European Securities Regulators Seek Comment on UCITS Directive Issues

Washington, DC, November 2, 2004 - The Committee of European Securities Regulators (CESR) has asked for comment on a number of issues relating to the implementation of the UCITS Directive.

Background
Funds offered to European investors represent approximately $4.6 trillion, or 33 percent of the total worldwide mutual fund market as of year-end 2003.

UCITS funds are European mutual funds that can be marketed in all EU countries. The UCITS Directive provides the framework for cross-border sales of investment funds in the European Union. The Directive allows a fund that qualifies under the Directive to be sold throughout the EU subject to regulation by its home country regulator.

A paper recently released by CESR seeks comment on:

• a requirement that, after September 30, 2005, EU member states will not be obliged to accept UCITS funds that do not provide a simplified prospectus;
• two options addressing the issue of whether a management company needs both a product passport and a management company passport in order to distribute UCITS funds in a host member state without establishing a branch in that member state; and
• the scope of permissible activities of management companies that are grandfathered into the UCITS Directive.

CESR will eventually release a set of guidelines that CESR members will introduce into their regulatory practices on a voluntary basis.

ICI Position
The Institute has long supported harmonization among EU member states on the rules and regulations governing the UCITS market and has worked to lower the barriers that prevent U.S. asset management firms from marketing their services more widely. ICI has not yet commented on the proposal, but is likely to by the December 8, 2004 deadline.

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