EUROPE: European Parliament votes for UCITS IV

Tuesday January 13 2009

The European Parliament has today approved the reforming of the UCITS Directive effectively saying YES to the proposed UCITS IV Directive.

The reformed Directive is expected to simplify the regulatory environment by reducing administrative barriers for cross-border trading of funds, creating cost savings by allowing huge economies of scale, broadening investor choice and providing increased investor protection by making sure that retail investors obtain more appropriate information on their investments.

More specifically the Commission is proposing:

* The removal of administrative barriers to cross-border distribution of UCITS funds by improved cooperation mechanisms between national regulators;

* The creation of a framework for mergers between UCITS funds and allow the use of `master-

* The replacement of the `Simplified Prospectus` with a short two-page `Key Investor Information` document.

The much anticipated and controversial Management Company Passport is included in the new Directive.

The Management Company Passport will allow funds authorised in one Member States to be managed remotely by a Management companies established and in another Member State and be authorised by that Member State’s regulatory body. This was initially excluded from the Commission’s original proposal issued in July 2008.

The Directive still needs to be approved by the Council, but the informal agreement already reached means this is now a formality. Member States will need to enact national legislation to apply the main changes by 1 July 2011.

The Investment Management Association (IMA) has given this development a very welcoming advance.

Director of international relations at the IMA, Jarkko Syyrilä, said today’s vote is a major milestone in creating a truly single market in asset Management and opening up more opportunities for Europe’s investors.

He said: ’Since its report ‘Towards a Single European Market in Asset Management’ in 2003, IMA has been calling for reform of the UCITS Directive in order to make it more efficient for fund Management firms to do business cross-border and to allow funds to compete against substitute products.

’We call on the European Commission and CESR (the Committee of European Securities Regulators) to work out swiftly the implementing measures of the Directive to ensure that these crucial improvements can be implemented without further delay by July 2011.