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Wednesday, December 03, 2008

Manager Passport Clears EU Customs

News summary by MFWire's editors

A new regulation that could shake up mutual fund operations in Europe took a step forward Tuesday when it got a thumbs up from European Union authorities. The EU parliament's economic and monetary affairs committee voted to insert a provision for a full management company passport into the draft law of the undertakings for collective investment in transferable securities (UCITS). The proposal has the support of the EU finance ministers and is expected to make it through the EU parliament next year.

Support for the provision was led by Germany, France and Great Britain, which overcame opposition from Ireland and Luxembourg.

The draft law would revamp the oversight of cross-border mutual fund sales in the 27-member EU. Currently, funds must retain a presence in the country in which their funds are sold. This requirement is believed to offer an advantage to Dublin and Luxembourg, which have both created large support centers for European mutual funds.

Tuesday, the EU committee inserted a provision put forward by France for what is known as management company passport. That provision would allow a firm to offer a fund throughout the EU without having to open local offices in each country. Observers expect the provision to benefit London, Frankfurt and Paris as many European asset managers already have offices in those cities.

Slovakia and Poland had also opposed the passport. Meanwhile, the Irish Funds Industry Association expressed support for the full company passport after the vote.

"The investor will have greater diversity of products and lower cost. It will ensure proper protection of investors, thanks to better supervision," French finance minister Christine Lagarde told the meeting of the EU finance ministers, according to the Irish Times.

An Irish government spokesperson told the paper that: "From a regulatory point of view, while funds are supervised through their management company, we would be concerned that the fund's regulator be in a position to ensure that the fund is operating in accordance with its rules. So for example, the Irish Financial Regulator should have enforcement powers over funds located in Ireland, even if they are managed abroad." 

Edited by: Sean Hanna, Editor in Chief

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