OPINION OF THE COMMISSION pursuant to Article 251 (2), third subparagraph, point (c) of the EC Treaty, on the European Parliament's amendments to the Council's common position regarding the proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Council Directive 85/611/EEC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS), with regard to investments of UCITS - AMENDING THE PROPOSAL OF THE COMMISSION pursuant to Article 250 (2) of the EC Treaty

1998/0243(COD)

OPINION OF THE COMMISSION pursuant to Article 251 (2), third subparagraph, point (c) of the EC Treaty, on the European Parliament's amendments to the Council's common position regarding the proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Council Directive 85/611/EEC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS), with regard to investments of UCITS

1. BACKGROUND

On 17 July 1998 the Commission sent to the European Parliament and the Council a proposal for a directive [1] to amend Directive 85/611/EEC [2] on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS), with regard to investments of UCITS.

[1] COM (1998) 449 final (OJ C 280, 9.9.1998, p. 6).

[2] OJ L 375, 31.12.1985, p. 3. Directive as last amended by Directive 2000/64/EC (OJ L 290, 17.11.2000, p. 27).

The Economic and Social Committee delivered its opinion at its 361st plenary session on 24 and 25 February 1999 [3]. At the request of the Council, the European Central Bank delivered its opinion on 16 March 1999 [4].

[3] OJ C 116, 28.4.1999, p. 44.

[4] OJ C 285, 7.10.1999, p. 9.

On 17 February 2000 the European Parliament adopted its legislative resolution on first reading [5],comprising 24 amendments to the Commission proposal.

[5] OJ C 339, 29.11.2000, p. 220, Rapporteur: O. Schmidt.

On 30 May 2000 the Commission adopted an amended proposal [6] taking account of its consultation of Parliament and the Economic and Social Committee.

[6] COM (2000) 329 final (OJ C 311 E, 31.10.2000, p. 302).

The Council adopted its common position [7] on 5 June 2001.

[7] OJ C 297, 23.10.2001, p. 35.

On 28 June 2001 the Commission adopted its communication to the European Parliament [8] on the Council's common position.

[8] SEC(2001)1003 final.

On 23 October 2001 the European Parliament voted on second reading one amendment to the common position.

2. PURPOSE OF THE PROPOSAL

The main purpose of the proposal is to promote further the cross-border sale of units in collective investment undertakings covered by Community harmonisation and to modernise their investment techniques with a view to boosting yields and competitiveness. This is achieved by extending the freedom to sell throughout the Union to collective investment undertakings investing in certain financial assets other than transferable securities in the strict sense, such as units of other collective investment undertakings, money market instruments, bank deposits and financial derivatives. New transparency rules will ensure that investors are properly informed.

Together with a joint proposal regulating management companies and the introduction of a simplified prospectus [9], this proposal forms part of the Financial Services Action Plan [10], which is due to be completed by 2005.

[9] Commission initial proposal (COM(1998) 451 final) and amended proposal (COM(2000) 331 final): OJ C 311 E, 31.10.2000, p. 273. Council's Common Position: OJ C 297, 23.10.2001, p. 10.

[10] COM(1999)232, 11.05.1999.

3. COMMISSION OPINION ON PARLIAMENT'S AMENDMENTS

On second reading, the European Parliament adopted a single amendment (Amendment 3) to the Council's common position.

For the reasons set out below, the Commission can accept this amendment.

Initially, Amendment 1 was approved by the European Parliament's Committee on Economic and Monetary Affairs. However, this was not adopted because it was superseded by the (nearly identical) Amendment 3, which was adopted instead and contains two different provisions.

First, paragraph 1 requests the European Commission to carry out a five point review programme of analyses and possible proposals for further modifications to the UCITS Directives, within three years of the entry into force of the present Directive.

Second, according to paragraph 2, Member States may grant UCITS existing on the date of entry into force of this Directive a period of no more than 60 months from that date to comply with the new national legislation.

Despite the tight timeframe, the Commission welcomes the review exercise contained in paragraph 1, which it considers as a valuable contribution to the steps which need to be taken in order to keep pace with evolving market practice and further modernise the UCITS Directives.

Regarding the 60-month transition clause introduced by paragraph 2, the Commission would have preferred a shorter period, in order to achieve a quicker incorporation of the new investment rules for all harmonised European investment funds. However, given that Amendment 3 incorporates a revised timeframe, thereby shortening the overall "grandfathering" period as compared with earlier draft amendments (one of which went as far as to propose unlimited grandfathering), the Commission can accept the final transition clause of Amendment 3 with a view to reaching a compromise and achieving swift adoption of the UCITS Directives.

4. CONCLUSIONS

The Commission therefore fully accepts the amendment voted by the European Parliament on second reading.