December 2013 - The European fund industry in December

European fund news in December

EU Council sets out its position on UCITS V

On 4 December, the Permanent Representatives Committee of the Council of the European Union agreed a position on the UCITS V draft directive.

The agreement enables negotiations with the European parliament to start, with the aim of adopting the directive at first reading.

As a reminder, the UCITS V directive includes changes about:

• depositary functions, the rules for which have remained substantially unchanged since the first UCITS directive of 1985
• remuneration policies, including principles to reduce incentives for excessive risk-taking
• sanctions.

The date for the start of the negotiations with the parliament has not yet been determined.

Volker rule: UCITS out of “covered funds” scope

On 10 December, regulators in the US approved the Volcker rule, part of US banking reform legislation.

Under the initial drafts of this rule promoter banks in the US would have been prohibited from investing and trading in their own UCITS funds, which were classified as “covered funds”, one of a number of banned proprietary funds including hedge funds and private equity funds.

The decision not to include UCITS, primarily because of lobbying by European governments and the fact that they are highly regulated, was welcomed by the European fund industry

Luxembourg to strengthen competitiveness of its fund industry

On 18 December, ALFI the Luxembourg fund association issued a press release reviewing the position of the incoming Luxembourg government as regards the fund industry.

In addition to an important action plan against tax fraud and tax evasion, a few of the key points for the financial sector included:

• A commitment to examine the fiscal regime of investment funds in order to enhance competitiveness
• The continuation of efforts to attract alternative investment funds
• Continued diversification into new markets and the launch of a programme around socially responsible investing, including micro-finance and impact finance.

Marc Saluzzi, ALFI Chairman looked forward to “ensuring that Luxembourg remains the partner of choice for asset managers around the globe”.

Reform of the European audit sector

On 17 December, the European Parliament and EU Member States reached a provisional agreement on the reform of the audit sector .

The original proposal on this reform dates back to November 2011 and the most recent agreement, though less ambitious, is significant.

Notably, firms auditing financial institutions and listed companies will be required to rotate every ten years (with possible extensions), joint audits will be encouraged and there will be restrictions on providing non-audit services to audit clients. 

Fundsquare News 5 - December 2013