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Brussels, 22 March 2007

Financial services: Commission consults on shape of possible changes to EU framework for retail investment funds (UCITS)

The European Commission has published initial orientations outlining the form of possible adjustments to the EU Single Market framework for investment funds – the UCITS[1] Directive. 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. These changes to the Directive were announced in the Commission White Paper of November 2006 (IP/06/1569). The consultation launched today seeks 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.

Internal Market and Services Commissioner Charlie McCreevy said: "The UCITS Directive has served the European fund industry well. It has been the springboard for global leadership. But the industry is faced with massive structural challenges – fragmentation, complex distribution channels, competition from new investment products. The current Directive provides no answer to these challenges. That is why I have pushed hard to strengthen the Single Market framework for funds. The November White Paper agreed the steps that were most urgently needed. This consultation marks the beginning of the delivery phase. I invite stakeholders to comment critically on the usefulness, coherence and cost-effectiveness of our preliminary ideas. This will ensure that the Commission's subsequent proposal will really deliver better outcomes for European investors and market participants."

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 Commission is now making public its initial views on how best to realise these objectives. This material is published as a basis for consultation and feedback from all interested parties. The Commission hopes to receive extensive feedback and input from regulatory bodies, market participants and other stakeholders on: their effectiveness in achieving the desired result; their coherence with the overall UCITS framework and related legislation; the likelihood of unintended consequences for stakeholders – particularly investors; and cost-effectiveness.

The consultation is further expression of the Commission's commitment to better regulation and transparent law-making. These are informal and preliminary orientations: the Commission retains full discretion as regards the final form of the proposal that it will subsequently table.

The following consultation documents are now available:

  • Overview of initial orientations for possible adjustments to UCITS Directive: this presents the main objectives and guiding principles of the envisaged solutions.
  • Detailed consultation material relating to the each set of envisaged adjustments (notification procedure, fund mergers, asset pooling, management company passport, simplified prospectus, supervisory cooperation): this includes a more developed presentation of the shape of possible methods for realising the desired improvements.

As part of the consultation process, the Commission will host an open hearing in Brussels on 26 April 2007. This will give stakeholders an opportunity to exchange views on the relevance and effectiveness of the envisaged solutions.

The consultation documents plus online registration for the open hearing are available at:

[1] Undertakings for Collective Investment in Transferable Securities

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