EUROPE: European Commission consults on changes to UCITS Directive

Friday March 23 2007

The European Commission has published initial orientations and consultation material outlining the form of possible adjustments to the EU Single Market framework for investment funds – the UCITS Directive . According to the Commission, the envisaged changes are needed in order to facilitate market-driven restructuring and boost efficiency in the dynamic but fragmented European fund market.

The material published sets out initial suggestions on how to facilitate cross-border marketing of funds; build scale and liquidity by supporting fund mergers and asset pooling; allow fund managers to manage funds domiciled in another Member State; simplify and improve product disclosures; and strengthen supervisory cooperation mechanisms. This follows on from the Commission White Paper of November 2006 (IP/06/1569). The White Paper identified a series of changes to the UCITS Directive which are urgently needed:

* to remove costly administrative interference when harmonised funds are sold cross-border;

* to support consolidation of the fragmented fund industry through mergers and asset pooling;

* to allow fund managers to manage funds established in another Member State ;

* to provide investors with meaningful and concise information about costs, risks and potential rewards when deciding whether to invest in a fund.

The objective in publishing this initial orientation paper and consultation material is to mobilise regulatory, commercial and user expertise to ensure the technical soundness of the Commission’s subsequent formal proposal. Deadline for comments is 15 June 2007. The Commission will finalise its formal proposal end 2007.

Amongst the documents published by the Commission are an Overview of initial orientations for possible adjustments to UCITS Directive as well as detailed consultation material relating to:

* UCITS Notification procedure

* UCITS Management company passport

* Fund mergers

* Asset pooling

* Simplified Prospectus/investor disclosures

* Supervisory cooperation

The documents can be found at the above link