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CROSS-BORDER DISTRIBUTION OF INVESTMENT FUNDS | PRE-MARKETING AND DE-NOTIFICATION

In “Economic and Monetary Affairs - ECON”

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For a brief overview of the key points of the adopted text and its significance for the citizen, please see the corresponding summary note.

Investment funds are investment products created with the purpose of pooling investors' capital, and investing that capital collectively through a portfolio of financial instruments such as stocks, bonds and other securities.

The two main existing pieces of EU legislation in the area of investment funds are

  • the Directive on Undertakings for Collective Investment in Transferable Securities (UCITS), which provides for strong investor protection, creates a label for European retail investment funds and gives UCITS managers a 'passport', which allows them to provide their services across the EU.
  • the Directive on Alternative Investment Fund Managers (AIFM), which lays down rules for the authorisation, supervision and oversight of managers of non-UCITS funds. Like in UCITS, EU AIF managers benefit from a passport to manage and market their funds to professional investors within the EU. Unlike UCITS, however, marketing AIFs to non-institutional investors is currently only possible at Member State discretion.

Currently 70% of the total assets under management are held by investment funds authorised or registered for distribution only in their domestic market. Only 37% of UCITS and about 3% of alternative investment funds (AIFs) are registered for distribution in more than 3 Member States. 

In March 2018 the Commission adopted a package of measures aimed to eliminate current regulatory barriers to the cross-border distribution of investment funds in order to enable a better functioning Single Market and economies of scale. The proposal is designed to improve transparency, remove overly complex and burdensome requirements and harmonise diverging national rules. It is expected to save up to EUR 440 million annually in costs for existing cross-border distribution. It consists of:

  1. a proposal for a regulation, which aligns national marketing requirements and regulatory fees, and harmonises the process and requirements for the verification of marketing material by national competent authorities. It further enables the European Securities and Markets Authority (ESMA) to better monitor investment funds.

  2. a proposal for a directive, which harmonises the conditions under which investment funds may exit a national market and allows European asset managers to test the appetite of potential professional investors for new investment strategies through pre-marketing activities. 

This wagon follows the directive. The regulation is followed in the other wagon, i.e. 'Cross-border distribution of investment funds: marketing and regulatory fees'.

The European Parliament named rapporteur and shadow rapporteurs for the file. The Committee draft report was published on 2 October 2018. On 25 October, amendments were tabled in committee. The report was adopted in Committee on 3 December 2018 and tabled for plenary on 6 December.

The Council published a mandate for negotiations with the European Parliament on 15 June. On February 5, the Council and the European Parliament reached a provisional agreement on the directive. Parliament approved the file in Plenary on 16 April 2019. Council signed on 20 June 2019.

On 11 July, the European Economic and Social Committee adopted in plenary its Opinion on the Commission proposal. The Opinion was published on 25 July.

 

References:

Author: Angelos Delivorias, Members' Research Service, legislative-train@europarl.europa.eu

As of 20/11/2019.