On July 16, the European Commission published its long-awaited legislative proposals for reforming the EU legislative framework for Undertakings for Collective Investment in Transferable Securities (UCITS) funds. The draft “UCITS IV Directive” will replace ten existing directives with a single text. The Commission intends to establish a more efficient framework by allowing UCITS managers to develop cross-border business to achieve savings consolidation and economies of scale.

The proposals also call for improving retail investor protection by ensuring that investors in UCITS funds receive clear and easily understandable information. This includes “key investor information” documents that would replace the current simplified prospectuses for UCITS funds. Specific measures are designed to reduce barriers to cross-border marketing by streamlining notification procedures and requirements.

Concurrently, the Commission has asked the EU Committee of European Securities Regulators to examine the possibility of establishing an effective management company passport as part of its package of targeted legislative amendments to be included within the UCITS IV Directive. A management company passport would allow a UCITS fund to be managed by a management company authorized and supervised in a Member State other than the Member State in which the fund is established.