Undertakings for Collective Investment in Transferable Securities Directives

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The Undertakings for Collective Investment in Transferable Securities, Directive 2001/107/EC and 2001/108/EC (UCITS) are a set of European Union Directives that aim to allow collective investment schemes to operate freely throughout the EU on the basis of a single authorisation from one member state. In practice many EU member nations have imposed additional regulatory requirements that have impeded free operation with the effect of protecting local asset managers.[citation needed]

Background[edit]

The objective of the original UCITS Directive 85/611/EEC, adopted in 1985, was to allow for open-ended funds investing in transferable securities to be subject to the same regulation in every Member State. It was hoped that once such legislative uniformity was established throughout Europe, funds authorised in one Member State could be sold to the public in each Member State without further authorisation, thereby furthering the EU’s goal of a single market for financial services in Europe.[1]

The reality differed somewhat from the expectation due primarily to individual marketing rules in each Member State that created obstacles to cross-border marketing of UCITS. In addition, the limited definition of permitted investments for UCITS weakened the marketing possibilities of a UCITS. Accordingly, in the early 1990s proposals were developed to amend the 1985 Directive and more successfully harmonise laws throughout Europe. These discussions, although leading to a draft UCITS II directive, were subsequently abandoned as being too ambitious when the Council of Ministers could not reach a common position.

In July 1998 the EU Commission published a new proposal which was drafted in two parts (a product proposal and a service provider proposal), which sought to amend the 1985 Directive. These proposals were finally adopted in December 2001, and are known as "UCITS III", which are now in force. Interestingly, LuxAlpha, an alleged "feeder fund" to Bernard Madoff's firm,[2] was a UCITS-regulated fund.[3]

Management Directive[edit]

The Management Directive 2001/107/EC, seeks to give management companies a “European passport” to operate throughout the EU, and widens the activities which they are allowed to undertake. It also introduces the concept of a simplified prospectus, which is intended to provide more accessible and comprehensive information in a simplified format to assist the cross-border marketing of UCITS throughout Europe.

Product Directive[edit]

The primary aim of the Product Directive 2001/108/EC is to remove barriers to the cross-border marketing of units of collective investment funds by allowing funds to invest in a wider range of financial instruments (including derivatives), which subject the same regulation in every Member state. All UCITS funds comply the same investment limits.

A collective investment fund may apply for UCITS status in order to allow EU-wide marketing. The concept is to create a single funds market across the EU. The aim is that with a larger market the economies of scale will reduce costs for investment managers which can be passed on to consumers.

Throughout Europe approximately €6.8 trillion are invested in collective investments. Of these funds about 76% are UCITS.[4]

Developments[edit]

The proposal of UCITS IV Directive [5] was approved by the European Parliament on 13 January 2009 and also by the Council of the European Union as the Directive 2009/65/EC,[6] to be implemented on 1 July 2011. This updated the UCITS III Directives by introducing the following changes,

See also[edit]

Notes[edit]

  1. ^ nb at the time the EU was still the European Economic Community. The term European Union did not come about until 1992
  2. ^ Sandler, Linda (12 July 2011). "LuxAlpha Seeks to Move Madoff Suit to U.S. District Court". Bloomberg. Retrieved 12 December 2011. 
  3. ^ Sender, Sam (27 March 2011). "Action Needed to Shield Investors from Ucits Risk". FT.com FM (Financial Times). Retrieved 12 December 2011. 
  4. ^ See EFAMA – Q3 2008
  5. ^ "EUR-Lex – 52008PC0458 – EN". Eur-lex.europa.eu. Retrieved 19 January 2013. 
  6. ^ "EUR-Lex – 32009L0065 – EN". Eur-lex.europa.eu. Retrieved 19 January 2013. 

References[edit]