July 2007

NEWS ANALYSIS: UK sees contradiction in single market plan

At least 30 UK funds with £8bn in assets under management might have to be re-domiciled in Ireland due to proposals by the European Commission. EC policy makers are consulting with the asset management industry to make the operation of European funds more efficient and less costly by creating a single market framework. But the Investment Management Association (IMA) has criticised a proposal that will require certain key back office administration processes to be carried out in the same domicile as the management company operating the funds. Many funds in Europe have their register of investors and net asset value calculations carried out in either Ireland or Luxembourg, while the management companies are domiciled elsewhere. Against the spirit
Sheila Nicholl, deputy chief executive of the IMA, told Funds Europe: “There are funds established in the UK that are administered in Dublin and under this proposal they would have to re-domicile in Ireland, or move their administration to the UK.” The EC argues that for regulators to properly regulate asset managers, they need to be properly within their jurisdiction. But Nicholl feels this goes against the spirit of a single market and she argues this could be solved by enhanced regulatory co-operation and by having the fund and its depositary in the same jurisdiction. The issue centres on the so-called ‘management company passport’, which is meant to enable asset managers to save costs by operating a single management company in one member state and passporting its services elsewhere rather than have to duplicate their organisations – and all relevant capital requirements – in each country where its funds are sold. In its response to the EC’s single market proposals, the association also said: “We would also note that suggestions that such processes should take place ‘physically’; in a particular place is out-dated. “Both the NAV calculation and registration involve significant electronic processing which can be effectively undertaken and overseen anywhere.” The IMA is broadly supportive of many other EC proposals concerning the single market for funds, Nicholl said. © fe July 2007

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