wrong.

Of course, hedge funds are here to stay, but very soon we all may know a little bit more about them. Jim Boulden, CNN, Hitchen (ph), England.


QUEST: And in about 25 minutes from now we will be talking to the chairman of the Hedge Fund Standards Board, to discuss exactly what they make of these regulations. Regulation is on its way, the question is are they happy with the proposals as put forward.

The markets that traded in Europe now demand out attention. And this is what happened on Tuesday.


Snapping at two-day losing streak, there were solid gains all around. Probably some bargain hunting going on. Debt fears were pushed aside as Greece received billions in the first slice of rescue money. That money will go out the door tomorrow and the next day as it refinances 10-year bonds. London's FTSE up just 1 percent. U.K. inflation hit a 17-month high of 3.7 percent in April. That will, of course, be of some worry to the new government of David Cameron. Now, as we look at the-across the Atlantic to the Dow Jones industrials, down 48. Just off nearly half of 1 percent; 10,500 and change, is where the market trades at the moment. We'll bring an update on the reasons for that move in just a moment.

As oil continues to gush into the Gulf of Mexico the U.S. Senate is trying to find a way out. Which is why the U.S. Interior secretary is talking about what went wrong and how it will be made right. Does the government have a point? In a moment.


QUEST: Welcome back. The U.S. Senate is looking into the cause of the Gulf oil leak and the sluggish response to it by those involved. The U.S. Interior Secretary Ken Salazar's turn in the hot seat as the hearings began on Monday. Now, Mr. Salazar is promising to overhaul the so-called MMS, Minerals Management Service, which is supposed to oversee offshore oil drilling. President Barack Obama blasted the group for having a cozy relationship with the oil industry.

Meanwhile, the chief executive of BP has been repeating the call that there would only be modest effects, very, very modest effects in terms of the environmental affect from the oil spill. Now, Brianna Keilar joins me now, live from Washington.

And very modest affects, Brianna, but when we look at the pictures that you are about to show us, that is really hard to believe isn't it?

BRIANNA KEILAR, CNN CORRESPONDENT: Yes, these are some pretty dramatic pictures. One of four video clips that BP has sent over to senators here on Capitol Hill, because you have a lot of critical Democrats, in particular, who have said that BP has not been sending over enough images. Well, there you go, this is one of them. And just to give you a sense of what you are looking at. That is top, right here, of what is called the blow out preventer. It is a piece of machinery that was supposed to stop this blowout, which is what this is there. And this is actually the smaller of three leaks.

One of the smaller of the three leaks that is going on right now, there, on the floor of the Gulf of Mexico. You can see the oil coming out, right there. This blow out preventer actually sits on top of the well, on the sea floor. So this isn't that far from the sea floor. And you can see, it is pretty dramatic. It paints a pretty bad picture. And that is why Democrats have said BP we want you to give more video, put out more video, publicly so that we can see just what is going on down there. And these may be some of the best pictures actually that we have seen so far, Richard.

QUEST: Now, this is interesting because we have Ken Salazar on Capitol Hill, we have the administration sending a very strong letter saying how much you going to pay to clean it all up. We have a blame game, Brianna, with the oil industry, with all the companies involved. So, I'm just wondering what role in all of this does Capitol Hill play now?

KEILAR: Well, today it plays a little bit of a different role, because we have been seeing the corporations that have come up here. And there has been a blame game going on there. But today on the hot seat is the head of the Department of the Interior, and this is where you are seeing some lawmakers say what role did the federal government, what role did essentially the regulators, the police, the people who are supposed to be looking over what these oil companies were doing, what role did they play and did they perhaps have a failure.

In particular you mentioned the Minerals Management Service that oversees these oil rigs and oversees drilling in the Gulf of Mexico. But issues with the MMS and that agency actually falls under the jurisdiction of the Department of the Interior. So we heard Ken Salazar answering some questions about that. Keeping in mind these are tough questions from a Democrat. Let's listen.


KEN SALAZAR, U.S. SECRETARY OF THE INTERIOR: When, Senator Widen, you take a look at this blow out prevention mechanism itself, you will find that this mechanism has three pipe ram, it has a shear ram, it has a blind ram, it has two annular rams, it has a number of different redundancies that were built in to keep this kind of incident from happening again.


KEILAR: Now, Ken Salazar there was also saying, before then, that the federal government essentially wasn't regulating those blowout preventers. That thing I just showed you, Richard, with the oil spewing out if it, that they weren't doing a proper job and that is an agency that falls under his department. So, obviously federal regulators being looked at as well. But we heard Salazar also pointing the figure at BP and the company that was operating the oil rig, the company that had just worked on the oil rig, Halliburton. So, as well, a little bit of a blame game going on here today.

QUEST: Brianna, if it wasn't so serious it would almost be comical, the way the hot potato is being passed around. But Brianna Keilar, who is joining us now live, from capitol. Many thanks.

When we come back, the body which speaks for world airlines is spitting fire over the handling of the ash crisis. And while you won't want to fly anywhere near this, IATA says Europe's governments are canceling thousands of flights, needlessly. The rules have changed, but how much ash is safe? In a moment.


QUEST: New U.K. regulations are in force tonight, allowing planes to fly through this lot. Thicker ash than was previously permitted. Well, maybe quite the ash that is actually spewing out of the volcano itself. But the new fly zone is designed to help reduce the number of flights that are cancelled as a result of the ash being spewed into it. Certainly, by the time it diffuses into lower parts of Europe. The U.K. civil aviation authority's time limited zone took affect a few hours ago. The global airline body IATA says the measures don't go far enough. We are going to talk to IATA in just a moment.

The new rules permit flights if the plane and engine makers can say the aircraft can handle it. Now, this is where it gets interesting. Ayesha Durgahee is here to talk to me and tell me all about these new rules and regulations.

Explain what the problem is.

AYESHA DURGAHEE, CNN INT'L. CORRESPONDENT: Well, Richard, let me remind you, when it comes to volcanic ash, this is where the problem lies. It is all about the engines. When the volcanic ash enters the hot turbine it turns into molten gas, which rapidly cools and then can clog up and cut out the engines. So there was no surprise when civil aviation authorities took no chances and shut down air space across Europe.

QUEST: All right. So, this is the problem with the engine. But clearly nowhere near this amount of ash goes into the engine when you get farther down into Europe. There were regulations about what was not safe.

DURGAHEE: Yes, the civil aviation authority, together with the MET office, and engine manufacturers deemed that acceptable levels were naught. point, naught, naught two grams per cubic meter of air. But this is the number we need to focus on, 0.004 grams per cubic meter of air. This is the new density, the new concentration level that is deemed safe to fly though.

QUEST: Hang on. Why are they suddenly saying that it is safer-or now safe, that is twice as much. So, come on.

DURGAHEE: It is twice as much, but then after conducting test flights and analyzing the data, they have deemed that this is an acceptable safe level for aircraft to fly through.

QUEST: You have been following this from day one, is there any political pressure to get to this .004? Or is it all based on science?

DURGAHEE: I mean, it is a revised number, but when the fist levels were set at 0.002 grams, this was always a conservative amount, where a decision had to be made quickly due to pressure from airlines to reopen air space. So that was a conservative amount. More analysis, they have all agreed on that. Air craft can fly in denser volcanic ash.

QUEST: OK. All aircraft? Which engines are able to fly that at the moment?

DURGAHEE: It is not yet clear. It is in the U.K. Fly A Bee is the first airline who have been given the all clear from Pratt & Whitney, who make the engines of the Bombardier Q400. And as part of the agreement they will have to increase, double the amount of scheduled inspections of their aircraft for every aircraft that flies through volcanic ash.

QUEST: But there is a big difference, isn't there, between this thing with props, turning around, and this thing with, you know, a heavy jet engine.


QUEST: We are still-are we close to this one being introduced?

DURGAHEE: We're not. As we speak airlines are talking to the engine manufacturers. And because talks are ongoing, none of the manufacturers would comment on how the negotiations are going.

QUEST: You'll keep watching it for us?

DURGAHEE: I will do.

QUEST: Many thanks.

Let's talk more about this with Tony Concil from IATA, the spokesman for IATA, Tony you are on the line, good evening to you.


So, the prop planes of Fly-Be are OK with this new higher limit of .004 grams, but you say that is not enough.

Well, Europe is trying to reinvent the wheel and if we look to the Unite States and the way that they handle similar types of incidences with volcanic ash; they do it in a completely different way. Rather than concentrating on the ash concentration levels, they provide the airlines with accurate information as to where the ash is. In other words the densest part of it, and then the airlines make the operational decisions on how to fly and how to maintain their aircraft should they fly through areas that have higher levels of ash concentration.

QUEST: Anthony-

CONCIL: Nobody wants to do anything that is unsafe.

QUEST: Yes, hang on, let's just pause at that, Tony. I am not just from you, but from everybody, I've heard a million times. Nobody wants to do something that is unsafe. The regulators say it, the CAA says it, the airlines say it, IATA says it. Well, between your views and their views what is safe and what is not?

CONCIL: Well, it should-the decision on safety, in terms of, first off, identifying where the ash plume is. No on wants to fly though that. So, if we can get from the meteorological authorities, an accurate picture of where the ash plume is. That is no fly zone. And then when we look at these other areas, where for example the U.K. has introduced these new measures, it is a step in the right direction by saying, OK, let's have some operational procedures to fly through that.

But the approach of Europe is for the government to regulate that as opposed to leaving it to the operators who have the experience of dealing with it.

QUEST: Ultimately, though, we could have many months, perhaps even years, of this ongoing, Tony. If that happens then-and this is how I think we have to move whole saga on. There has got to be some fundamental root and branch rethinking of the way the industry and the regulators handle the ash clouds.

CONCIL: Sure. I mean, first off, in Europe, we need to have some fundamental rethinking about how we operate in Europe. It is a golden opportunity for us to push forward with a single European sky. To have some sort of over arching European approach to these things, as opposed to the fragmented, segmented approach that different states are giving. The approach that the U.K. is taking is next we'll move in the right direction. It is not as far as we would like to go, but it is further on than some other European states.

But we would hate to see a system develop where for the next five years we are dealing with 27 different decision making bodies. How will we deal with that?

QUEST: Tony, finally, are you and your IATA hopeful that the Europeans will stamp out cash to bailout all of these-to help compensate airlines for what has taken place?

CONCIL: Clearly there is a good case. It drops by-the European Commission has given the green light. Now it is up to government to act.

QUEST: You will be working on that, Tony Concil from IATA, many thanks, for joining us. Appreciate it.

When we come back hedge funds are in danger of being cut down to size. You have heard from the politicians at the beginning of this program. Next, someone who is from the hedge fund world. Do they see regulation as being quite so important.


QUEST: Hello, I'm Richard Quest. QUEST MEANS BUSINESS, this is CNN, where we must take a check of the main news headlines.

The United States says key nations are now on board, for a plan to impose strong new sanctions on Iran. U.S. Secretary of State Hillary Clinton says China and Russia have agreed to a draft resolution that is expected to circulate today at the U.N. Security Council. Mrs. Clinton says Iran's new deal on nuclear fuel swap, brokered by Brazil and Turkey, it does not go far enough.

No peace talks until protests end is the message from Thailand's government, as it rejected a new senate offer to mediate negotiations with demonstrators, saying the talks cannot start until the Red Shirts dismantle their sprawling protest site in Bangkok. One protest leader says we have come too far to surrender.

The Taliban are claiming responsibility for the deadliest strike on Kabul in many months. A suicide bomber attacked a NATO convoy today, killing five American troops and Canadian service members. Twelve Afghan civilians were also killed, many of them women and children who were riding on a public bus.

NATO has condemned the attack, saying it will not weaken its resolve.

Now, to return to our top business story tonight, European finance ministers have agreed to turn the screws on hedge funds tighter regulation on the sector. One French MVP made it very clear, for those that live outside Europe, if you want to do the business here, you will have to tow the line and live with E.U. legislation.


ANTONIO BORGES, CHAIRMAN OF THE HEDGE FUND STANDARDS BOARD (through translator): For those hedge fund managers outside the European Union, we say quite simply, if you wish to be on an equal footing with managers who are located within the European Union, and, therefore, subject to the directive, then you must join the club by conforming voluntarily to the directives.


QUEST: Antonio Borges is the chairman of the Hedge Fund Standards Board and he joins me now.

Good evening to you.

BORGES: Good evening.

QUEST: The new regulation, it all sounds very reasonable, actually. Let's face it, regulate fund managers or funds have to be regulated. They have to be registered. You have to register with all different authorities across the continent, proper capital requirements.

What's your problem?

BORGES: The problem is that the whole model is not the best one. It -- this is essentially a missed opportunity. And we have many different regulatory regimes for hedge funds in Europe. We could have chosen the best one, which in my view, is the British model. And we adopted something of a mixture of what happens in other countries. It's not by...

QUEST: Why is it not the right model?

BORGES: The one that's being put in place now?


BORGES: Because it is -- number one, it closes the market. It -- basically, it's quite protectionist, really. Many European investors are very upset that their choices are being limited. Who -- why should a -- a large pension fund, a large insurance company, a big endowment who are sophisticated investors, who know what they want, why should they be prevented from having free choice of where they want to invest their money?

This is the -- the first point.

And why is this point important?

Because any English trader that operates in the closing market will not be very efficient and very prosperous, in my view.

QUEST: You can understand though, can't you, the anger?

I mean hedge funds didn't cause the crisis. They might have made it worse and they are a great area of unregulated finance.

BORGES: No. Many of those statements are actually factually wrong. As I said, there's plenty of regulation, certainly in Europe, and in particular in the U.K., of the hedge fund industry, which does...

QUEST: Self-regulations.

BORGES: No, there is -- they are all under the regulatory powers of the Financial Services Authority, who -- who has the right to access all the information, can intervene any time. And our standards come on top of that, to go a lot further, actually, a lot further than what's in the directive that is being approved as we speak.

So they are regulated industries. That's -- that's the first point.

The second point is that hedge funds do not -- have not created the crisis and contrary to what you hear every day, do not make things worse. In fact, I think they make things better...

QUEST: They exacerbate...

BORGES: -- because they (INAUDIBLE)...

QUEST: No, no, come on. They -- they exacerbate trends. They are there to -- hedge funds' raison d'etre...

BORGES: Well...

QUEST: -- is to exploit...


QUEST: -- a weakened...

BORGES: Market opportunities.

QUEST: Market -- but market opportunities, which is a weakness where it's (INAUDIBLE)...


QUEST: -- an arbitrage mechanism.

BORGES: That's not necessarily a weakness. But either you believe in the market economy or you don't. If you believe in the market economy, you want markets to work. And hedge funds are there to make markets work. And the extent -- the only extent to which they are influential -- hedge funds are tiny. The only extent to which they are influential is because the rest of the market very often understands them and follows their lead.

QUEST: You can understand why European politicians are spitting feathers, though, can't you?

BORGES: Oh, yes, I can.

QUEST: And you...

BORGES: Because...

QUEST: -- you're going to lose this one, aren't you?

BORGES: The reason -- the main reason why they are spitting feathers, as you say, is that many people in Europe do not like markets, in particular, powerful financial markets. We, on the one hand, believe -- and I think this is why Britain is so important in financial matters -- that investors should be in charge.

QUEST: In which case, you've got really serious problems with Michel Barnier in charge of -- of being in charge of European Finance commissioner.

BORGES: Well, he does -- he certainly does have a different view of financial markets than most people in Britain or the United States would have. He talks all the time about the financial service -- the financial system being at the service of the economy, meaning being at the service of the large companies or of the large governments.

We prefer a financial system at the service of investors. That's the key difference. And it's a major difference.

QUEST: So finally, Mr. Borges, is it your goal to try and persuade them not to go ahead with the proposals that they're putting forward, to water them down or to, in some shape or form, change then to something that you find more acceptable?

BORGES: Well, this has been underway for more than a year now.


BORGES: The initial proposal was presented a year ago. It was really terrible -- a very, very bad piece of legislation. It has already been transformed because people finally are sensible and reasonable. And most of them -- of the more damaging components are -- have gone. And that's, I think, a step in the right direction. It's not automatic. Many people worked for -- for that goal.

Second, we want that in the next few weeks and months...

QUEST: Right.

BORGES: -- when there's this discussion between the council, the commission, the parliament, there will be a final version of the document. We want to use every opportunity to make it better.

And, finally, of course, we also want to establish the truth about the reputation of hedge funds and why they are important for investors in particular.

QUEST: Our viewers will have some thoughts on that.

Many thanks, indeed.

BORGES: Thank you.

QUEST: We appreciate you coming in.

Thank you very much, indeed.

BORGES: Thank you.

QUEST: Now, interesting stuff. Google is being accused of cyber snooping. A number of countries want answers after the search engine's roving cars picked up private material. We'll look into this one in just a moment.


QUEST: This is fascinating. Germany wants answers from Google, the world's largest search engine has until next week to give German regulators details on private data that Google gathered for its Street View mapping service.

The tech giant says it was all a mistake, there was nothing wrong with it, but it still kept the data -- at least I think that's what happened. Look, we're in very dodgy ground here -- Jim Boulden -- if we're on dodgy ground, Jim Boulden is the man to help us explain.

What's it all about?

JIM BOULDEN, CNN CORRESPONDENT: Well, we all know what Street View is, right?

I mean Google, a few years ago, took us from the map that you can look down on...


BOULDEN: -- down onto the street and they were able -- you're able to go along any street you wish in major cities. And it's a phenomenal service. I use it a lot. I really, really like it.

The problem is when their car -- the little car was going down the street...


BOULDEN: -- and collecting these photos...


BOULDEN: -- at the same time, it was collecting data from open wi-fi networks.

Now, why were they doing that?

Because they want to put this service on your mobile phone.

They want you to walk down the street and say, what restaurants are here?

Where can I find a McDonald's?

Where can I go do this or that?

So they collected that data -- the open wi-fi networks that were supposed to be of help.

Meanwhile, while they're doing that, they were actually getting data that was being transferred on these open wi-fi networks. That's what Germany and Italy and Ireland say is illegal.

QUEST: Hang on. So they're going along the streets and whatever -- you know, obviously, how they do it. So they're going along here and they're getting the pictures that they can. And while they're doing it, they are picking up information from wi-fi.

Why were they picking up wi-fi networks anyway?

BOULDEN: OK. If you have a firewall, they couldn't look at your information. So most people have a firewall. It's not a problem.

QUEST: But why were they picking up...

BOULDEN: Because...

QUEST: -- any wi-fi networks?

BOULDEN: Because you may say I want to find a restaurant with an open wi-fi network in walking distance or while I'm on my mobile, because -- because Google, for that GPS -- free GPS service -- it is very, very key while you're walking. That -- they think that's a huge market for them.

So they said we want to collect all this data. We want to know where these wi-fi networks are. So they collected that data. What they didn't know, they say -- and what they didn't even know last week was while they were doing that, they were collecting, on a hard drive, some of the data that was transferring on that wi-fi network.

QUEST: We have no reason -- let's be quite clear about this. We have no reason to dispute or disbelieve Google saying that this is a complete and utter mistake on their part.

BOULDEN: Correct. And -- and they said -- they said they haven't used the data, obviously, and they would like governments to prove, if they could, where this data might have been used incorrectly, because data -- because Google says they haven't.

Here's the interesting thing.

QUEST: Right.

BOULDEN: Ireland asked them to destroy the data. So they said last weekend they were going to destroy the data in Italy -- sorry, Ireland. Germany says we want you to hold onto this data, because if there's a prosecution, we need the evidence.

So they're having this whole issue about what do they do with the data?

QUEST: This whole Street -- Street View business -- which, which, actually, I quite liked, it really is raising huge issues of privacy, isn't it?


QUEST: Particularly in Germany, Jim.

BOULDEN: It's upset people because they find their faces on there. It upsets people because they see their cars, even if their license plates -- their registration plates have been wiped out. You can see people's homes. A lot of people really don't like it.

But I have to say, for someone like me, for some of the things I do, I really like the service.

QUEST: All right. Jim, many thanks, indeed.


QUEST: @richardquest is the -- while Jim continues to snoop around the streets of London.

BOULDEN: There's a nice hotel right there, 35 Buckingham Gate. There are some people there.

QUEST: It's quite funny. You know I


QUEST: Well, listen, @richardquest.

Are you worried about your privacy issues?

Careful, Jim. Don't put it...

BOULDEN: Well, they've blurred these faces, which is what they're supposed to do.

QUEST: Right. They are.

All right, we need to -- @richardquest is where you can join in our discussion on this one. And we'll be able to have some of your thoughts in the days ahead. I'm not sure I care too much about who's watching from their cameras.

OK, Guillermo is at the World Weather Center for us this evening.

Good evening.

You've got very big cameras to look at the weather.

GUILLERMO ARDUINO, CNN METEOROLOGIST: Yes, we do. And, actually, I'm going to tell you something else, what's going on with ash in Europe. I think I have good news, especially for tomorrow. But let's start with this.

We see a new system moving into Britain. Here's where we will see some increasing clouds and rain showers. The main system is over here, here to the east. And we see some storms in the Baltics and also into the Balkan Peninsula. That's where we saw most of the action with this low pressure center named Jolanda (ph). What a name.

Now, Spain, Portugal and France looking OK; Italy, Corsica, Sardinia, looking fine. You see here, regulation, evidence that this new system is moving into Ireland and Northern Ireland. And it will eventually get need to Great Britain, the rest of Great Britain.

Here in England and Scotland and though we see nice conditions right now, it will be mostly clouds, OK?

We will see some rain showers, especially toward the north. I think that England is going to be fine. The winds along with that low pressure center you see here close to Lands End, Normandy, Britannia, those areas.

So we don't see significant winds, luckily. But I think that especially into Amsterdam, we'll see winds.

Now, the good news concerning the ash is that the jet stream is going to continue to push that into the north, clearing northern parts of Europe and Europe overall, all across the continent. So this is good news, especially on Wednesday. We have to take it on a day by day basis, because, you know what, this is a very big thing. Compare Tuesday and Wednesday. So you see on Tuesday how we have Britain affected by it and also Germany.

That is today, right?

Then, when it comes to Wednesday, it clears. We see a lingering effect. But most of the concentration is going northward. And remember that now there are new ways to measure or new tolerance in terms of what airlines can -- or aircraft can take, in terms of ash. So that's certainly good news. They have doubled, actually, the standards.

So another view of Europe you see, especially if you are in Romania into the Czech Republic, Slovakia, Poland, that's where you will see the bad weather.

Now, let's translate that into airport activity. Probably Amsterdam, as I said, with some winds; Dublin with some rain showers; Copenhagen, also the northern sections with some rain showers. And everybody else looking OK.

In Germany, we'll see some clouds swell. All parts of the same system. We'll see -- we will refer to it as the ridge of this area of bad weather.

Nineteen in Paris for tomorrow, looking fine; 23 in Madrid; 22 in Kiev. Look at the -- the east still hasn't changed significantly.

Hong Kong looking OK for now. But there's an area here of bad weather that extends all the way into the Korean Peninsula and Japan. And we are expecting, Richard, some delays into Singapore. You know, what we see at this time of the year. Kuala Lumpur, the same thing, in the evening, nothing major -- back to you.

QUEST: We thank you, Guillermo.

ARDUINO: Thank you.

QUEST: For our look at world weather.

See you tomorrow.


QUEST: Now, we're less than a month away from the biggest money making opportunities in football. This is the World Cup. A big slice of the profits from advertising will go not to South Africa, but to FIFA, the governing body that oversees the game, as Nkepile Mabuse tells us, FIFA is keen to defend the source of its income, even if that upsets African business.


NKEPILE MABUSE, CNN CORRESPONDENT (voice-over): Football governing body, FIFA makes the bulk of its money from selling marketing and TV rights. Big companies pay big bucks to be associated with the World Cup. In return, FIFA strictly enforces its trademark rules to protect its sponsors. Those who haven't paid are barred from using symbols and words associated with the tournament.

So, when a South African airline advertised itself as the "unofficial carrier" of the you know what, FIFA found nothing amusing about its choice of words or symbols. It accused of ambush marketing and said their ads created an unauthorized association with the World Cup.

So the budget airline had to withdraw it.

HEIDI BRAUER, KULULA MARKETING DIRECTOR: It's quite Draconian and it's quite hard-hitting and tough to prove in court.

MABUSE (on camera): So why did you pull the ad?

BRAUER: Well, you know what?

The ad had served its purpose, actually.

MABUSE (voice-over): The ad got the country talking and Kulula found itself leading a chorus of objections against what some in South Africa consider heavy-handed restrictions around an event they feel they should own.

It's not only big companies that are disgruntled, many of the country's poor are angry.

(on camera): South Africa has a vibrant informal trading sector and football games have traditionally provided street vendors with an opportunity to sell their wares to thousands. But there will be none of that during the World Cup.

CHECHE SELEPE, INFORMAL TRADERS SPOKESMAN: They know -- they knew beforehand.

MABUSE (voice-over): Informal trader spokesperson, Cheche Selepe, believes FIFA should adjust its rules and allow non-sponsors to sell their merchandise inside the stadium perimeter.

SELEPE: They cannot expect us to be just like Europe or another part of Europe. This is the African continent. There is a great under development. There's big poverty in the country and they have to take into account that they have to change their rules.

JEROME VALCKE, FIFA SECRETARY GENERAL: Again, I'm sorry to say, no. And -- and then I'm the bad guy. And -- and that's what I have to be, because, me, I have to ensure that all we are doing is protected.

MABUSE: FIFA and the government point to the improved infrastructure as a lasting benefit for all South Africans. But some are finding it hard to celebrate possible future games.

SELEPE: There's not -- there's nothing themed product. Nothing product to watch and to order in this World Cup.

MABUSE: Nkepile Mabuse, CNN, Johannesburg.


QUEST: Now, this just in from the -- the CNN Newsroom. The German government plans to ban naked short selling from midnight tonight. Naked short selling -- well, basically it's where you short a stock or any financial instrument without actually having ownership of the stock or having the means to deliver it thereafter. It is considered to be one of those mechanisms that causes great turbulence and -- on the financial markets. It was banned in the worst days of the financial crisis two years ago, 18 months ago.

The euro has tumbled on the news. It's down 1 percent, at $1.22 and change. The German's foreign ministry says the ban will affect the country's 10 most important financial institutions. Media sources say Chancellor Merkel will make an official announcement about the ban on Wednesday. You can expect to see to be something that will be of great interest.

Being funny is no joke. Just ask Henry Cho. He's a standup comedian. In our World At Work, he reveals life in the spotlight and the dark side.


QUEST: You may have to think on your feet for your job and sometimes some people say I have to do it here. But you're probably -- and I'm certainly not as quick as the stand up comedians that we enjoy.

On this week's World At Work, we meet Henry Cho. His daily life is anything but routine.


HENRY CHO, STAND-UP COMIC: Get a water, please. Get a water. Water. Water.

(INAUDIBLE) here we come!

Two cups, man. It's the breakfast of champions. The thing about being a comedian is not being funny. I mean that's key. But that's only an hour.

How you doing, man?


How are you?

CHO: I'm doing great.


CHO: You did that for me?


CHO: Did you do that all day?

Are you right-handed?


CHO: All right. I'm doing a couple of (INAUDIBLE) here.


CHO: Henry Cho. If there's something funny to be said, the normal guy here may think of one thing, but I've got 50 things in my head I could say. And I go through the rolodex and I pick the right -- which I think is the funniest and then I say that.

My job consists of the whole day, like you saw today. You know, I've got press. I do this, I do that. It involves more than just me -- the show. I'm a professional packed in three shows, three shirts.

Is that your bag?

Well, we're good. That's good.

I got her at 4:00 a.m. Wow!. Yes, it was tough.

If I got there early to eat, it's only -- it was an economic decision.

Chicken fingers.

UNIDENTIFIED MALE: Chicken fingers?

CHO: Just a few fingers.

And if I stayed out late with the staff, you might as well stay where you're -- where you get everything for free.

I'm 48. It was like I said today, I know I don't look like I'm Korean. That's a 28 white boy. So -- you can laugh, right?

(INAUDIBLE) somebody laughing now.

Well, I'm a full-blooded Korean. I was born and raised in Nashville, Tennessee. So I'm South Korean.

Thank you.

OK, go ahead.

You're by yourself 23 hours of the day. When the best part of your day is that hour up there, I think you don't have it right. The bar is open tonight -- all night long. It's easy to get caught up in that. We didn't stay in hotels, we stayed in condos. And there were two lists. One was show times and all the rules. The other list was A.A. meetings. I've lost a lot of good friends. And it's a dark life and there's a lot of guys who can't handle it. (INAUDIBLE) part is the life. That's the easy part.

So three kids. I have to be done at three. I ain't doing four. No way. (INAUDIBLE).


CHO: Well, we might try it before, you know, get back in the game.


CHO: I'm a hands-on dad. When I'm home, I'm home. You know, I coach my boys' baseball teams, I take my daughter to school, I pick her up. You know, but being a comedian, I had to miss stuff.

I love my wife to death. I do. I would jump in front of most cars for her.

The best part of being a comedian is writer, producer, editor every show. No one tells me what to do. Up there. When I get offstage after every show, I just kind of go well, I got away with another one. I tricked them again.


QUEST: Henry Cho and is World At Work.

Now, I had a go at comedy myself some years ago at Caroline's Comedy Club in New York City. It was for the QUEST show. And it was one of the most frightening things that I've ever done, as perhaps you can judge for yourself.


QUEST: I'm Richard Quest from London and we like to -- I was going to tell you. See, I've -- I've raised the level of it.


QUEST: I've improved the sartorial elegance of this place.


QUEST (voice-over): I kept my routine pretty clean.

Take these. Now you call these suspenders. In England, suspenders are frilly lady's garters with nylons. We call these braces, which, of course, you put in your mouth.


QUEST: So imagine, if you will, my horror -- remember, these are suspenders, suspenders, so that you remember -- when my American producer says to me, hey, Richard, nice suspenders you're wearing.


QUEST: How did she know?


QUEST (voice-over): Thankfully, the red light tells me my time is up. It's over.

(on camera): Thank you.


QUEST (voice-over): It was only five minutes long. It seemed so much longer.

(on camera): I don't ever -- ever...


QUEST: -- ever want to do that again.


QUEST: Five years later, I still cringe when I see that at the fear that took place going on stage and actually doing comedy. My hat's off to all of them.

When you and I come back together in just a moment, it's no laughing matter -- ho-ho. We'll talk about hedge funds in a Profitable Moment.


QUEST: Tonight's Profitable Moment.

The battle lines are being drawn over the new rules and regulations for hedge funds. The European Union is determined to get greater control over these lightly regulated financial groups. The industry knows change is on its way. But as you heard tonight, it's going to fight the most draconian measures.

And Britain, which is home to 80 percent of European funds, fear that this country will be badly affected.

So are hedge funds a menace in the markets?

It's often difficult to see what purpose they serve other than to enrich the investors. Hedge funds do have a role to play, though. They show up weaknesses in companies and in economies. And the fund then exploits it and eventually brings about better performances. They're often venal, scheming to care nickel about the carnage they create on the way.

But let there be no doubt -- hedge funds were not responsible for the Great Depression. They made things a bit more worse, but hedge funds were not the culprit.

And that's QUEST MEANS BUSINESS for tonight.

I'm Richard Quest.

Whatever you're up to in the hours ahead, I hope it's profitable.

WORLD ONE is next.