ICI Recommends Steps to Ensure Consistent Implementation of UCITS Directive, December 2004

Washington, DC, December 7, 2004 - European Union member states should not impose conflicting regulations on UCITS funds, according to a recent Institute comment letter to the Committee of European Securities Regulators (CESR).

Background
UCITS funds-or Undertakings for Collective Investment in Transferable Securities-are European mutual funds that can be marketed in all EU countries. The Institute's recent comment letter addresses the implementation of the UCITS Directive, a pan-European effort to provide a framework for cross-border sales of investment funds in the European Union. The Directive allows a fund to be sold throughout the EU subject to regulation by its home country regulator. CESR is working to create a set of common guidelines that will help CESR member states implement the UCITS Directive. CESR members would adopt the guidelines voluntarily.

Funds domiciled in Europe-which include UCITS and non-UCITS funds targeting only investors in specific EU nations- represent approximately $4.6 trillion, or 33 percent of the total worldwide mutual fund market as of year-end 2003.

ICI Position
In its comment letter, the Institute urges CESR to use its influence to prevent member states from diverging from the voluntary guidelines when they are eventually adopted. ICI states that it is critical that UCITS funds not be subject to conflicting requirements in different member states if a pan-European UCITS market is to be successful.

recommends that CESR require a product passport (but no management company passport) if a management company only wishes to distribute UCITS funds managed by itself in a host member state;
expresses concern with CESR's view that open-ended investment companies may only designate a management company in the same EU jurisdiction as the UCITS fund, meaning that a management company and its UCITS funds must be located in the same member state; and
seeks clarification regarding certain of the Directive's deadlines.