The EU executive said it will look into "the implementation of the [UCITS] directive" following the Madoff scandal, according to Oliver Drewes, spokesperson for Internal Market Commissioner Charlie McCreevy.
"The Commission will start an investigation on how member states implemented the UCITS Directive and its underlying principles," Drewes told EurActiv. "If it turns out that there is a need to supplement these principles, the Commission will take the lead by coming forward with the necessary actions," he said, including a binding set of guidelines or far-reaching harmonisation of the legislation. "An infringement procedure is always possible," he added.
EU economy and finance ministers, meeting in Brussels yesterday (20 January), unanimously backed the investigation.
The probe will seek to clarify a dispute which erupted last week when French Economy Minister Christine Lagarde sent a letter to McCreevy, complaining that the application of rules regarding UCITS investment funds varies across Europe.
In the letter, Lagarde points to alleged "different transpositions and interpretations of the role and liability of fund depositaries" across EU countries. According to Lagarde, French savers have lost their investments in Luxembourg because fund managers there can take advantage of softer legislation, which requires them to return the funds only partially, rather than completely as is the case in France.
"In my opinion, the security of the UCITS mark needs to be reasserted by applying a simple principle: any investor who entrusts his or her securities to a bank, or to the regulated financial sector in general, must be sure of recovering them. The Commission could launch a legislative project to that effect in the very near future."
But Luxembourg dismisses this accusation. "We have exactly the same text as France," said a Luxembourg official close to Prime Minister Jean-Claude Juncker. "The investigation does not pose any problem for us. The Luxembourg law is 100% the same as the French. The accusations are totally wrong."
Towards binding guidelines for UCITS funds?
As a result of the enquiry, the Commission said it may present binding guidelines to clarify the implementation of the UCITS legislation. A review of the directive is not excluded either. A revised text has just been adopted by the Parliament, but officials have not ruled out a second reading, if necessary, to include additional clarifications.
The banking industry fought hard to have the new directive adopted by the end of the European Parliament's current mandate, but a second reading could delay the whole process, casting fresh doubt over the issue of so-called "financial passports" for fund managers (EurActiv 03/12/08).