Brussels, 02/05/2006 (Agence Europe) - On 27 April, the European Parliament adopted the own initiative report from German Liberal Wolf Klinz on asset management. MEPs followed the same line as the economic and monetary affairs committee, which was the one set out by the European Commission in its July 2005 Green Paper (see EUROPE 8991). They do not recommend completely reworking the legislation in this area, but suggest certain adjustments, notably on the simplified prospectus and notification procedure for investment products. The PES group amendment calling for a new basic directive was thrown out in plenary session. In autumn, the Commission will publish a White Paper on asset management.
MEPs noted weaknesses on “protection of investors, range of products, fair competition conditions” and the sector's overall “competitiveness”, in spite of European directives (1985/611/EC, 2001/107/EC, and 2001/108/EC) on pooled investment. They felt that it was “necessary to go further and to amend” European law on a simplified prospectus, the notification procedure, the removal of tax obstacles for mergers and the adaptation of assets eligible to market developments.
In terms of information and protection for investors, the report says that the simplified prospectus had been introduced in forms that varied from one Member State to another and that sometimes rigorous national requirements had been added in spite of the Commission's recommendation 2004/384/EC. The EP proposed a new simplified prospectus in the form of a descriptive sheet containing, in the investor's national language, information, harmonised at European level, on the nature of the financial instruments used and on the risk they carry, on the relationship between general expenses and bonuses, and a comprehensible description of the asset management strategy.
The EP highlighted the wide variety of national requirements on the notification procedure of a fund and pointed out that, in practice, the notification procedure would become an authorisation procedure. It called, therefore, on the Commission to put forward a new, simplified notification procedure, based principally on the recognition of the authorisation delivered by the competent authority of the Member State of origin.
Finally, MEPs called on the Commission to identify the, mainly tax, obstacles to cross-border mergers, because the size and number of European funds were not the optimum, and only 18% were truly cross-border. They noted that investment was increasing in new financial instruments, such as hedge funds, which were not affected by the investment services directive. They called on the Commission to keep a close eye on how the situation develops and keep them informed of the advantages and other effects of regulation in this area.