Undertakings for collective investment in transferable securities (UCITS) (recast) (debate) 
President
The next item is the report by Wolf Klinz, on behalf of the Committee on Economic and Monetary Affairs, on the proposal for a directive of the European Parliament and of the Council on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (recast) - C6-0287/2008 -.
Wolf Klinz
Mr President, Commissioner, ladies and gentlemen, in July 2008 the European Commission presented its proposal for a revision of the existing Directive on Undertakings for Collective Investment in Transferable Securities (UCITS), thus providing the basis for what we are debating today. We needed to stick to an extremely ambitious timetable if we wanted to ensure that we could actually succeed in revising the UCITS Directive, which has been in place since 1985 in its initial form, by the end of this parliamentary term.
The clear aim of these reforms was to improve the competitiveness of the European fund industry, to enable it to reduce its costs, to develop and make use of economies of scale, to ensure that all fund providers do indeed have access to all markets in the European Union, and to achieve all of this without reducing protection for investors: on the contrary, we wanted to improve protection for investors. In other words, we had a very ambitious programme, and I have to say that I really do appreciate the fact that, in cooperation with all the institutions involved, we have managed to conclude this project within such a short period.
Investment funds provide small investors with the option of investing small sums of capital in a diversified, professionally managed portfolio. In the past, European UCITS have already proven to be a great success story. Collective investments in transferable securities are not only sold in Europe, but are also, to a not inconsiderable extent, exported to regions outside the European Union - particularly to South America and Asia - where they are very highly regarded. That is why it was so important, when revising this directive, to ensure that we did not damage the status of these UCITS.
The UCITS Directive has been amended twice in the past, and on this occasion too, the Commission has tackled the revision with great care. It carried out a consultation process, presented a green paper and a white paper, and undertook in-depth discussions with all those involved in the market. The Commission proposed a total of six measures in this revision, which should help to achieve the aims I referred to earlier.
These include, firstly, introducing a management company passport; secondly, facilitating cross-border mergers of funds, in order to reduce the number of funds provided in the European Union and thus resolve the imbalance that can currently be seen between Europe and, in particular, the United States; thirdly, providing the possibility of master-feeder structures, in other words the option of investing one fund in another master fund and having that master fund manage the investments; fourthly, developing a short - only two pages long - information document, known as the key investor information, containing the most important information for small investors; fifthly, simplifying the notification procedure in order to ensure that, when a fund requests authorisation in a country where it is not yet authorised, this does not de facto result in a new re-authorisation; and, finally, strengthening supervisory cooperation.
The fund industry has not escaped unscathed from the financial crisis. A lot of money has flowed out, and in these circumstances it is absolutely vital that we make decisions as soon as possible, in order to strengthen the credibility of the funds and to ensure that small investors do not lose confidence in these investment instruments.
I would just like to conclude with two final comments. The first is that the Commission has established a group, chaired by Jacques de Larosière, to examine the issue of supervision in Europe. I hope that the conclusions drawn by this group and the proposals it develops will ultimately be taken on board by the Commission and will find favour here. Secondly, particularly in the case of cross-border mergers of funds, we are still seeing differences in the tax treatment of cross-border mergers and national mergers. Here, too, we call on the Commission to make sure that we have the same conditions for both, not different treatment.
Charlie McCreevy
Member of the Commission. - Mr President, I am pleased to express the Commission's support for Parliament's amendments to the UCITS IV proposal. This will facilitate the adoption of UCITS IV modifications in a single reading. Such an outcome will be a very welcome development for EU fund markets which have recently been confronted with many tough challenges.
The proposal adopted by the Commission last July is the outcome of a thorough process of consultation. It started before the financial crisis. It sets some clear objectives for improving the functioning of the UCITS Directive. Bearing this in mind, the Commission wanted to simplify and stimulate cross-border sales of UCITS, provide fund managers with effective tools for increasing the size of their funds and benefit from economies of scale. However, it is not only about being competitive. The Commission also wanted to put in place effective rules on investor disclosure ensuring that anybody wishing to invest its savings into a UCITS should receive essential, clear and understandable information before taking his or her decision.
I am pleased to note that the goals set by the Commission proposal have been met. Parliament and Council have adjusted the Commission's proposal on mergers, master-feeder-structures, fund notification and key investor information, but the high-level ambitions set by the Commission in its original proposal was fully respected.
The Commission is very pleased with the outcome of the codecision process as regards the chapters contained in its July proposal. On the subject of the management company passport - which became an important part of the proposal - initially at the time of the adoption of the proposal, the Commission had serious concerns about the potential negative impact that an insufficiently prepared management company passport would have for the security and retail investors placing their money in UCITS funds.
Looking back, I am convinced that our decision to consult the Committee of European Securities Regulators on these issues was the right one. It helped Parliament and the Council to design sound provisions which would protect the interests of unit-holders. This was my one and only consideration dealing with the management company passport.
We have come a long way since July 2008. The CESR advice has provided the basis for a comprehensive set of provisions that clarify respect for responsibilities, ensure full information flow and underpin the necessary cooperation and support to EU Member State authorities. This is true at all stages: initial authorisation, ongoing supervision and enforcement. The Commission can now sign up to the compromise text.
Our work in this is, however, not finished. The success of the management company passport depends on our ability to deal with some remaining complex issues, like risk management via Level 2 measures. This work will also provide the occasion to tackle weaknesses in risk management that have become apparent in a small number of cases in recent times.
Very strict deadlines have been imposed on the Commission in delivering these measures. We have expressed our concerns on the feasibility of these deadlines. We will need time and resources to carefully prepare these measures, to consult stakeholders and adopt them. The Commission will endeavour to start this process as quickly as possible. We will also need the full and active cooperation of all actors, including this Parliament, to be able to deliver on time.
I would like to warmly thank again the rapporteur Mr Wolf Klinz and express my appreciation and admiration for the efficient handling of this file by Parliament. All three institutions can be satisfied with the consensus that has been achieved in the space of only a few months. You have shown that Europe can move speedily to bring about useful regulatory improvements. You must build on this achievement now and complete the ambitious programme of implementing legislation.
Finally, let me conclude by making two statements which the Commission agrees to make in relation to the adoption of this report.
Firstly, regarding the issue of taxation of cross-border mergers. The Commission will undertake to examine the potentially adverse impact that national taxation systems may have on cross-border mergers and use its funds once the proposed provisions are adopted. The Commission will in particular examine the potential cases of adverse tax consequences for investors.
On the issue of supervision, I have been vocal about the need to strengthen supervisory cooperation. In Solvency II and in the amendments to the capital requirements directive, the Commission has, on my recommendation, put forward proposals to strengthen supervisory cooperation. I therefore have no difficulty in agreeing on the need to push forward in this crucial domain. Therefore, in order to ensure consistency and coherence in all relevant financial sector regulation, the Commission agrees, on the basis of the conclusions of the de Larosière report, to examine the need to strengthen the provisions of this directive related to supervisory cooperation arrangements.
Jean-Paul Gauzès
Mr President, Commissioner, ladies and gentlemen, please allow me first of all to salute the remarkable work accomplished by our rapporteur, Wolf Klinz, who has managed to find broad agreement within the Committee on Economic and Monetary Affairs and negotiate a completely satisfactory compromise with the Presidency.
The Committee on Legal Affairs, when asked for its opinion, made known its views and these were taken into account. The original UCITS Directive was the key to development for European investment funds. In June 2007, the assets managed in UCITS represented EUR 6 000 billion and UCITS accounted for around 75% of the investment fund market in the European Union. The internal guarantees provided by UCITS explain why they are recognised by investors well beyond Europe's borders. However, the regulations must change to promote the development of these funds.
The changes made in 2001 opened new investment areas for UCITS but they left behind several bottlenecks. The Green Paper led to a public debate. In 2005 it was followed by a White Paper.
Today, we can welcome the major advances in efficiency offered by the proposal that we have before us. The most significant progress is the recognition of a European passport for management companies. The proposed provisions will allow the implementation of this passport for management companies, whilst guaranteeing adequate protection for investors. It is a complete passport and we welcome it. The supervision measures it includes will certainly be effective in removing any doubts which might have been expressed.
The proposal also makes major technical improvements, for example, notifications, cross-border mergers and the grouping of funds via master-feeder-structures. The harmonisation which will be thus achieved will also guarantee equitable competition conditions across the European Union, provided, as our rapporteur has stated, that actions are taken at a fiscal level to avoid distortions.
Astrid Lulling
Mr President, Commissioner, more than ever, I have very mixed feelings about the proposal for a directive on which Parliament is preparing to vote. It is true that the rapporteur, Mr Klinz, has been working for many years on this and has negotiated with talent, especially during the trialogue. It is also true that the directive will make some significant advances in the operation of the internal market and in the collective management of financial assets, and these have been welcomed by Europe's investment fund industry. It is still the case that the debates and discussions in the Council and Parliament have never been totally free, as the result was known in advance: for some players it was essential, at any cost, to introduce the European passport for management companies.
On the principle, there is no more to say; the passport is its own defence. However, it is necessary to ensure that the introduction of the passport for management companies is accompanied by the necessary guarantees, especially as regards the supervision of funds, as it leads to dissociation of functions beyond borders. I note with regret that the system as implemented is not only complicated but also subject to different interpretations. There is a risk that it will soon run into practical difficulties that will damage the European export fund industry, especially for export to third countries.
I have indeed noted that my position is in the minority, although I do not feel ill at ease. In normal times, I would have been tempted to say that only in practice will it be possible for definitive conclusions to be drawn on the issue and therefore to decide who is right. Is it those who trust in the abilities of market operators to adapt or those who insist on a more prudent approach? I do not exclude the possibility of success, but it is not guaranteed either. Given the latest news, especially the Madoff scandal and its implications for the collective financial assets management industry, we are unlikely to be reassured.
My scepticism gives way to concern. The investment fund industry will not be spared by the financial crisis; we know that now. It may be that fundamental questions need to be asked. In this deep crisis, making choices that dilute the responsibilities of stakeholders or assume perfect cooperation between the regulatory authorities may really lead to incongruity.
I am saying what I think: this directive is also from another era, from before the crisis. It is marked by a certain nonchalance. The financial system, in fact, is experiencing a lasting and fundamental crisis of confidence, and entire chunks of its architecture must be reconsidered. Let us not forget that the first duty of money market funds is to protect the investor by diversifying the risks and by establishing strict rules. By voting for this text as it stands, without really knowing where we are heading, we make it look as if nothing has happened. This withdrawal from reality will lead to no good, so I will abstain, even though I have signed the compromise amendments negotiated with the Council. Given the circumstances, the improvements made seem to me to be of little import compared with the questions of principle that I have just raised.
Donata Gottardi
Mr President, Commissioner, ladies and gentlemen, we are about to vote on the new directive on undertakings for collective investment in transferable securities. This directive has been extremely important in the past and will continue to be so in the future.
Things have changed so quickly since the first directive, which dates back nearly a quarter of a century, that we now need to coordinate the laws, regulations and administrative provisions, as the title states, and request a radical update to take into account new needs, which I think should be seen in terms of greater fluidity and mobility, as well as greater supervision and control.
The work in the Committee on Economic and Monetary Affairs went ahead in a spirit of excellent cooperation due to the positive attitude of the rapporteur, whom I cannot thank enough, and the Council, perhaps because we realised that we were touching on an area that is closely connected to the financial crisis and that we urgently needed to come up with some timely and appropriate answers. I think it is important at this stage to sum up a few points on which we reached a good understanding and, I hope, good results. This is the case with management companies, particularly as regards identifying the applicable law - the law of the Member State where the fund is or where the management company was set up - in order to take us toward a clearer, safer and more efficient supervision system. It is also the case with the agreement on the Level 2 measures that the Commission has been asked to adopt by July 2010 without fail.
It also applies to the understanding that makes the management company responsible for procedures, mechanisms and contact names to enable consumers and investors to obtain specific information, not least if they have complaints to make, if the management company is not based in their Member State. We should view in a positive light the possibility of further strengthening cooperation in terms of supervision, with bilateral and multilateral agreements between the competent authorities of Member States on UCITS and management companies, and also the agreement on merger and master-feeder-structures that make it possible to operate throughout the full extent of the internal market. We still have some differences of opinion, however, on the timing of the notification procedure, because we would have liked and would still like this to be longer and more appropriate, as laid down by the Council.
Lastly, I would like to mention the progress made on the prospectus, the key investor information for consumer protection, noting that in this case as well we would have liked a hard copy of the prospectus to be circulated automatically due to its small size, and not solely on request. To conclude, I feel there should be broad agreement on the need to complete this dossier at first reading.
Olle Schmidt
Mr President, Commissioner, I would like to begin by thanking my colleague from the Group of the Alliance of Liberals and Democrats for Europe, Mr Klinz, for his excellent work. In such a turbulent time as this autumn has been, the rapporteur has succeeded in finding a reasonable compromise, as we have already heard. Even without the financial crisis, these issues are difficult to deal with. I know this only too well, as I was responsible for steering through UCITS in 2001.
The aim of UCITS funds is to create not only a better and larger funds market, but also an open and consumer-friendly market. This has largely happened. Many obstacles were removed in 2001. I would like to remind everyone that it was not particularly easy then, either. It was also prior to the Lamfalussy process. A few obstacles remain, however, and it is these obstacles that are being dealt with now. There will be an improvement in marketing. There will be greater protection for investors. The merger of funds and master-feeder-structures will be possible, and cooperation between supervisory authorities will be strengthened, something that was also mentioned by the Commissioner.
The rules concerning the management company passport have been a sensitive issue. We have already heard comments on this. We are aware of the different opinions. However, I think that the present proposal is a good one. Competition and openness are always good in a well-organised market.
Another important issue was the key investor information, which replaces the simplified prospectus. A balance must be achieved between relevant information and effectiveness. Too much information is not good but neither is too little. The question of language is, of course, a sensitive one, but I believe we must have the courage to deal with this issue if we want to make more headway with cross-border trade. A reasonable balance is also required in this area.
As became evident in the autumn, Europe needs a financial market that functions effectively. UCITS have cleared the way and become a success and an esteemed trade mark outside Europe, too. Let us safeguard this development, which is also something this proposal does.
Eoin Ryan
on behalf of the UEN Group. - Mr President, I wish to begin by congratulating Mr Klinz, the rapporteur, on his excellent report. He has worked extremely hard to get an agreed compromise, and I congratulate him on that.
The revised UCITS directive will, when it enters into effect, serve to reduce much burdensome red tape and unnecessary costs.
During compromise negotiations, certain specific concerns of some Member States were recognised, allowing for the production of a strong and widely supported proposal. I believe it not only protects consumers but is also good for investors. As some speakers have already said, an open market is a positive thing and can be a very good thing for all of us if it is well regulated.
UCITS revision is yet another recognition that the financial markets of today are so integrated that we need common rules and standards for the effective regulation and operation of the global financial services industry. That is recognised not only in Europe but also globally, as we go through unprecedented financial times. It is very important that we work together at a global level to try and resolve the problems.
Let me just say that today is a great occasion: we celebrate the 10th anniversary of the euro currency, which itself serves as an illustration of the importance of economic cooperation. It is fortunate that my own country, Ireland, is a member of the euro zone as the current currency has been a source of stability for Ireland and other countries at a time of unprecedented turbulence and during the current global recession. If Ireland were not in the euro zone, we would probably be in the unfortunate position of Iceland - but that is not the case.
I would like to remind some of the Irish Members in this House - Sinn Féin in particular - that if they had had their way, we would not be in the euro. They described it at the time as a backward step. Ireland would not be in the monetary union and Ireland's economic position would be as bad as Iceland's.
I would like to remind those who opposed the European project in Ireland that many countries around the world are now using Ireland's rejection of the Lisbon Treaty and exploiting the confusion over its possible or perceived repercussions to win over new contracts at the expense of Ireland. Economically, Ireland must stay at the centre of decision-making in Europe, where we have traditionally been and where our enterprise needs and wants Ireland to be.
John Purvis
Mr President, with all the controversy currently surrounding regulation of the financial services industry and the headlong urge to rush towards over-regulation, this is a welcome example of common-sense, appropriate and measured regulation of the industry. Mr Klinz and the Commission have done a good job and I happily support this report and the proposed revision.
UCITS are a vital part of the European - and, yes, of the Scottish - investment management industry. They are a vitally important savings vehicle for savers and investors, not just in Europe, but all over the world. Imitation is surely a sufficient compliment and, even in the US, the UCITS is the model to be aspired to. Mr Klinz has incorporated much of what I consider to be vitally important, such as diversification into new investment products and techniques with reasonable security at a common-sense level. Most importantly, we have to achieve greater economies of scale in Europe. Many of our UCITS are too small and there are too many of them, so we must facilitate mergers. Personally, I would have liked to have seen that go even further to allow UCITS with different investment objectives to be able to merge more easily, provided that the investor was adequately protected and informed of such changes.
Thirdly, the management passport is a vitally important new provision which will allow for greater economies of scale, greater efficiency and the reduction of red tape. This must only be in the interests of the investor. The revision will therefore be good for the industry but, even more importantly, it will be good for the investor and the saver, not just in Europe but all over the world. I am very glad to support Mr Klinz's report and the UCITS revision.
Pervenche Berès
(FR) Mr President, Mr Klinz, thank you for your work, your commitment and your negotiating skills. UCITS are in some way a trade mark for the European financial markets; they are a good export product. However, there are imbalances in the European Union, as it is an area in which there are producer countries and consumer countries, so there are different strategies.
One of the aims in revising this directive is to organise, in these conditions, an internal market in UCITS which really works. Now, there are four questions at this stage: the first, which has already been raised in this debate, is evidently that of the management passport and I heard the Commissioner tell us about his fear of seeing this passport badly prepared. However, Mr McCreevy, there needs to be a will to prepare it: I have sometimes had the impression that it was not something the Commissioner was set on achieving. I am therefore pleased about the negotiations that have begun on the initiative of the European Parliament and the Council to ensure that, when the UCITS Directive is revised, we will adopt a real management passport which will allow the European Union's internal market to function in normal conditions.
The second observation relates to the issue of retention. If, when the Capital Requirements Directive is revised, we require the banks to hold 5% of the securitisations that they place on the market, it will be necessary immediately to harmonise, and under similar conditions, the retention obligations in the UCITS field, because the same risks must lead to the same rules.
My third observation relates to the issue of supervision. I do not think anyone here will doubt our determination to seek improved supervision conditions. We are all awaiting, on the initiative of President Barroso, the results of the working group led by Jacques de Larosière. I believe that the stakes are such that we cannot wait much longer for the results of this working group to be implemented. That will have an impact on the conditions for organising supervision between the stakeholders, in other words the producers and the consumers of UCITS. We thus need the supervision issues in this area to be defined.
Finally, my last observation is about tax regime issues. The rapporteur has mentioned them and the Commissioner has made a commitment. There is, behind the issue of tax regimes, hidden protectionism which we must denounce, which we wish to overcome. To do so, the Commission must take initiatives so that the tax regime allows truly free movement of UCITS products, with no protectionism.
Margarita Starkevičiūt
(LT) I would also like to underline our rapporteur's excellent work and ability to find a suitable compromise. However, like some of the speakers, I also have a few doubts. Those doubts concern the provision that EU Member States will have to prepare all the documents related to investment business, as stated in the document, 'in a language customary in the sphere of international finance', and this means in English.
I spoke in favour of creating an opportunity for business to reduce costs which would not be regulated in detail, but fund managers with one language, in this case English speakers, should not receive priority and a competitive advantage. We should also avoid creating legal uncertainty.
How can a consumer defend his rights if the document creates prerequisites for ambiguous interpretation of financial business responsibility? I am in favour of clearly defining financial business responsibility and the competitive conditions which investment business follows.
Marek Aleksander Czarnecki
(PL) Improving the effectiveness of the mechanisms by which UCITS function should, in my opinion, be a priority of Parliament's work. In order to increase the benefits and competition in the European fund industry, costs to investors should be restricted, guaranteeing them at the same time the same high level of protection. I agree with the rapporteur that the existing prospectus should be replaced by a free document containing key information for investors.
It is also extremely important to continue work on the directive in the area of taxation of fund mergers in order to remove tax barriers. Furthermore, and like the rapporteur, I take the position that practical use of the management company passport, which is intended to give management companies the right to offer group portfolio management services in the whole of the EU, would contribute to the creation of a true common market for the fund industry.
Charlie McCreevy
Member of the Commission. - Mr President, once again I express my appreciation and admiration for the efficient handling of this file by Parliament. It is a result of a remarkably quick consensus.
As has already been mentioned, this is not yet the end of the story - much still needs to be done at Level 2. Member States will also have the task of transposing this new set of rules - Level 1 and Level 2 - altogether before the summer of 2011. Arrangements for cooperation between national supervisors will have to be put in place. These are key to the good functioning of the management company passport.
I can assure you that the Commission will play its role in order to facilitate this progress and to put these badly needed changes to work in the EU fund industry.
Wolf Klinz
Mr President, first of all, I agree with the Commissioner that this is indeed not the end of the story. We now need to get started on implementation, and one reason why we have set relatively tight deadlines for Parliament and for the Council is that we want to ensure that we do not have to wait too long for implementation. We need to keep up the pace, because we can see that the markets are changing at a tremendous pace, and if we are constantly lagging behind we will not be able to achieve our targets fully, or perhaps not at all.
Today's debate has shown that we have broad cross-party support for the compromise we have negotiated here. I acknowledge that Mrs Lulling sees things a bit differently in this respect, but I am reasonably confident that the future will show that her concern that Luxembourg's position as one of Europe's central investment fund centres could be damaged will prove to be unfounded, and that, on the contrary, this new UCITS directive could also provide opportunities for this financial centre.
Mrs Berès is absolutely right: what this is really about is finally creating a real internal market in the investment funds sector. This sector is an example of the fact that, though we talk about the internal market, in many cases we do not yet have one. That is crucial. No one disputes that it will lead to a completely new and very ambitious level of cooperation, including between the supervisory bodies, but we need to achieve that in any case. In other fields, too, the supervisory bodies need to work more closely and more constructively together, and trust each other more, than they have in the past. If the UCITS directive can give a gentle nudge to encourage that, then in my opinion that is all to the good.
The Level 2 measures to which the Commissioner referred are legion, and need to be dealt with within a short time; that much is true, but we all have an interest in ensuring that this does happen.
That, however, is not the end of things: the industry itself also needs to do its own homework. The Commission, and we here in Parliament too, have deliberately chosen not to raise the issue of fund processing at all, because we are working on the assumption that the industry will keep its promise to deal with this matter on its own, without legislative pressure. It has been working on this for quite some time now, and we still have nothing concrete to show for it. I hope that it will soon be able to put something on the table, otherwise we will have no choice but to take further action in the foreseeable future.
In conclusion, I would like to thank not only the Commission but also, and in particular, the Council for their cooperation and for their active support. I am also grateful to all the representatives of the other groups, particularly Mrs Berès, Mrs Gottardi, Mr Gauzès, and also Mrs Lulling, who, as we have seen again today, defended her interests valiantly but was still perfectly willing to compromise where possible. Thank you very much.
President
The debate is closed.
The vote will take place shortly.
(The sitting was suspended at 09.40 and resumed at 10.00.)
