WRITTEN QUESTION E-2044/96 by Marlies Mosiek-Urbahn (PPE) to the Commission (19 July 1996)

Subject: Restriction of the movement of capital and services for unit trusts in Austria

Austrian capital market legislation specifies that an offer to the public of securities and unit trusts, even if the issuer is from an EU Member State, requires the prior publication of an approved prospectus and the issue of an annual report in Austria, even where the securities meet the harmonized standards in the state of domicile of the issuer and are subject to state supervision applicable to free capital markets. There are exemptions from this prospectus and reporting requirement.

They do not apply, however, to foreign securities and unit trusts relating to the property sector; the Austrian provisions make no distinction between EU Member States and third countries. Furthermore, there is no exemption from the obligation to produce a prospectus for units from open-ended unit trusts as these are not covered by Directive 80/390/EEC ((OJ L 100, 17.4.1980, p.1. )) which provides for exemptions.

However as units from open-ended unit trusts in the property sector are subject to the free movement of capital and services, the additional Austrian requirement for a prospectus for securities, for which there is already a prospectus in the country of domicile which conforms to Union law, represents an obstacle and thus an illegal restriction.

1. What steps has the Commission taken to remove this unlawful obstacle to the free movement of capital and services?

2. What deadlines have been set for the Republic of Austria?

Answer given by Mr Monti on behalf of the Commission (18 September 1996)

When selling units of collective investment undertakings to the public, the overriding responsibility for Member States will be to guarantee a high level of investor protection. This must not be conceived, though, as a barrier to the free movement of capital inside the Community but as a complement to it.

Currently, Community legislation (Directive 85/611/EEC ((OJ L 375 of 31.12.1985. )) of December 1985) only harmonizes the units of certain unit trusts, basically the units marketed by most open-ended undertakings for collective investment in transferable securities (UCITS). Units from open-ended unit trusts which invest in the property sector fall outside the scope of the Directive. This means that, in principle, Member States are free to impose conditions on the marketing of those units deemed necessary and justifiable on public good grounds, which conditions may be more restrictive than in the case of harmonized units. This possibility has not been modified by the adoption of the directive on investment services (Directive 93/22/EEC ((OJ L 141 of 11.6.1993. )) of 10 May 1993) which clearly states in the second paragraph of Article 14.1 that 'This Directive shall not affect the powers of host Member States in respect of the units of collective investment undertakings to which Directive 85/611/EEC does not apply'.

Article 46 of Directive 85/611/EEC states that before harmonized units are sold in another Member State, the host competent authorities must receive:

- an attestation by the home competent authorities that the unit trust fulfils the conditions imposed by the Directive;

- its funds' rules or its instruments of incorporation;

- its prospectus;

- where appropriate, its latest annual report and any subsequent half-yearly report and

- details of the arrangements made for the marketing of the units.

In addition, Article 47 of the same Directive describes the language regime to be followed in the host Member State.

In view of this it seems evident that Austria applies basically the same rule for the units of open-ended unit trusts investing in the property sector as for harmonized units and therefore the Commission does not see the need for action along the lines proposed by the Honourable Member.