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04 September 2008

CESR publishe responses on UCITS consultation

CESR published the responses to its call for evidence on the UCITS asset management company passport. Answers range from postponing the decision of its introduction to new alternative approaches.

CESR published the responses to its call for evidence on the UCITS asset management company passport.


ALFI calls for complete analysis on Management Company Passport for UCITS

The advantages of introducing a Management Company Passport could be outweighed by significant potential costs and risks, ALFI states warning that “the global credibility of the UCITS ‘brand’ would suffer.” Moving away from a “product-centred” regulatory approach is not a simple exercise and necessarily alters and potentially weakens oversight integrity, the association states. 


The EBF, along with EFAMA and the ABBL believe that CESR’s work should follow the organisational split that at present naturally exists in the industry, between on the one hand the “production”, and on the other hand the “control” function at the level of the fund.


ZKA believes that a more flexible management of UCITS funds is necessary to create a fully integrated Market. The introduction of a passport is not only logical, but in fact also essential, ZKA states. The concerns voiced about effective supervision of fund management can be dispelled through effective cooperation between supervisors, ZKA says.


BNP, however, suggests an alternative approach to the ones proposed so far and considers that the following principles should be retained:

  • Wherever the management company is located, all administrative functions are performed in accordance with the fund’s domicile rules, regulation and objectives.
  • In any case, the oversight of the fund and the safekeeping of the underlying assets are performed by a depositary located in the fund’s domicile.
  • The management company remains responsible for the correct performance of all administrative functions.
  • As long as legal frameworks governing the administrative functions have not been harmonised, all administrative functions can be performed from abroad under certain circumstances.


The French AFG states that the issue of getting a real Management Company Passport is different from the debate “full passport” vs. “partial passport”. A “partial” passport would be a significant step back from a Single Market perspective, AFG states. Beyond the reinforcement of cross-border cooperation between CESR members, repealing Article 3 would allow for getting a real Management Company Passport, the association states. The main improvement at Level 1 would be to delete the requirement of Article 3. AFG also suggests that as soon as possible the Commission delivers a Level 2 mandate to CESR in order to provide for the “technical details” which will be introduced later on at Level 2 in 2009 after the final adoption of the revised Level 1 Directive.


Citi proposes establishing a standing regulatory/industry committee in the area of UCITS. “Although we do not advocate for a single regulator, we consider that all the efforts made so far in the definition of asset eligibility for instance, but also in the area of investor documentation, may eventually be ineffective if the co-ordination effort is not consistent and prolonged in time”, Citi states. Such committee would ensure convergence of UCITS practices and their continuing harmonised evolution in the future and avoid regulatory surprises and introduces additional divergences leading to additional complexities to the passporting of services or products.


IMA believes that the management company passport should cover all kinds of UCITS funds, even though the detailed solutions can slightly differ between the different legal structures in which UCITS can operate. However, the scale and costs of such further harmonisation measures have to be taken into consideration, IMA states.


“Further detailed harmonisation of aspects of the UCITS activity might help some regulators to accept the management company passport more easily”, IMA states and warns that “such a radical step would, however, generate significant work for all firms and regulators concerned and the costs of this would in the end be paid by the investors.”


Responses to the CESR consultation

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