EUROPE: CESR: Draft advice on Management Co Passport &amp KID

Wednesday July 8 2009

CESR has today published its draft advice to the European Commission on the regulatory framework that should underpin the Management Company Passport (MCP) for Undertakings for Collective Investment in Transferable Securities (UCITS), as well as its draft advice to the European Commission on the format and content of Key Information Document (KID) disclosures for UCITS.

Management Company Passport:

The advice published today is part of CESR `s response to the Commission `s provisional request for assistance of 13 February 2009.

CESR `s draft advice covers the organisational requirements that companies managing UCITS need to fulfil, and conflicts of interest those companies must avoid.

CESR says its approach to the advice (which includes requirements applying to the direct sale of UCITS by management companies, as well as best execution, order handling and inducements) on rules of conduct is to seek maximum alignment with the relevant MiFID provisions.

The advice also includes details on the companies ` rules of conduct, measures to be taken by a depositary of a UCITS managed on a cross-border basis and risk management, as well as on supervisory co-operation referring to on-the-spot verification and investigation and the exchange of information between competent authorities that host either the management company or the UCITS .

The Commission `s mandate requires CESR to deliver technical advice on possible implementing measures concerning the new UCITS Directive by 30 October 2009.

Click here to download the Draft Advice-Consultation Paper – http://www.cesr.eu/popup2.php?id=5793

Key Information Document

The Draft advice published to the Commission on the format and content of Key Investor Information disclosures for UCITS is also up for consultation.

The proposed disclosure, to be known as the Key Information Document (KID), will replace the current Simplified Prospectus that was introduced in 2002 and aims at increasing investor protection and convergence across Europe.

CESR `s Draft advice sets out a number of proposals designed to ensure the KID fulfils the criteria of being a short, pre-contractual disclosure document containing only the key elements of information investors need before making a decision on whether to invest in a fund.

KID is expected to contain a summary of the investment policy and objectives of the fund, risk and reward, charges and past performance, as well as practical information.

CESR has today set out two options for risk and reward disclosure: a synthetic risk and reward indicator (SRRI) supported by a narrative explanation versus an improved version of the narrative approach.

The SRRI being the preferred approach, CESR is expected to publish a consultation on the SRRI `s methodology later this month.

CESR seeks views on its proposals included in the draft advice by 4 September 2009

Click on the above link to download the Draft Advice-Consultation Paper.