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Regulatory overview
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to permit covered bonds – the only legal reference to them. Also, fund of funds were excluded
explicitly.
UCITS II
was proposed by the Commission in 1994 but it became deadlocked and was withdrawn in
1998 when a new proposal was made.
UCITS III
was that new proposal and was enacted in 2001 and introduced the following key
elements:
Widened the investment possibilities but re-enforced the diversification rules. So the
following will be permitted: funds of funds, money market funds (then not permitted in
most states), cash funds, index tracker funds, and broader use of derivatives, including OTC
derivatives. However, “alternative investments” have developed rapidly – such as hedge
funds, real estate, private equity and venture capital and commodities. These collective
investment vehicles use new and non-conventional strategies so could not be
accommodated within the limits and criteria of the existing UCITS Directive.
Broadened the range of possible activities for the management company. A manager will
now be able to carry out other activities such as the management of the assets of pension
funds.
Introduced a fully harmonized and simplified prospectus. The industry had demanded this
for years as it will give investors a clear and easily understandable description of the fund
including its risk profile. Critically, it should simplify cross-border marketing because it can
be used as a marketing tool in all Member States without alterations (except translation)
and host countries will no longer be allowed to require further documents or additional
information.
However, the high hopes of a genuinely single market were progressively dashed as regulators in
different countries gave inconsistent interpretations of some of the key measures. The degree of
dissatisfaction was such that a special group was set up as part of the review of the FSAP in 2004.
Moreover, the introduction of the Lamfalussy Process gave the opportunity to move UCITS into the
ambit of the newly-established Committee of European Securities Regulators (CESR) to resolve many
of these inter-regulator conflicts.
UCITS IV
was enacted in 2009 to update the UCITS framework. The necessary implementing
measures were approved in 2010 and, after transposition into national legislation, UCITS IV came
into force on 1 July 2011:
Improve investor information by creating a standardised summary information document.
Create a genuine European passport for UCITS
management companies – this is the last
piece missing from the internal market as regards UCITS management.
Facilitate cross
-
border marketing of UCITS
by simplifying administrative procedures: there
will be immediate market access once the authorisation has been granted by the country of
origin of the UCITS; the host country will be able to monitor the commercial documents but
not to block access to the market;
Facilitate cross
-
border mergers of UCITS, which will make it possible to increase the average
size of European funds;
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