Brussels, 21/11/2008 (Agence Europe) - EU Member States' representatives to the EU decided on general guidelines on Wednesday 19 November 2008 on the draft directive to change the rules governing the work of UCITS (undertakings for collective investments in transferable securities) (see EUROPE 9705). The draft compromise submitted by the French Presidency of the EU introduced a European management company passport, a measure the European Commission had left out of its initial proposal. Ireland and Luxembourg, the two Member States where 90% of European UCITS are based, expressed hostility to the introduction of a European passport system. Backing the general idea of a passport, Poland and Slovakia are reported to have also made reservations vis-à-vis the lack of any local contact in the country where the fund is established for the online management of funds from a distance. Early in December 2008, EU finance ministers will be asked to back the compromise. The French Presidency believes a deal will be possible in codecision with the European Parliament in first reading.
The Member States have scraped the obligation for countries to operate from the same Member State as the one where the UCITS it manages is based. A European source says the passport idea is included in the draft compromise in line with the opinion voiced by the Committee of European Securities Regulators (CESR). 'It must not be made a condition of authorisation that the UCITS be managed by a management company having its registered office in that Member State or that the management company performs (sic) in the UCITS home Member State,' explains the compromise. At the end of October this year, the CESR issued an opinion favouring the idea of introducing a European passport and made recommendations on the coordination of national supervisors for the control of funds and national supervisors of management companies if the two are based in different countries. It was the European Commission, when it unveiled the draft directive, that asked the CESR to draft an opinion, saying that it would agree to the introduction of a European passport if the CESR felt it would be useful. The CESR has been welcomed by industry.
The Member States generally approve the other measures in the draft legislation to ensure greater integration in a Common Market for harmonised investment funds. A new electronic notification procedure among national regulators will be introduced. Mergers and acquisitions of harmonised investment funds will be allowed both nationally and internationally. The European Commission is expected to unveil before 1 July 2010 implementing measures to ensure fund management companies do all they can to avoid, identify, manage and publicise potential conflicts of interest. (M.B. trans fl)