Proposals to extend Ucits legislation to cover the passporting of new products as well as management ...
If the legislation is passed, funds of funds, money market funds and derivatives funds will be allowed, while a second proposal will increase the freedom of fund managers to run multiple types of financial products.
The first proposal expands the types of funds covered.
Proposal one is almost identical to one mooted in the early 1990s but which was dropped because agreement could not be reached.
The second proposal is more complex and controversial and therefore less likely to make it through the parliament either quickly or without substantial revision. It is an attempt to increase the flexibility of fund management groups, by passporting not just products but managers also.
Steffen Matthias, secretary general of the FEFSI, said: "It will allow companies running Ucits to go into other fund management areas, such as pension funds. There has been a lot of demand for this."
This part of the legislation has been pretty much copied straight from the Investment Services Directive. This gives a passport to a company that fulfils various capital adequacy requirements, follows a code of conduct and so on.
Matthias thinks one of the most important developments is a new pan-European set of rules for prospectuses, which is also being proposed. In principle, this should be good for both fund management groups and investors.
Investors should get a simplified prospectus, written in a clear and easily understandable way. The groups should benefit because the various advertising laws of each country will be unified, so marketing departments will only have to produce one pan-European prospectus.
The legislative process has being bogged down by conflict between various interest groups. For example, one of the arguments concerns the passporting of funds of funds, where a sub fund does not have to itself be Ucits compliant. One side rejects this idea on the grounds that it will weaken the structure of the whole scheme.
Some pressure groups are unhappy about the looser restrictions surrounding index tracker funds that are being suggested, arguing that no funds should be disadvantaged when compared to others.
Another area of dispute is about delegation. One of the suggestions in the draft proposal is to centralise the way countries deal with companies delegating management tasks in different countries.
As it currently stands, each country has its own disparate rules, but FEFSI's opinion is that a working system should be left alone.
Nonetheless, the investment industry as a whole welcomes the majority of the proposals, according to Matthias.
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