MEPs overwhelmingly backed the reform presented by the European Commission (589 votes in favour, 28 against and 38 abstantions), but added a provision for a so-called 'financial passport' for fund managers to the text, which is expected to facilitate the creation of a truly European market of investment funds. Internal Market Commissioner Charlie McCreevy did not include the passport provision in the Commission's initial proposal, after industry and member states had voiced concern over the matter (EurActiv 06/11/08).
Industry argues that reform of the sector is urgently required, with the financial crisis making changes even more necessary. According to the latest figures published by EFAMA, the European Asset Management Association, in the third quarter of 2008, the total value of assets under UCITS management shrank by 6.4% to €5.2 trillion. A few months earlier, the industry had boosted assets to over €6 trillion. The European Central Bank yesterday confirmed the negative trend, signalling a drop of European investment fund assets to €4.7 trillion in September.
The review of the current rules also includes the elimination of administrative barriers to cross-border marketing of UCITS (Undertakings for Collective Investment in Transferable Securities). The current directive already allows fund managers to market their products in other countries, but a cumbersome notification procedure slows down cross-border transactions significantly, with extra costs for the industry of around €45 million a year, according to Commission figures.
The current two-month deadline between notification and access to other markets will be replaced by a simplified regulator-to-regulator electronic procedure "that would allow the UCITS to have immediate access to the targeted markets," according to the EU executive.
Another important change is the introduction of provisions for fund mergers to address the relatively limited size of EU funds. According to EU data, in 2007 an average UCITS had €199 million under management, compared to €1,100 million for a US fund.
The new rules also aim to improve the quality of product disclosure to retail investors, simplifying the current set-up by introducing the concept of 'key investor information'.
