sou · H7B344 · 2019-11-04 00:00:00 — The Inquiry proposes that the procurement to be used in the selection should be reviewable by an administrative court. This will provide a check that the selection is performed within discretion. The Inquiry therefore finds that there is no tension between having the ambition of procuring the best possible funds for the fund marketplace and making the necessary assessments of suitabil- ity when doing so while doing this in a legally certain and sufficiently transparent way. What funds should it be possible to procure for the fund marketplace of the premium pension? Under our terms of reference, the Inquiry is to draft proposals for a regulatory framework for the procurement of funds for the fund marketplace of the premium pension. The proposals made should start from the ’s agreement. ’s agreement states that the funds to be offered in the fund marketplace for the premium pension should be procured in the private market and the State should not itself have any funds in the fund market- place. Our terms of reference also state that it is funds, and not fund managers, that should be procured. The Inquiry sees clear advantages in procuring capital manage- ment services rather than individual funds. Solutions of that kind would enable savers to influence their own risk level and investment approach, which the Inquiry sees as the most relevant aspects of freedom of choice in pension saving, at the same time as this would enable the costs of the system to be kept at a minimum level. The type of aggressive and misleading marketing that has been relatively common in the premium pension system would cease entirely. Moreover, the risk of fraud would be minimised. However, our terms of reference do not provide scope for the Inquiry to present pro- posals for a regulatory framework with that direction. The objective of the premium pension system should steer what types of funds it should be possible to procure for the fund marketplace of the premium pension The proposed objective of the premium pension system and the role of the fund marketplace for achieving that objective and the principle of freedom of choice must, in the view of the Inquiry, steer what types of funds it should be possible to procure for the fund market- place. In this context, types of funds means the different types of funds defined in the commercial law frameworks and that are covered by different regulations. The regulations can, for instance, apply to what asset the funds’ money may be invested in and to what investors they may be marketed to. Swedish UCITS-funds and spe- cial funds are examples of different types of funds. According to the Inquiry’s proposal, the procured fund market- place should contribute to the achievement of the objective of the premium pension system by offering a selection of funds suitable for the premium pension system with different risk levels and invest- ment approaches that provides real freedom of choice. The funds should be cost-effective, sustainable, controllable and of high quality. The requirements that the funds should be cost-effective, sustain- able, controllable and of high quality are best assessed in relation to individual funds, not in relation to different types of funds. Ensuring that the funds procured do meet these requirements is therefore something that should be done in the first place through the spe- cifications set in the procurements and the award criteria used to award fund agreements. The requirement that the funds should be appropriate for the premium pension system can be assessed in relation to individual funds and different types of funds. So, in assessing which type or types of funds it should be possible to procure to the fund marketplace, what is of prime importance is therefore how the different types of funds can contribute to pension savers being offered a selection of funds appropriate for the premium pension system with different risk levels and investment approaches that provides real freedom of choice. Against this background, what risk levels and investment approaches the different types of funds can have is of importance. In assessing which types of funds it should be possible to procure for the fund marketplace, another important consideration is which pension savers can be assumed to want to place their premium pen- sion assets in funds in the fund market place. The starting point of the choice architecture proposed by the Inquiry is that this concerns individuals who both want to and have the knowledge required to make such a choice. However, these savers are still to be regarded as non-professional investors according to law. The Inquiry considers that the types of funds currently available in the market satisfy the need of funds for the fund market place. So, in the view of the Inquiry, there is no need to investigate in depth and propose regulations that involve the creation of a new type of fund solely for the premium pension system. It should be possible to procure Swedish and foreign UCITS-funds as well as special funds and foreign equivalents of such funds for the fund marketplace of the premium pension The Inquiry proposes that it should be possible to procure mutual funds and fund companies that are already permitted in the fund marketplace for the premium pension’s fund marketplace. These include funds with a number of investment approaches such as equity funds, mixed funds and fixed income funds that can, in turn, focus on different industries and geographical areas. Risk levels can vary depending on the funds’ investment approaches. In the view of the Inquiry, the great range of mutual funds and fund companies create good conditions for the new agency to procure funds that maintain high quality and have low fees, in addition to having different risk levels and investment approaches. The characteristics of the mutual funds and fund companies and the great range of funds therefore mean that the funds should be able to contribute to the role of the fund market place in achieving the objective of the premium pension system and maintaining the principle of freedom of choice. In addition, the Inquiry proposes that it should also be possible to procure special funds and the foreign equivalents of such funds for the fund marketplace. The characteristics of the special funds, including the fact that they can have different investment approaches from mutual funds, and the fact that there is a relatively large range of funds, also mean that the special funds ought to be able to con- tribute to the role of the fund marketplace in achieving the objective of the premium pension system and maintaining the principle of freedom of choice, including by increasing freedom of choice for pension savers. A special fund only needs to be open for redemption once a year. To ensure that the funds offered in the fund marketplace are liquid, it should only be possible to procure special funds and the foreign equivalents of such funds if they are open for redemption at least once a week. In the view of the Inquiry other types of funds are not appropriate for the premium pension system, so it should not be possible to procure them for the fund marketplace. Are there applicable regulatory frameworks for procurement? The remit of the Inquiry includes proposing a regulatory framework for procurement of funds for the fund marketplace of the premium pension. When assessing the legal possibilities of drafting such a framework, account must be taken of the competence of the EU in the area. Competence is shared between the EU and Member States in the area of social security. Member States have the right to design their own social security systems. In the Inquiry’s assessment, however, the procurement of funds for the fund marketplace of the premium pension cannot be held to fall outside the competence of the EU on the grounds that the procurement is being carried out as part of a social security system. Competence regarding public procurement is also shared between the EU and Member States. The EU has adopted several directives in the area of procurement. The procurement directives and the Swedish acts that implement these directives in Swedish law regulate how a contracting authority has to act when selecting one or more suppliers in the acquisition of goods, services or works contracts. To ensure that the contracting authority acts in an open, market- oriented and non-discriminatory way, the regulatory frameworks contain regulations about how the selection and award have to be carried out. The Inquiry makes the assessment that the procurement of funds for the fund marketplace of the premium pension does not fall within the scope of any of the procurement directives or any of the procurement acts. This means that there are no legal obstacles to introducing a special regulatory framework for the procurement of funds for the fund marketplace. However, if one of the procurement acts is judged to be suitable for the procurement of funds for the fund marketplace, there is, in the view of the Inquiry, no need to propose a new regulatory frame- work. The Inquiry has therefore analysed whether any of the pro- curement acts should nevertheless be applied to this type of pro- curement. The assessment of the Inquiry is that this should not be done. The act that could be considered for application to the procurement of funds for the fund marketplace for the premium pension is the Public Procurement Act. In the view of the Inquiry, there is no need for a regulatory framework as extensive, detailed and complex as that Act in the procurement of funds for the fund marketplace. In the Inquiry’s opinion, a separate regulatory framework should be drafted for the procurement of funds for the fund marketplace for the pre- mium pension. Starting point for new regulations A regulatory framework for the procurement of funds for the fund marketplace for the premium pension should be flexible and spe- cially geared to the fact that the procurements relate to funds to be offered in the fund marketplace. The means, for instance, that the requirements that the funds should be cost-effective, sustainable, controllable and of high quality and should also be appropriate for the premium pension system should be expressed in the regulatory framework. In the first place, the regulatory framework should set out the limits of the new agency’s scope for action without com- promising with the requirement of legal certainty. In the Inquiry’s assessment a fund agreement is a ‘contract having a certain cross-border interest’, i.e. it may be of interest to a fund manager established in another . This means that the fundamental principles of procurement (the principles of non-dis- crimination, equal treatment, transparency, proportionality and mutual recognition) are applicable even though the procurement falls outside the scope of the EU’s procurement directives. The regu- latory framework for the procurement of funds for the fund market- place should therefore be based on these principles. General principles for procurement of funds for the fund marketplace of the premium pension Our terms of reference state that the procurement of funds for the fund marketplace for the premium pension should be conducted according to general principles of freedom of choice, sustainability and controllability. The Inquiry’s terms of reference include pro- posing a regulation of these principles. Principle of freedom of choice As part of the role of the fund marketplace in achieving the objective of the premium pension system and maintaining the principle of freedom of choice, the Inquiry proposes that the new agency should procure funds with different risk levels and investment approaches on such a scale that the selection of funds in the fund marketplace for the premium pension gives pension savers real freedom of choice. The proposed regulation ensures that freedom of choice in the fund marketplace is maintained. It is not possible to give an exact definition of what is meant by or should be meant by real freedom of choice, since the meaning of the term is subjective and therefore depends to a great extent on the ’s values. However, the Inquiry considers that a definition suitable as a starting point is that there should be a freedom of choice that means that the selection of funds is broad enough to satisfy most of the pension savers interested in making their own choices. The starting point should be generally accepted fund categories in the light of the best industry standards at any particular time. A fund agreement should, according to the Inquiry’s proposal, contain conditions requiring the fund manager to take account of environment, social responsibility and governance, ‘ESG factors’, in their management. A minimum requirement should be that, in their management, the fund manager shall observe what follows from international agreements has entered into that concern sustain- ability issues. It will be up to the new agency to design these conditions in greater detail in the agreements. Passing this matter on to the new agency makes it possible to adapt the requirement to different methods of taking account of ESG factors in management. It will then be possible to take account of circumstances such as what assets the fund invests in and the size of the fund manager. This kind of regula- tion also makes it possible to adapt the requirement both to the development of the market and to future legislative changes. One expression of the principle of controllability is that the fund managers and funds that participate in the fund marketplace are covered by licensing requirements and are subject to supervision. The commercial law framework containing regulations about licens- ing requirements and supervision means that there are possibilities of ensuring that the fund managers and funds participating in the fund marketplace are conducting sound and safe activities. However, since private funds will be admitted to a state fund marketplace that is part of a compulsory social insurance system, it is reasonable for savers to assume that the State is taking a special responsibility for the quality and soundness of the funds that goes beyond what follows from the commercial law framework. Therefore, in the view of the Inquiry, the funds offered in the fund marketplace cannot be considered to be subject to sufficient control in that the fund managers and funds are covered by licensing requirements and subject to super- vision. To ensure that the fund managers and funds meet the require- ments for participation in the fund marketplace – and that the range of funds is therefore secured and controlled – the Inquiry proposes that the new agency should audit that the fund managers and funds always meet the conditions of their fund agreements. To be able to conduct this audit, the agency has to receive information from the fund managers. A fund agreement should therefore, according to the Inquiry’s proposal, contain conditions about an obligation for fund managers to provide information to the new agency and to also assist in audit and monitoring work in other ways. The new agency and the Swedish Financial Supervisory Authority have different responsibilities regarding fund managers and funds. Both agencies can benefit from an exchange of information, par- ticularly in terms of effectiveness. Such an exchange of information also increases the protection for pension savers. The Inquiry there- fore proposes an obligation for the Swedish Financial Supervisory Authority and the new agency to collaborate and exchange in- formation. If the new agency is to be able to ensure that fund managers and funds are following the conditions of their agreements, it is, in the view of the Inquiry, of crucial importance that there are not too many funds in the fund marketplace. In practice, the possibilities of effective audit set limits on how many funds can be offered in the fund marketplace. Given the number of savers who choose funds in the fund marketplace, there is also a limit to the amount of resources it is reasonable to put into audit and the size of the organisation to be built up for this purpose. The number of funds in the fund market- place should therefore not be so great that the agency is unable to perform its audit task in a secure and effective way with reasonable resources. In assessing how many funds should be procured for the fund marketplace, the new agency should therefore take account of the fact that it will have to be possible to audit the fund managers and funds in a certain and effective way. A regulatory framework for procurement of funds for the fund marketplace for the premium pension The Simplification Inquiry’s proposal of simpler and more flexible procurement regulations should serve as a model When it comes to proposing a new regulatory framework for the procurement of funds for the fund marketplace for the premium pension, the existing procurement acts are natural starting points. There is a value in the rules that apply to a particular area also being designed in a similar way – to the extent that they deal with the same or closely related subjects. With regard to a procedure like procure- ment, it goes without saying that regulations of a certain kind will always be needed, irrespective of what is being acquired. The Inquiry considers that the Public Procurement Act – and especially its regulations for procurement in the area not steered by directives – can serve as a model in designing the new regulatory frame- work. In 2018 the Inquiry on Certain Simplified Procurement Regulations (the Simplification Inquiry) presented its report Possible, permitted and accessible – proposals for simpler and more flexible pro- curement regulations and certain regulations about review cases.1 The report includes proposals about how the regulations on procure- ment under the EU thresholds in the Public Procurement Act can be made simpler and more effective. These proposals are currently being processed by the Government Offices. The remit of the Simplification Inquiry – to propose simpler and more flexible procurement regulations – coincides with the starting points of the regulatory framework for procurement that this Inquiry is tasked with proposing. Moreover, in designing its legislative pro- posals, the Simplification Inquiry has taken account of what is required under EU law if a contract has a certain cross-border interest. Against this background, the Inquiry considers that the Simplifica- tion Inquiry’s proposal of regulation for procurements under EU thresholds in Chapters 19 and 19 a of the Public Procurement Act should serve as a model for the design of the procedural regulations that should apply to the procurement of funds for the fund market- place. 1Möjligt, tillåtet och tillgängligt – förslag till enklare och flexiblare upphandlingsregler och vissa regler om överprövningsmål (SOU 2018:44). This does not mean that the legislative proposals are identical. Some regulations proposed by the Simplification Inquiry have no equivalent in the Inquiry’s proposal. The Inquiry also proposes certain regulations that are specially adapted to the fact that the procurement relates to funds to be offered in the fund marketplace. The regulations are shaped by the requirements that have to be set for the funds procured if the fund marketplace is to contribute to the achievement of the objective of the premium pension system and to maintaining the principle of freedom of choice. Requirements for the funds to be procured The premium pension is part of the national public pension and, as such, part of the social insurance system, for which there is a state responsibility. This means there is reason to set particularly high requirements for the funds offered in the premium pension system. According to the Inquiry’s proposal, the funds procured to be offered in the fund marketplace should be appropriate for the pre- mium pension system. To ensure this, the new agency should set mandatory requirements in the procurements that are aimed at suitability. The term mandatory requirements means requirements that must be met for a tender to qualify for evaluation. If these requirements are not met, the tender has to be rejected. The require- ments should be formulated on the basis that the premium pension is a social insurance system and that pension savers should be able to feel high confidence in the premium pension system and the par- ticipants in it. The Inquiry also proposes that the funds procured to be offered in the fund marketplace should be cost-effective, sustainable, con- trollable and of high quality. The requirement that the funds should be cost-effective is pri- marily aimed at the size of the administration fee, but other aspects linked to the fund category that is the subject of the procurement can also be taken into account. As regards the requirement that the funds should be sustainable the Inquiry proposes, as set out above, that a fund agreement should contain conditions requiring the fund manager to take account of ‘ESG factors’ in their management. The requirement that the funds should be controllable mainly refers to the complexity of a fund. A fund should not be considered to be controllable if it has such a high degree of complexity that the agency cannot audit it in a satisfactory way with a reasonable input. The requirement concerning quality has a great deal to do with the fund manager’s ability to generate future returns. This can, for example, cover the fund’s return, risk, return in relation to risk, investment approach and management model, qualifications and experience of those managing the fund, the fund manager’s owner, leadership and organisation, the fund manager’s business models, internal processes and incentive structures and significant events and staff turnover at the fund manager. If the fund marketplace is to be able to contribute to the achieve- ment of the objective of the premium pension system, it is of central importance that the funds procured to be offered in the fund marketplace meet these requirements. It is up to the new agency to ensure through its design of the mandatory requirements and award criteria in its procurements that the funds procured meet these requirements. The Inquiry proposes a number of procedural regulations that should apply to the procurement of funds for the fund marketplace for the premium pension. This includes regulations about notices, procure- ment documentation, forms of communication, deadlines, informa- tion about decisions, documentation, the award of fund agreements and direct awards. In all essential respects the provisions have been designed on the model of the Simplification Inquiry’s proposal. In addition, the Inquiry proposes that it should be possible to review a procurement of funds for the fund marketplace and the validity of a fund agreement. As part of this the Inquiry proposes provisions on standstill periods, review and damages. In all essential respects the provisions correspond to the provisions in Chapter 20 of the Public Procurement Act. The relationship between the new agency and a fund manager will be regulated in the fund agreement, i.e. it will be based on civil law. The Inquiry’s proposals include provisions about the minimum condi- tions a fund agreement must contain. The term of a fund agreement must not exceed twelve years, according to the Inquiry’s proposal. Transition to a procured fund marketplace Our terms of reference state that the Inquiry is to propose how the transition from the present fund marketplace to the procured fund marketplace should take place. The transition should be gradual, show care about the needs of pension savers, be cost-effective and lead to as limited effects on the capital market as possible.