The European Commission has proposed an important revision of the EU framework for investment funds (Undertakings for Collective Investment in Transferable Securities (UCITS)).
The proposed changes to the UCITS Directive include:
- Removal of administrative barriers to the cross-border distribution of UCITS funds. A new notification procedure is proposed which will be a simple, electronic, regulator-to-regulator communication. The distribution of units of funds will start immediately after such communication.
- Creation of a framework for mergers between UCITS funds and allow the use of master-feeder structures. Fund mergers will be allowed, on both a domestic and a cross-border basis, and their authorisation procedure will be harmonised, as will the required level of information to be provided to investors. Subject to approval and the appropriate information of investors, a UCITS fund (feeder) will be allowed to fully invest its assets into another fund (master).
- Replacement of the Simplified Prospectus with a new concept, Key Investor Information (KII). KII will be contained in a short document conveying key facts to retail investors in a clear and understandable manner so as to assist them in taking an informed investment decision.
- Improvement of cooperation mechanisms between national supervisors. As regards the "management company passport" (i.e. the possibility for funds authorised in one Member State to be managed remotely by a management company established in another Member State), the most recent consultation process has revealed that there are a series of potential supervisory and investor protection concerns. The Commission has decided to consult the Committee of European Securities Regulators (CESR) on these issues. CESR will be invited to provide advice that will help the Commission develop provisions permitting the introduction of a management company passport under conditions that are consistent with a high level of investor protection. In that regard CESR will be invited to advise the Commission by 1 November 2008 on the structure and principles which could guide potential future amendments to the UCITS Directive which may be needed to give effect to the UCITS management company passport. Following that advice the Commission will come forward with an appropriate proposal in time to allow for its adoption during the current legislature. If the proposal is adopted by the EU Council of Ministers and the European Parliament in Q2 2009, its provisions will come into force mid 2011.
View European Commission revision of EU investment funds, 16, July 2008