19 Financial services: undertakings for
collective investments in transferable securities
| (34086)
12397/12
+ ADDs 1-2
COM(12) 350
| Draft Directive amending Directive 2009/65/EC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) as regards depositary functions, remuneration policies and sanctions
|
| Legal base | Article 53(1) TFEU; co-decision; QMV
|
| Department | HM Treasury
|
| Basis of consideration | Minister's letter of 14 December 2012
|
| Previous Committee Reports | HC 86-xii (2012-13), chapter 8 (12 September 2012) and HC 86-xvi (2012-13), chapter 12 (24 October 2012)
|
| Discussion in Council | Not known
|
| Committee's assessment | Politically important
|
| Committee's decision | Cleared
|
Background
19.1 The Undertakings for Collective Investments in Transferable
Securities (UCITS) Directive was originally adopted in 1985 and
allows open-ended investment funds investing in transferable securities
to be subject to the same standards of regulation in each Member
State and to be marketed to investors in other Member States without
the need for additional authorisation. The Directive was recast
in 2009 as Directive 2009/65/EC.[56]
19.2 When the Alternative Investment Fund Managers
Directive is transposed into the national laws of Member States
in July 2013, funds aimed at professional investors, such as hedge
funds and private equity funds, will have substantially greater
investor protection requirements than UCITS funds which are aimed
at retail investors.
19.3 In July the Commission presented this draft
Directive in order to help address the anomaly of professional
investors having better protection than retail investors by introducing
new requirements in key areas. It is a narrow update, only introducing
new requirements in respect of depositaries, remuneration and
sanctions.
19.4 The draft Directive was presented as part of
the Commission's retail package that also includes the draft Regulation
on key information documents for investment products[57]
and the draft recast Directive on insurance mediation.[58]
It is expected that a further legislative proposal will follow
shortly to address the remaining imbalances in investor protection
as well as bringing wider reforms to UCITS funds.
19.5 When we considered this proposal in September
we heard that the Government supports the Commission's consideration
of amendments to the UCITS Directive, holding that retail investors
should be able to expect a consistent and suitable level of protection
regardless of where a fund is located in the EU. We said that,
whilst we recognised the utility of this proposal for improving
protection for retail investors, we noted the Government's intention
to seek improvements to the text of the draft Directive in regard
to issues related to depositaries, including depositary liability,
sanctions and remuneration. In October we had an interim account
of working group negotiations and looked forward to hearing about
further substantive developments in due course. Meanwhile the
document continued under scrutiny.[59]
The Minister's letter
19.6 The Economic Secretary to the Treasury (Sajid
Javid) writes now about a new Presidency compromise text circulated
very recently as a result of further working group discussion.
He discusses the key content of the text as follows.
ELIGIBLE DEPOSITARIES
19.7 The Minister reminds us that:
- the original text would have
required a depositary to a UCITS to be a credit institution or
a Markets in Financial Investments Directive (MiFID) investment
company; and
- three of the six depositaries in the UK are authorised
under a national regime and this provision would have forced them
to restructure.
He says that:
- the compromise proposed deletes
the provision that a depositary may be a MiFID investment company;
- instead it copies the key capital, organisational,
and reporting requirements of MiFID authorisation directly into
the UCITS Directive on a minimum harmonising basis;
- this would allow MiFID firms or other firms authorised
to equivalent standards to act as depositaries to UCITS; and
- this will be sufficient to bring all UK firms
into scope and also prevents other Member States from permitting
firms with less stringent requirements than MiFID to act as depositary
to UCITS that might be marketed to UK investors.
DEPOSITARY LIABILITY
19.8 In this connection the Minister says that:
- for the most part, depositary
liability requirements have been aligned with those of the Alternative
Investment Fund Managers Directive;
- the difference is that, where a third country
jurisdiction requires a depositary to delegate its safekeeping
function to a local entity, the depositary cannot discharge its
liability on a contractual basis to the local entity in the event
of loss of assets caused by a criminal or negligent act by the
local entity; and
- this is acceptable.
SANCTIONS
19.9 On sanctions the Minister tells us that:
- the Government's position has
been that sanctions are a horizontal issue and that a consistent
approach needs to be taken across dossiers;
- following the general approach on the Markets
Abuse Regulation, the relevant sanctions provisions are being
copied across into the UCITS proposals; and
- this secures all the Government's key specific
concerns in the sanctions text.
REMUNERATION
19.10 Here the Minister says that:
- the Government has pushed for
as close as possible an alignment on remuneration provisions with
the Alternative Investment Fund Managers Directive;
- barring the removal of certain technical points
that were not relevant in a UCITS context, the remuneration requirements
are the same as the Alternative Investment Fund Managers Directive;
and
- moves to impose stricter requirements have been
resisted.
Conclusion
19.11 We are grateful to the Minister for his
account of developments on this proposal and note the improvements
secured. Having no further questions to ask we clear the document.
56 See http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:302:0032:0096:EN:PDF. Back
57
(34087) 12402/12 + ADDs 1-2: see chapter 20 of this Report. Back
58
(34089) 12407/12 + ADDs 1-2: see HC 86-xvi (2012-13), chapter
14 (24 October 2012). Back
59
See headnote. Back
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