U.S. Treasury Secretary Timothy Geithner has warned the European Commission (EC) over its proposal to tighten regulations on hedge funds through legislation in a letter to the European Union (EU) official, a spokesman from EC confirmed the saying on March 11, Xinhuanet reported.

EU spokesman Amadeu Altafaj said Michel Barnier, the EU commissioner responsible for financial services regulation, had indeed received a letter from Tim Geithner regarding plans to regulate hedge funds.

He also said the bloc's proposed actions were in line with a decision by the Group of 20 to "reinforce transparency and the responsibilities of key actors in these markets.”

In the letter, Geithner said the draft EU directive would impose tighter restrictions on investment funds, saying proposed new rules might damage U.S. hedge funds by curbing their ability to do business with Europe, according to a report by the Financial Times that day.

EC put forward the draft legislation last April, for the first time suggesting that EU should place tougher restrictions on the activities of hedge funds and set limits on the entry into EU market for non-EU members.

The directive is to be put before finance ministers in a regular meeting on March 16 as cheduled. However, the EU members failed to reach an agreement in Brussels on March 11. The United Kingdom, by far Europe's biggest centre for hedge funds, is leading opposition to aspects of the directive.