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Brussels, 13 February 2006

Financial services: strong support for strengthening the single market framework for investment funds

The European Commission has published an analysis of over 120 detailed responses from the European fund industry and other stakeholders to its July 2005 Green Paper on "enhancing EU framework for investment funds" (IP/05/927), which invited comment on a range of proposals aimed at boosting the efficiency of the single market for investment funds. The responses showed strong support for improving implementation of the existing framework and also provided insight into potential solutions to some of the main challenges facing fund investors and market practitioners. The results and subsequent work will feed into the Commission's White Paper on investment funds, scheduled for publication in autumn 2006. An efficient European investment fund market – which accounts for over €5 trillion of assets – is of key importance for mobilising funds for productive investment and contributing to better provisioning for old age.

Internal Market and Services Commissioner Charlie McCreevy said: "The depth and quality of the responses testify to full engagement with the Green Paper agenda by actors across the EU market. There was almost universal consensus that the current framework can be improved, plus a real desire to confront the challenges facing the industry. The onus is now on us to build on this interest and come forward with the right proposals."

Main conclusions

Responses showed strong support for continued efforts by the Commission and Committee of European Securities Regulators (CESR) to improve implementation of the provisions of the existing Directive, while insisting on the need for further harmonisation of the content and the format of the Simplified Prospectus to make it more investor-friendly.

There was also a willingness to look beyond current legislative provisions towards proposals such as expanding the range of single market freedoms available to fund managers. There was a large degree of support for examining some of these options - management company passport, master-feeder pooling structures, and mergers. However, some respondents pointed out that this should not prejudice investor protection.

A significant number of respondents considered that regulatory fragmentation was holding back the development of the alternative investment/hedge fund sector. A common understanding of a 'private placement' regime was widely regarded as a necessary and sufficient response to this.

There was a wide spread of opinion on whether the current approach to regulating investment funds is sustainable in the long term. Responses revealed some support for an eventual move towards principle-based regulation, counter-balanced by concerns that a fundamental overhaul of existing single market rules could give rise to unintended consequences and disruption.

Contributions were received from 22 countries including 19 EU Member States.

Next steps

The Commission will now proceed with impact assessment work on possible steps to improve the regulatory environment for the European fund industry and investors. It has recently appointed industry expert groups and commissioned studies on possible ways to tap efficiency benefits of an integrated fund market. This work will feed into the Commission's White Paper on investment funds, scheduled for publication in autumn 2006
The feedback statement on the responses is available at:

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