24 January 2006

ECON meeting on Asset Management

European Parliament’s ECON Committee discussed the draft report on Asset Management which was drawn up by Mr Klinz. The rapporteur stated that he does not intend to propose a radical overhaul of the directive rather than identifying the current weaknesses of the current regime, making use of and improve the existing legislation where necessary to find practical solutions. Therefore, the UCITS directives should not become ‘Lamfalussy-Directives’, although it has to be insured that any new provisions have to be enforced efficiently.

Mr Klinz noted that many difficulties arise from diverging interpretation and application of implementation of existing rules in the Member States. For example, in the case of the product passport, national supervisory authorities have different interpretations of the range of products covered by the Directive. They also impose very different requirements as regards the notification procedure, both in terms of the information required for the initial notification as well as for the subsequent notification of changes in the fund's composition.

In the case of the management company passport, there is still not an adequate legal basis despite the fact that this was mooted in the management company directive and could bring about efficiency gains. On the other hand, the industry shows little interest in the depositary passport.

The rapporteur also noted that new market and product developments go beyond the scope of the currently existing UCITS directives. Any improvement should therefore be aimed at increasing the efficiency by facilitating cross-border mergers and pooling, and reducing the existing barriers of differing taxation among the member states.

The report calls member states to permit the transfer of pension fund asset management to be transferred to other undertakings. It states that the number and size of European funds is “sub-optimal” – and that greater consolidation “would bring lower costs and/or higher net returns”.

Members from the conservative and socialist parties altogether criticized that the draft report rules out any new legislation in principle. Mr Purvis questioned whether the existing directives are useful in the longer term, especially with regard to current market developments and the range of new products. He doubted that these new products can be incorporated into the current legislation and asked to consider a new regime for these new products in the medium term.

The deadline for amendments is 20 February and will be discussed in the ECON meeting on 21 March.
Vote in ECON will be in April, vote in Plenary in May.

Report

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