European Commission's proposals for adjustments to the UCITS Directive
17/07/2008

Further to the White Paper on Investment Funds, the European Commission has proposed a number of changes to the UCITS Directive. The purpose of the so-called 'UCITS IV' review is 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.

While there was wide agreement among the industry with regard to most of the Commission's proposed changes, there was significant debate with regard to the Commission's proposals for a Management Company Passport, with differing views as to whether a full or partial Management Company Passport was the most appropriate way forward. The European Commission has just issued a press release advising how it intends bringing forward these proposals.

The proposed Directive seeks to codify the successive changes introduced to the UCITS Directive since 1985 and also to translate the measures announced in the Commissions White Paper on investment funds into legislative provisions. These measures include;

- The simplification of the UCITS notification procedure
- The possibility of cross-border mergers of funds
- The possibility of setting up so-called master feeder funds
- A revision of the simplified prospectus to provide investors with key fund information
- Cross-border supervisory cooperation.

Regarding the Management Company Passport, the Commission decided to consult the Committee of European Securities Regulators (CESR). Both press release and explanatory memorandum underline that “a mandate to CESR will be sent out today. CESR will be invited to provide advice that will help the Commission to develop provisions permitting the introduction of a management company passport under conditions that are consistent with high level of investor protection. In that regard CESR will be invited to advise the Commission by 1 November 2008 on the structure and principles which could guide potential future amendments to the UCITS directive which may be needed to give effect to the UCITS management company passport. Following that advice the Commission will come forward with an appropriate proposal in time to allow for its adoption during the current legislature.”

European Commission press release

European Commission Proposal for a Directive (UCITS IV)