Luxembourg’s funds industry has welcomed progress in Brussels to remove barriers to the cross-border distribution of investment funds and said costs would be saved.
The Association of the Luxembourg Fund Industry (Alfi) said the European Parliament’s adoption of a trilogue agreement to remove barriers will provide more harmonisation for investment funds sold across national borders under the Ucits Directive and under the equivalent rules for alternative investment funds.
The agreement, which stems from a European Commission initiative to reduce complexity in marketing and disclosure rules for cross-border funds, was also endorsed last week by the European Fund and Asset Management Association (Efama).
Alfi said it welcomed “the final outcomes of the negotiation as a trade-off between the objectives of removing barriers to cross-border distribution of investment funds and the adequate protection of investors”.
One aim is to create a harmonised framework for “de-notification” procedures, where a fund management firm wishes to cease marketing a Ucits or alternative investment fund in a particular market. A perception of complexity owing to numerical thresholds in the rules were considered detrimental to the growth of cross-border distribution.
On this point, Alfi said the trilogue proposals were “not entirely suited to the investor protection objective and the way the industry is organised”, although do have the “advantage of providing a harmonised framework and a level playing field throughout the EU”.
Also in the agreement, which would amend the Ucits rules and the Alternative Investment Fund Managers Directive, is the ending of a requirement for fund firms to have a physical presence in a host Member State or to appoint a third party as a local representative, which Alfi said meant significant costs would be avoided.
Efama’s director general, Tanguy van de Werve, said better cross-border distribution of funds will enable consumers to benefit from greater choice at a lower cost.
De Werve particularly welcomed the “recognition of the need to postpone the application of the PRIIPs disclosure regime for Ucits by two years, in light of the regime’s documented shortcomings”.
However, Efama did have some reservations. The organisation said: “Also welcome is the fact that existing AIFs [alternative investment funds] may be ‘pre-marketed’ into new EU host jurisdictions, alongside not-yet-established AIFs, thereby broadening the range of funds available to prospective investors.
“Somewhat puzzling, however, is the rationale behind the requirement for an informal notification by the management company to the competent home authority announcing the start of the pre-marketing regime for AIFs.”
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