In October 2004 the European Commission issued a mandate to the Committee of European Securities Regulators (CESR) requesting technical advice regarding the clarification of the definition relating to eligible assets. CESR then carried out two rounds of public consultation and as part of this process the following documents were published:

  • CESR's advice on clarification of definitions concerning eligible assets for investments of UCITS – consultation paper (March 2005).
  • CESR's draft advice on clarification of definitions concerning eligible assets for investments of UCITS – 2nd consultation paper (October 2005).

After the public consultations, CESR published its final advice to the Commission in January 2006, together with a feedback statement. The final advice suggested measures that could be adopted at Level 2 and Level 3 of the Lamfalussy process. The European Commission after taking CESR’s advice into account adopted an implementing Directive on 19th March 2007. The implementing Directive seeks to clarify the definitions of eligible assets for UCITS with regard to certain classes of assets. Member States now have 12 months to implement the implementing Directive into national law.

To accompany the implementing Directive CESR published on 19 March 2007 its Level 3 guidelines concerning eligible assets for investment by UCITS. The Level 3 guidelines cover:

  • Article 2 UCITS Directive - Transferable securities.
  • Article 3 UCITS Directive - Instruments normally dealt in on the money market.
  • Article 4 UCITS Directive - Liquid instruments with a value which can be accurately determined at any time.
  • Article 5 UCITS Directive - Instruments of which the issue or issuer is regulated for the purpose of protecting investors and savings.
  • Article 8 UCITS Directive - Financial liquid assets with respect to financial derivative instruments.
  • Article 9 UCITS Directive - Financial indices.
  • Article 10 UCITS Directive - Transferable securities and money market instruments embedding derivatives.
  • Article 11 UCITS Directive - Techniques and instruments for the purpose of efficient portfolio management.
  • Article 12 UCITS Directive - Index replicating UCITS.
  • Other collective investment undertakings.

CESR reports that its members will bring the implementing Directive and the Level 3 guidelines into effect by March 2008 at the latest.

On the classification of hedge fund indices and eligible assets for investment for UCITS, CESR is currently in consultation and will issue additional Level 3 guidelines, if needed, in mid-2007.

View European Commission acts to improve efficiency of EU investment fund market, 19 March 2007

View CESR publishes its final Level 3 guidelines on eligible assets of UCITS, 19 March 2007