ICI Recommends Changes to European Fund Market Proposals

Washington, DC, June 15, 2007 - ICI applauds the efforts of the European Commission to encourage a more efficient and integrated market for investment funds in Europe, but recommended adjustments to proposals recently released.

Background
The Undertakings for Collective Investment in Transferable Securities (UCITS) Directive created the first European Union retail financial product. The cross-border marketing of UCITS is based on a "notification" procedure: a UCITS complying with the common basic rules of the Directive can be authorized by its home member state authority, and the authorization to market UCITS units is valid in all member states, subject to interaction with the host member state authority.

Since 2004, the European Commission and the Committee of European Securities regulators (CESR) have embarked on a series of initiatives to address difficulties arising in the UCITS marketplace. These difficulties often result from a lack of standardization brought on by different administrative practices and diverging interpretations of the Directive in individual EU states.

ICI Position
In a June 15 comment letter, among other views expressed, ICI largely supports proposals advanced in a March 2007 exposure draft, but encouraged the EC to adopt a "full management company passport" instead of the partial passport now contemplated. A full passport, implemented with improved cooperation among regulators, would not compromise investor protection or the ability of regulators to supervise management companies, while allowing management companies the flexibility to organize their businesses most efficiently.

ICI also encouraged the EC to take a more expansive approach to asset pooling, questioning the basis for a proposed requirement that a master fund must have at least two feeder funds since it would unnecessarily preclude a master-feeder structure that is launched with one feeder fund and then adds others over time. ICI also encouraged the EC to reconsider its rejection of the option that would permit more liberal entity pooling, noting that it could create benefits for fund promoters and lead to greater choice for investors.

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