CESR's consultation paper follows the decision of the ECOFIN Council on 3 December 2002 and anticipates the proposal for a Directive by the Commission. This Directive will bring into being the extension of the 'Lamfalussy procedure' to other sectors as agreed at ECOFIN and will include the transfer of UCITS responsibilities to the European Securities Committee and to CESR. At present regulatory issues related to collective portfolio management are considered by the UCITS Contact Committee established by the European Commission. In the meantime, CESR was invited to attend the UCITS Contact Committee, and already attends in an observer capacity.
Securities regulation and supervision has traditionally included within its scope the regulation of collective investment schemes, therefore, all CESR members are also the competent authorities responsible for implementing the UCITS Directive. For this reason, the effect of bringing UCITS within the ambit of CESR represents a rationalisation of the new regulatory structure for European financial services established under the Lamfalussy process. This will also ensure that regulators are better placed to ensure the rights and obligations of the securities industry on both the 'sell side' and 'buy side' (including both individual and collective asset management) are managed coherently on EU wide basis.
CESR sets out the three principles that will underpin its work in this area until it formally receives responsibility for providing advice to the Commission for portfolio management activities from the European Union.
These principles include the commitment that:
- Any future work done by CESR regarding UCITS would have to be conducted in full coherence with the EU institutional framework.
- CESR should take in a global vision of the so-called "buy side", and not limit its activities to investment funds.
- Account should be taken of the outcome of work already done by the International Organisation of Securities Commissions (IOSCO).
- Areas where supervisory convergence should be achieved, such as:
- Elaboration of common supervisory techniques by exchanging experiences and developing standards regarding, in particular, risk management, marketing policy, fee structures, and conflicts of interest
- Co-operation between competent authorities concerning Asset Management companies being active in several Member States
- New activities in the UCITS sector (e.g. distribution techniques)
- Collection of data by supervisors.
- Areas where input to ensure the harmonized implementation of the UCITS Directive could be provided to the UCITS Contact Committee, ideally on its request. In relation for example to:
- Depositories
- Outsourcing/delegation of functions
- Scope of the passport of asset management companies
- Use of indexes
- Money-market instruments
- Areas not harmonised at EU level but where a common approach by regulators is necessary:
- Non-harmonised Collective Investment Schemes (such as real-estate funds, and possibly private-equity funds)
- Hedge funds
- Areas where consistency with other EU Directives are needed:
- Investment Services Directive (ISD) - passport issues, conduct of business rules (regarding for example, best execution and conflicts of interest);
- International Accounting Standards (IAS) - in particular its impact on listed UCITS, consolidation and the scope of application;
- Distance Marketing Directive
- E-Commerce Directive
In order to accomplish these new tasks CESR proposes the establishment of a Consultative Working Group of market participants in the sector which will include practitioners, consumers and end-users. The role of this consultative working group would be to provide technical expertise to the provisional Expert Group and to express an opinion on the proposed priorities of the Expert Group.
All interested parties are invited to comment on this consultation paper by 1 December and to attend an open hearing at CESR's offices in Paris on 20 November 2003.
