In what the European Fund and Asset Management Association (Efama) has described as “a new milestone in the creation of an effective single market for investment funds”, the UCITS IV Directive has today been passed by the European Parliament.
As well as shorter notification procedures, and new rules on mergers and master-feeder funds, UCITS IV will introduce the sometimes controversial management company passport. The passport has provoked concern in existing cross-border hubs, such as Luxembourg and Ireland, which saw in it a threat to their dominance in this area, and at one time it looked unlikely to get through.
“Less than six months ago, it seemed impossible that the management company passport would see the light, but with today’s vote it will soon become a reality,” said Peter de Proft, director general of Efama.
There was fear in the Luxembourg camp until the final moment, according to observers. But Jarkko Syyrilä, director of international relations at the UK Investment Management Association (IMA), told funds europe he believed Luxembourg and Ireland had nothing to fear.
“The Directive will mean more competition between domiciles and the industry will become more mobile, but I can’t see Luxembourg and Ireland losing their place,” he said. “They have a well established framework and they will be the first to adopt the new regulations in an effective way.”
UCITS IV will also mean more competition at the management company level, Syyrilä added. Selling funds cross-border in Europe will become cheaper, reducing barriers to entry. Cross-border business will therefore no longer be the preserve of large groups; medium-sized and smaller groups will also be able to participate, resulting in greater choice for investors.
More recently, in the light of the ‘Madoff Affair’, the management company passport has raised furrowed brows because of the differing levels of responsibility apportioned to custodians in different European domiciles. However, Syyrilä told funds europe he believed this matter could also be resolved.
“Madoff has raised some issues and these will be addressed during the level-two work at CESR [Committee of European Securities Regulators],” he said.
Today’s vote was the penultimate step towards the adoption of UCITS IV. Efama expects member states to approve the Directive in March 2009. It should then be implemented into national law by July 2011.
©2009 Funds Europe