Concerns over the Commission’s proposal on investment funds that risks creating additional barriers rather than facilitating cross border fund distribution

The European Commission is proposing legislation to tackle the remaining barriers to the cross-border distribution of collective investment funds within Europe. A comprehensive package of measures includes strengthened protections for investors, with controls on pre-marketing and the discontinuation of activities in a member state, the fairness and clarity of marketing communications and the full disclosure of the fees that will be charged. For the funds industry, there is the requirement that national regulators should levy charges that are proportionate to the costs incurred in registration, investigation and supervision. The European Fund and Asset Management Association (EFAMA) welcomes the Commission’s commitment to deepening the Single Market for investment funds. EFAMA has long argued that there is significant room for improvement in terms of overcoming the obstacles to cross-border activity. EFAMA, however, questions whether new legislation, creating new regulations, is likely to prove the most effective tool in this regard. Asset managers and their clients have identified lack of clarity and transparency concerning the existing rules as the main barrier to cross-border activity. It is difficult to see how adding another layer of regulation will improve matters rather than, as seems more likely, add to the existing burden for asset managers. This paper would urge, first, practical steps to reducing these obstacles and the proper enforcement of existing rules, with new legislation as a last resort.