The Treasury will move to replace key features documents with a European standardised fund prospectu...
The Treasury will move to replace key features documents with a European standardised fund prospectus next year, writes Kira Nickerson.
This is to comply with the forthcoming Ucits 2 directive from Europe, designed to create EU wide standards on the sales, marketing and distribution of mutual funds.
The Treasury has confirmed to Investment Week that it will begin consultation on the changes during 2002 and introduce the alterations once Ucits 2 is approved. This week draft proposals for Ucits 2 are released to EU members before going to the European parliament later this year. These are on course to be implemented by 2003, following a compromise on the directive's more controversial proposals, in particular capital adequacy requirements for fund manager businesses.
Originally there were concerns that controversial portions of Ucits 2 would lead to the entire directive being held up.
The proposals coming out this week recommend that groups have five years before they have to comply with the capital adequacy rules, which Autif had been lobbying against, believing them to be detrimental to small fund management firms.
Under today's Ucits rules, a manager of a fund must have at least six weeks expenses in order to meet capital adequacy rules. These expenses include everything needed to run the fund, including marketing costs and payroll. The new directive will see this move to 13 weeks fixed assets, or two basis points of funds under management ' whichever is the higher. So far there has been no definition of the term fixed assets and, as such, there is still confusion as to whether it will include more than what expenses covered.
The report also recommends that Ucits 2 be reviewed within three years of implementation to ensure that all aspects covered under the directive are working.
Julie Patterson, director of regulation and taxation at Autif, said the report means the non-contentious parts of Ucits, such as the simplified prospectus and the passporting of products, may now pass without further debate.
The Treasury has said that it will look to implement Ucits within 18 months to two years of its passing and that the FSA will be responsible for consulting with the financial services industry on the capital expenditure implications of conforming with the regulations and how they will be implemented.
Investment Week first reported on 30 July that Ucits 2 included proposals to replace key features documents with a prospectus.
The prospectus will include past performance, risk ratings and charging information, but at present contains no requirement to provide forward projections, such as reduction in yields. However, the prospectus will include the warning that past performance is no guide to future returns.
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