Transparency and market integrity 'at heart of new EU fund law'

The deal reached today (25 February) between the 28 member states and the European Parliament on amendments to the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive (UCITS V) will strengthen transparency in the EU fund market and improve investor protection.

Vice Chair of the Economic & Monetary Affairs Committee and lead negotiator for the Socialist and Democrats group MEP Arlene McCarthy said: “UCITS funds are a great EU success story. With almost €6 trillion in assets, EU UCITS are easy and simple to use funds which give ordinary investors access to EU financial markets.

“Following the financial crisis, more transparency is needed to ensure that UCITS funds remain trustworthy and that the responsibilities and liability of depositary who look after investors assets are clear and uniform across the EU.

“The rules provide better information for investors and prohibit depositories reusing investors assets.”

On remuneration, McCarthy added:  “We want to ensure that responsible remuneration policies are in place across the financial sector and that there are no loopholes for risky and dangerous trading practices.

“The new rules will bring funds in line with EU bankers bonus rules, as there will be no guaranteed bonuses for fund managers and 40% of bonuses must be deferred.

“Protections for whistleblowers are to be included in the new law and strong sanctions including fines of up to 10% of turnover or twice the profit gained to deter risky rule breaking behaviour.”

The new rules on UCITS funds will come into force in 2016 across the EU. The main elements of the deal are:

o Better information for investors.
o Stronger responsibilities and liability for depositories in charge of safekeeping assets for UCITS funds.
o Increased investor protection as assets cannot be reused by the depository that is in charge of safekeeping them.
o Stronger rules on remuneration including:
o No guaranteed bonuses.
o 40% of bonuses must be deferred.
o ESMA will issue guidelines on which persons shall be covered by the remuneration principles.
o Tougher sanctions for breaches of the Directive:
o For legal persons fines of €5 million or 10% of annual turnover.
o For natural person fines up to €2.5m.
o Fines of twice profit gained by breaches of the rules.
o Protection for whistleblowers and the creation of an ESMA whistleblowing channel.

Share this article: