Brussels, 04/12/2013 (Agence Europe) - Member states' representatives to the EU, on the Coreper committee, have reached agreement in principle on the review of the UCITS directive that requires harmonised investment funds to apply certain pay and pension rules to ensure healthy risk management.
The pay rules apply to senior managers whose jobs involve financial risks or who manage funds. The agreement reached at Coreper on Wednesday 4 December lays down that the member states shall require funds registered in their country to use pay and pension policies that do not encourage excessive risk-taking. The European Securities Markets Authority (ESMA) will draw up guidelines to this effect.
Adopting in first reading a draft report by Sven Giegold (Greens/EFA, Germany) in July, the European Parliament rejected the competent committee's idea of restricting bonus payments for asset management (see EUROPE 10880).
Under EU rules, all assets managed by a UCITS fund have to be lodged with a depositary that is responsible for losses incurred as a result of failure in the depository's work. As was shown by the Madoff scandal, member states take varying approaches in this domain. In order to boost investor protection, the draft directive lays down an exhaustive list of bodies eligible to act as depositories, mainly banks and bodies subject to similar capital requirements. Special requirements are also introduced for depositories, along with criteria for delegations to be able to hive off work to sub-depositories.
The draft directive does not prevent member states from issuing criminal penalties for breaking the EU rules, but it does lay down compulsory administrative penalties, ranging from the scrapping of authorisation for a fund to be in operation to fines of €5 million for a company and €1 million for an individual. (MB/transl.fl)