The European Fund and Asset Management Association (EFAMA) has welcomed the vote by the European Parliament plenary, formally adopting the trilogue agreement on the Commission's initiative to remove cross-border barriers to the distribution of investment funds.
This marks a decisive 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. It also allows the European Commission more time to conduct a thorough review of the same within one year.
Also welcome is the fact that existing AIFs 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.
Another important result has been the removal of numerical thresholds, initially governing the de-notification of UCITS/AIFs from host Member State jurisdictions under the Commission's original proposal. Such thresholds would have de facto introduced an additional barrier to the cross-border distribution of funds. Yet, some doubts remain with respect to the co-Legislators' rationale to continue requiring the formal notification requirements between home and host competent authorities, despite the end of the marketing regime.
Other results obtained relate to the removal of the requirement for asset management companies to establish a mandatory physical presence in a host jurisdiction as a condition for marketing their funds therein.
In terms of facilitating the cross-border notification procedure to avail themselves of the EU fund distribution passport, management companies will benefit from a centralised and updated information database held by ESMA.
Tanguy van de Werve, EFAMA Director General, says: “The increase in cross-border fund ownership in Europe over the past decade is a welcome development. We expect this trend to continue in the future, driven by technology-enabled access to a larger pool of foreign fund providers. The European Commission’s proposal on facilitating the cross-border distribution of funds will enable consumers to benefit from greater choice at a lower cost, thereby further unlocking the benefits of the CMU.”
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