Current proposals put forward by the Committee of European Securities Regulators (CESR) concerning eligible assets for investment under Undertakings for Collective Investment in Transferable Securities (UCITS) regulations have been called too prescriptive by the Investment Management Association (IMA).
The IMA says it is concerned that in an attempt to define structured financial instruments and listed closed ended funds, CESR has redefined the term transferable security, and that this approach will disallow investment in certain assets which have, since the implementation of the first directive covering UCITS in 1985, been considered eligible, including investment trusts and investment in property.
The IMA claims the advice, first published by the CESR in its consultation paper Advice on clarification of definitions concerning eligible assets for investments in UCITS in October 2004, also calls into question investment in liquid assets such as smaller companies and emerging markets securities.
While it says it accepts the need to protect the UCITS brand, given the extension of powers within UCITS, the IMA says the CESR’s advice is unnecessarily detailed and prescriptive and would stifle innovation stifling the attractiveness of UCITS as an investment vehicle when compared to other retail products, such as life funds, in the process.
The European Commission has tasked the CESR with providing advice to managers of UCITS on the eligibility of certain assets within their fund by 31 October 2005, following a second consultation due to be issued in July. The Commission will publish its recommendations in April 2006 following its second consultation period.
But the IMA says, given the complexity of some of the issues included in the consultation paper, this is an unrealistic timetable within which to work and, in its response to the CESR, has asked for the deadline to be pushed back in order to reduce the risk of unintended consequences.
Sheilla Nicoll, deputy chief executive of the IMA, says a move to reach a clearer understanding and agreement among regulators as to how the UCITS directive is implemented across the EU must be welcomed as it will simplify the process of registering funds for cross border. But she adds: “IMA considers that the level of detail and prescription in CESR’s advice is a backward step and urges CESR to reconsider its position.”IFAonline
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