UCITS Brussels 27 November 2007
UCITS represent 75% of investment in Europe but uneven implementation of directives and non-standardised costly notification procedures has led to a further review and a possible revision of UCITS III. Another lively debate with many leading speakers from across the globe gathered on a grey day in Brussels.
Nial Bohan Head of Unit Asset Management, DG Internal Market, European Commission began the UCITS conference praising the success story of UCITs. The directive may be unwieldy but it is based on pure regulatory principles, understood and accepted throughout the world. Problems have been deeply rooted in the drafting but CESRs Trojan work to find sensible solutions to UCITS III is vital. Final proposals should be ready by the end of February with completion expected before April 2009 subject to cooperation of all concerned.
Rather like insurance funds are sold and not bought. The reliable user friendly disclosure document though the simplified prospectus has been subject to failures of design and execution. Distributors do not want to offer excessively complex information to retail investors. Key investor information is not a way to educate clients and it is down to the intermediary to explain.
The directive includes hedge funds but not funds of hedge funds and REITs are also excluded. However whatever is included harmonisation on the key issues is desirable. There is also the question of unfair competition where competing products create the unfair treatment of regulated products. All products should be subject to similar rules but there are so many issues it is a question of prioritisation.
There is no pan European model of comparing products and it is very much about self regulation with some guidance. There are huge differences between countries with the UK having by far the largest density of advisers.
Supervisors are improving with joint training programmes and increasing trust between each other. The home supervisor has the better picture and should be the prudential supervisor and conduct of business is better judged by the host supervisor. Eventually there will have to be a single approach. The impact in a country like Lithuania where most of the banks are foreign owned would leave the local regulator with little to do.
Governments are interested in consumers although consumers only appear from time to time at CESR but CESR are interested in hearing from all stakeholders. So the message is do not just rely on trade bodies but partake in some active engagement with CESR as more and more decision making powers are being centrally delegated to achieve maximum harmonisation, consistency and practical solutions.