Brussels to tackle regulatory ‘gold-plating’ of funds

The European Commission is to launch an impact assessment on the cross-border distribution of investment funds.

Brussels has recognised regulatory regimes cause friction in the passporting of Ucits and alternative funds and plans to carry out the impact assessment in the first quarter of 2018.

The announcement came in the Commission’s “rebooted” Capital Markets Union (CMU) plan, which was published yesterday as an interim report.

Industry bodies welcomed this and other new initiatives under the CMU including a strong focus on sustainable and green financing, and on fintech.

Josina Kamerling, regional head of regulatory outreach at the CFA Institute, a professional body, said: “An EU impact assessment should establish which issues are still outstanding around passporting and the marketing of funds. This was raised by CFA Institute in our comment to the midterm review as one of the clear obstacles in creating a liquid EU market for cross-border investment and the one which is most subjected to ‘gold-plating’.”

The European Fund and Asset Management Association (Efama) also welcomed the announcement but urged that any legislative changes around cross-border distribution be a “last resort”.

“As maintaining legal certainty and stability for market participants remains key in our view, we consider that changes to the existing legislation should be a last-resort means and trust that all non-legislative solutions will be fully explored first,” Efama said.

Brussels also confirmed it would unveil a pan-European personal pension (Pepp) product in the next few months – something that Efama has supported and particularly welcomed yesterday.

Alexander Schindler, Efama president, said: “EU citizens need to be encouraged to start saving more and at [an] earlier time, and to re-allocate part of their savings towards more market-based financial products. A well-regulated, EU-labelled Pepp would ultimately give people access to low-cost personal pensions and give them the chance to get better returns for their savings.”

Better Finance, an investor group, said the Pepp would provide “value for money”.

However, Better Finance also urged more action from Brussells on fund management fees.

To “ensure the success” of the CMU, the body said it would like to see “more ambition” by the Commission aimed at restoring confidence in capital markets and investment products.

“Whereas the EC declared that ‘to further promote transparency in retail products, the Commission will ask the European Supervisory Authorities (ESAs) to work on the transparency of long-term retail and pension products and an analysis of the actual net performance and fees’, this action has still not really gotten started…”

Among other proposals, the CMU also intends to review the prudential treatment of investment firms.

©2017 funds europe

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