European Finance Ministers Discuss Deregulation Of Mutual Funds

Ulrika Lomas, Tax-news.com, Brussels

09 October 2000

When EU finance ministers met in Luxembourg at the beginning of the week, the deregulation of mutual funds was one of the main topics on the agenda. The aim was to reach political agreement on deregulation, as the EU nations are still divided on what percentage of funds may be invested in assets not subject to EU rules and in derivative products.

The EU ministers decided, in the end, to relax rules governing investment funds, which can be sold throughout the EU, to broaden the scope of their investments. Proposals for a new draft directive, amending a 1985 directive, would allow mutual funds, known as Ucits (undertakings for collective investment in transferable securities), to invest in a wide range of modern financial instruments.

The new measures would allow Ucits to invest in unlisted money-market instruments, such as commercial paper and bank deposits. It would also allow investment in non-Ucits mutual funds, a measure that would favour funds used by portfolio managers to lower costs. The plan would also ease rules on index-tracking funds in certain European sectors.

Laurent Fabius, the French finance minister who chaired the Luxembourg meeting, described the planned changes as the most important financial services directive for several years. However, the plans still need to be approved by the European Parliament. Agreement also depends on ministers backing a second proposal, which would give fund management firms a European “passport" to operate across EU borders.

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