UCITS Upgraded – Could this be a genuine benefit from the EU?

Aware that I am even more Euro-sceptical than most,

it is really quite rare for me to suggest that an EU action might genuinely provide a benefit, either to the industry or to consumers. But so it is this time. However, as no silver lining comes without its cloud, we will get the good news quickly out of the way so that we can then focus on the inevitable drawbacks.

For really quite a long time, like ten years, the European Commission has been trying to introduce a ‘management company passport’ for UCITS. After a number of ham-fisted attempts, they may have finally pulled this off in UCITS IV. The purpose of the management company passport is to make it possible for a UCITS operator (NB we are not talking about the investment manager) to run a UCITS fund that is domiciled in another EEA country. However modest that may sound, it is quite a significant step and tackles head on the protectionism that is particularly noticeable in Dublin and Luxemburg. It is not difficult to see why this passport might be unpopular in countries that have developed financial services on an entirely export basis with no significant domestic sales. The regulators in those nations have little interest in investor protection and much in attracting the regulatory arbitragers and the business that clings to the coat-tails of investment funds, so well evidenced by the branches and subsidiaries established in those jurisdictions.

But for the UK it is a different story.