Undertakings for Collective Investments in Transferable Securities
Encyclopedia
The Undertakings for Collective Investment in Transferable Securities Directives 2001/107/EC and 2001/108/EC (or "UCITS") are a set of European Union Directive
s that aim to allow collective investment scheme
s to operate freely throughout the EU on the basis of a single authorisation from one member state. In practice many EU member nations have imposed additional regulatory requirements that have impeded free operation with the effect of protecting local asset managers.
investing in transferable securities to be subject to the same regulation in every Member State
. It was hoped that once such legislative uniformity was established throughout Europe
, funds authorised in one Member State could be sold to the public in each Member State without further authorisation, thereby furthering the EU’s goal of a single market for financial services
in Europe.
The reality differed somewhat from the expectation due primarily to individual marketing rules in each Member State that created obstacles to cross-border marketing of UCITS. In addition, the limited definition of permitted investments for UCITS weakened the marketing possibilities of a UCITS. Accordingly, in the early 1990s proposals were developed to amend the 1985 Directive and more successfully harmonise laws throughout Europe. These discussions, although leading to a draft UCITS II directive, were subsequently abandoned as being too ambitious when the Council of Ministers
could not reach a common position.
In July 1998 the EU Commission published a new proposal which was drafted in two parts (a product proposal and a service provider proposal), which sought to amend the 1985 Directive. These proposals were finally adopted in December 2001, and are known as "UCITS III", which are now in force. Interestingly, LuxAlpha - the major European part of Madoff scandal - was a UCITS regulated fund.
, which is intended to provide more accessible and comprehensive information in a simplified format to assist the cross-border marketing of UCITS throughout Europe.
s), which subject the same regulation in every Member state. All UCITS funds comply the same investment limits.
A collective investment fund may apply for UCITS status in order to allow EU-wide marketing. The concept is to create a single funds market across the EU. The aim is that with a larger market the economies of scale will reduce costs for investment managers which can be passed on to consumer
s.
Throughout Europe approximately €6.8 trillion are invested in collective investments. Of these funds about 76% are UCITS.
on 13 January 2009 and also by the Council of the European Union
as the Directive 2009/65/EC http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32009L0065:EN:NOT, to be implemented in 2011. This will update the UCITS III Directives by introducing the following changes,
European Union directive
A directive is a legislative act of the European Union, which requires member states to achieve a particular result without dictating the means of achieving that result. It can be distinguished from regulations which are self-executing and do not require any implementing measures. Directives...
s that aim to allow collective investment scheme
Collective investment scheme
A collective investment scheme is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group...
s to operate freely throughout the EU on the basis of a single authorisation from one member state. In practice many EU member nations have imposed additional regulatory requirements that have impeded free operation with the effect of protecting local asset managers.
Background
The objective of the original UCITS Directive 85/611/EEC, adopted in 1985, was to allow for open-ended fundsOpen-end fund
An open-end fund is a collective investment scheme which can issue and redeem shares at any time. An investor will generally purchase shares in the fund directly from the fund itself rather than from the existing shareholders...
investing in transferable securities to be subject to the same regulation in every Member State
Member state
A member state is a state that is a member of an international organisation.The World Trade Organization has members that are sovereign states and members that are not, thus WTO members are not called member states.- Worldwide :...
. It was hoped that once such legislative uniformity was established throughout Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
, funds authorised in one Member State could be sold to the public in each Member State without further authorisation, thereby furthering the EU’s goal of a single market for financial services
Financial services
Financial services refer to services provided by the finance industry. The finance industry encompasses a broad range of organizations that deal with the management of money. Among these organizations are credit unions, banks, credit card companies, insurance companies, consumer finance companies,...
in Europe.
The reality differed somewhat from the expectation due primarily to individual marketing rules in each Member State that created obstacles to cross-border marketing of UCITS. In addition, the limited definition of permitted investments for UCITS weakened the marketing possibilities of a UCITS. Accordingly, in the early 1990s proposals were developed to amend the 1985 Directive and more successfully harmonise laws throughout Europe. These discussions, although leading to a draft UCITS II directive, were subsequently abandoned as being too ambitious when the Council of Ministers
Council of the European Union
The Council of the European Union is the institution in the legislature of the European Union representing the executives of member states, the other legislative body being the European Parliament. The Council is composed of twenty-seven national ministers...
could not reach a common position.
In July 1998 the EU Commission published a new proposal which was drafted in two parts (a product proposal and a service provider proposal), which sought to amend the 1985 Directive. These proposals were finally adopted in December 2001, and are known as "UCITS III", which are now in force. Interestingly, LuxAlpha - the major European part of Madoff scandal - was a UCITS regulated fund.
Management Directive
The Management Directive 2001/107/EC, seeks to give management companies a “European passport” to operate throughout the EU, and widens the activities which they are allowed to undertake. It also introduces the concept of a simplified prospectusProspectus (finance)
In finance, a prospectus is a document that describes a financial security for potential buyers. A prospectus commonly provides investors with material information about mutual funds, stocks, bonds and other investments, such as a description of the company's business, financial statements,...
, which is intended to provide more accessible and comprehensive information in a simplified format to assist the cross-border marketing of UCITS throughout Europe.
Product Directive
The primary aim of the Product Directive 2001/108/EC is to remove barriers to the cross-border marketing of units of collective investment funds by allowing funds to invest in a wider range of financial instruments (including derivativeDerivative (finance)
A derivative instrument is a contract between two parties that specifies conditions—in particular, dates and the resulting values of the underlying variables—under which payments, or payoffs, are to be made between the parties.Under U.S...
s), which subject the same regulation in every Member state. All UCITS funds comply the same investment limits.
A collective investment fund may apply for UCITS status in order to allow EU-wide marketing. The concept is to create a single funds market across the EU. The aim is that with a larger market the economies of scale will reduce costs for investment managers which can be passed on to consumer
Consumer
Consumer is a broad label for any individuals or households that use goods generated within the economy. The concept of a consumer occurs in different contexts, so that the usage and significance of the term may vary.-Economics and marketing:...
s.
Throughout Europe approximately €6.8 trillion are invested in collective investments. Of these funds about 76% are UCITS.
Developments
The proposal of UCITS IV Directive http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:52008PC0458:EN:HTML was approved by the European ParliamentEuropean Parliament
The European Parliament is the directly elected parliamentary institution of the European Union . Together with the Council of the European Union and the Commission, it exercises the legislative function of the EU and it has been described as one of the most powerful legislatures in the world...
on 13 January 2009 and also by the Council of the European Union
Council of the European Union
The Council of the European Union is the institution in the legislature of the European Union representing the executives of member states, the other legislative body being the European Parliament. The Council is composed of twenty-seven national ministers...
as the Directive 2009/65/EC http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32009L0065:EN:NOT, to be implemented in 2011. This will update the UCITS III Directives by introducing the following changes,
- Notification Procedure
- Key Investor Information (KII)
- Adapted Framework for Mergers
- Master-feederMaster-feederThe master-feeder structure allows asset managers to capture the efficiencies of larger pools of assets although fashioning investment funds to separate market niches....
Structures - Cooperation between Member State Supervisory Authorities
- Management Company Passport
See also
- Alternative Investment Fund Managers DirectiveAlternative Investment Fund Managers DirectiveThe Alternative Investment Fund Managers Directive is a proposed European Union law which will put hedge funds and private equity funds under the supervision of an EU regulatory body. These kinds of business vehicle have not been subject to the same rules to protect the investing public as mutual...
2009/0064/COM - Markets in Financial Instruments Directive 2004/39/EC
- European company lawEuropean company lawEuropean company law is an emerging field of legal scholarship, which concerns the formation, operation and insolvency of corporations within the European Union. There is presently no substantive European company law as such, although a host of minimum standards are applicable to companies...
- UK company law and German company lawGerman company lawGerman company law is an influential legal regime for companies in Germany. The primary form of company is the public company or Aktiengesellschaft . The private company with limited liability is known as a Gesellschaft mit beschränkte Haftung...
- Institutional investorInstitutional investorInstitutional investors are organizations which pool large sums of money and invest those sums in securities, real property and other investment assets...
- Money market funds
- Fund of fundsFund of fundsA "fund of funds" is an investment strategy of holding a portfolio of other investment funds rather than investing directly in shares, bonds or other securities. This type of investing is often referred to as multi-manager investment...
- Investment Company Act of 1940Investment Company Act of 1940The Investment Company Act of 1940 is an act of Congress. It was passed as a United States Public Law on August 22, 1940, and is codified at through . Along with the Securities Exchange Act of 1934 and Investment Advisers Act of 1940, and extensive rules issued by the Securities and Exchange...