Amended proposal for a Directive of the European Parliament and of the Council amending Directive 85/611/EEC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) with a view to regulating management companies and simplified prospectuses - (presented by the Commission pursuant to Article 250(2) of the EC Treaty)
Date: 2000-05-30
Institutions: European Commission
Subjects: approximation of laws, financial legislation, freedom to provide services, investment company, securities

31.10.2000

EN

Official Journal of the European Communities

C 311 E/273

Amended proposal for a Directive of the European Parliament and of the Council amending
Directive 85/611/EEC on the coordination of
laws, regulations and administrative provisions
relating to undertakings for collective investment in transferable securities (UCITS) with a view
to regulating management companies and simplified prospectuses (1)

(2000/C 311 E/20)

(Text with EEA relevance)

COM(2000) 331 final (cid:151) 98/0242(COD)

(Submitted by the Commission pursuant to Article 250(2) of the EC Treaty on 30 May 2000)

(1) OJ C 272, 1.9.1998, p. 7.

INITIAL PROPOSAL

AMENDED PROPOSAL

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE
EUROPEAN UNION,

Unchanged

Having regard to the Treaty establishing the European
Community, and in particular Article 57(2) thereof,

Having regard to the Treaty establishing the European
Community, and in particular Article 47(2) thereof,

Having regard to the proposal from the Commission,

Unchanged

Having regard to the opinion of
Committee,

the Economic and Social

Having regard to the opinion of
Committee (1),

the Economic and Social

Acting in accordance with the procedure laid down in Article
189b of the Treaty,

Acting in accordance with the procedure laid down in Article
251 of the Treaty,

Whereas:

(1) Whereas Directive 85/611/EEC on undertakings

for
collective investment in transferable securities (UCITS) (1),
as last amended by Directive 88/220/EEC (2), has already
contributed substantially to the achievement of the Single
Market in this field, laying down (cid:151) for the first time in
the financial services sector (cid:151) the principle of mutual
recognition of authorisation and other provisions which
facilitate the free circulation within the European Union of
the units of the collective investment undertakings (unit
trusts/common funds or
companies)
covered by that Directive.

investment

as

(1) Directive 85/611/EEC on undertakings

for

has

collective
in transferable securities (UCITS) (2), as last
investment
95/26/EC (3),
already
by Directive
amended
the
contributed substantially to the achievement of
Single Market in this field,
laying down (cid:151) for the first
time in the financial services sector (cid:151) the principle of
mutual recognition of authorisation and other provisions
which facilitate the free circulation within the European
Union of the units of the collective investment under-
takings
investment
companies) covered by that Directive.

trusts/common funds or as

(unit

___________
(1) OJ L 375, 31.12.1985, p. 3.
(2) OJ L 100, 19.4.1988, p. 31.

___________
(1) OJ C 116, 28.4.1999, p. 1.
(2) OJ L 375, 31.12.1985, p. 3.
(3) OJ L 168, 18.7.1995, p. 7.

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Official Journal of the European Communities

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INITIAL PROPOSAL

AMENDED PROPOSAL

(2) Whereas, Directive 85/611/EEC does not regulate to a
the companies which manage collective
great extent
(cid:145)management
(so-called
undertakings
investment
companies(cid:146)); whereas, in particular, Directive 85/611/EEC
lay down provisions assuring in all Member
does not
States equivalent market access
rules and operating
conditions
such companies; whereas, Directive
85/611/EEC does not lay down provisions regulating the
establishment of branches and the free provision of
services by such companies in Member States other than
their home Member State.

for

(3) Whereas,

the financial

authorisation granted in the management
company’s home Member State must ensure investor
system;
protection and the stability of
whereas the approach adopted is to ensure the essential
harmonisation necessary and sufficient
to secure the
mutual recognition of authorisation and of prudential
supervision systems, making possible the grant of a
the European
single
Union and the application of the home Member State
supervision.

authorisation valid throughout

(2) However, Directive 85/611/EEC does not regulate to a
the companies which manage collective
great extent
(cid:145)management
(so-called
undertakings
investment
companies(cid:146)); in particular, Directive 85/611/EEC does not
lay down provisions assuring in all Member States
equivalent market access rules and operating conditions
for such companies; Directive 85/611/EEC does not lay
of
down
branches and the free provision of services by such
companies in Member States other
than their home
Member State.

establishment

provisions

regulating

the

is

(3) Authorisation granted in the management company’s
home Member State must ensure investor protection
and the stability of the financial system; the approach
adopted
essential harmonisation
the
necessary and sufficient to secure the mutual recognition
of authorisation and of prudential supervision systems,
making possible the grant of a single authorisation valid
throughout the European Union and the application of
the home Member State supervision.

to ensure

(4) Whereas it is necessary, for the protection of investors, to
guarantee the internal supervision of every management
company
two-man
management and by adequate internal control mech-
anisms.

in particular by means of

a

(4) It is necessary, for the protection of investors, to guarantee
the internal overview of every management company in
particular by means of a two-man management and by
adequate internal control mechanisms.

(5) Whereas by virtue of mutual recognition, management
companies authorised in their home Member States shall
be permitted to carry on the services for which they have
received authorisation throughout the European Union by
establishing branches or under the freedom to provide
the fund rules of
the approval of
services; whereas
common funds/unit
trusts falls within the competence
of the management company’s home Member State.

(5) By virtue of mutual recognition, management companies
authorised in their home Member States
shall be
permitted to carry on the services for which they have
received authorisation throughout the European Union by
establishing branches or under the freedom to provide
the fund rules of common
services;
funds/unit
the
management company’s home Member State.

falls within the competence of

the approval of

trusts

of

unit

funds

the unit

trusts/common

(6) Whereas, with regard to collective portfolio management
and
(management
investment companies),
the authorisation granted to a
management company authorised in its home Member
State should permit the company to carry on in host
Member States the following activities: to distribute the
trusts/common funds set up by the
units of
company in its home Member State;
to distribute the
shares of the investment companies, managed by such a
company; to perform all the other functions and tasks
included
portfolio
in
management;
investment
companies incorporated in Member States other than its
home Member State;
to perform, on the basis of
mandates, on behalf of management companies incor-
porated in Member States other than its home Member
State, the functions included in the activity of collective
portfolio management.

the
to manage

assets of

collective

activity

the

of

(6) With

funds

to
of

the unit

trusts/common

portfolio management
collective
regard
and
(management
unit
investment companies),
the authorisation granted to a
management company authorised in its home Member
State should permit the company to carry on in host
Member States the following activities: to distribute the
trusts/common funds set up by the
units of
company in its home Member State;
to distribute the
shares of the investment companies, managed by such a
company; to perform all the other functions and tasks
portfolio
included
in
management;
investment
companies incorporated in Member States other than its
home Member State;
to perform, on the basis of
mandates, on behalf of management companies incor-
porated in Member States other than its home Member
State, the functions included in the activity of collective
portfolio management.

the
to manage

assets of

collective

activity

the

of

31.10.2000

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INITIAL PROPOSAL

AMENDED PROPOSAL

(7) Whereas this Directive represents therefore an important
in the field of

step to complete the Single Market
collective investment undertakings.

(7) This Directive represents therefore an important step to
in the field of collective

complete the Single Market
investment undertakings.

of

of

that

State

content

operations,

programmes

supervision require

(8) Whereas the principles of mutual recognition and of
home Member
the
Member States’ competent authorities should not grant
or should withdraw authorisation where factors, such as
the
the
geographical distribution or the activities actually carried
on indicate clearly that a management company has opted
for the legal system of one Member State for the purpose
of evading the stricter standards in force in another
Member State within the territory of which it intends to
carry on or does carry on the greater part of its activities;
whereas, for the purpose of this Directive, a management
company must be authorised in the Member State in
which it has its registered office; whereas, in accordance
with the principle of the home country control, only the
Member State in which the management company has its
registered office can be considered competent to approve
the fund rules of unit trusts/common funds set up by such
a company and the choice of the depositary;

(9) Whereas Directive 85/611/EEC limits

to

the

the

sole

activity

companies

trusts/common funds

scope of
of
management
management of unit
and of
investment companies (collective portfolio management);
whereas,
in order to take into account recent devel-
opments in national legislation of Member States and to
permit such companies to achieve important economies
of scale, it is desirable to revise this restriction; whereas
therefore it is desirable to permit such companies to carry
out also the activity of management of portfolios of
(individual
basis
investments
portfolio management)
including the management of
pension funds as well as some specific non-core activities
linked to the main business; whereas such an extension of
the scope of the activity of the management company
would not prejudge the stability of such companies;
whereas, however,
shall be introduced
specific rules
preventing
interest when management
companies are authorised to carry on both the business
of collective and individual portfolio management.

client-by-client

conflicts of

on

a

(8) The principles of mutual

of

the

stricter

in force

operations,

programmes

recognition and of home
Member State supervision require that
the Member
States’ competent authorities should not grant or should
withdraw authorisation where factors, such as the content
of
geographical
distribution or the activities actually carried on indicate
clearly that a management company has opted for the
legal system of one Member State for the purpose of
evading the
in another
standards
Member State within the territory of which it intends to
carry on or does carry on the greater part of its activities;
for the purpose of this Directive, a management company
must be authorised in the Member State in which it has
its registered office; in accordance with the principle of
the home country control, only the Member State in
which the management company has its registered office
can be considered competent to approve the fund rules of
unit trusts/common funds set up by such a company and
the choice of the depositary; in order to prevent super-
visory arbitrage and to promote confidence in the effec-
tiveness of supervision by the home Member State auth-
orities, a requirement for authorisation of a UCITS must
be that it should not be prevented in any legal way to be
marketed in its home Member State; this does not affect
the free decision, once the UCITS has been authorised, to
chose the Member State(s) where the units of the UCITS
shall be marketed in accordance with this directive.

investment

therefore it

is desirable to permit

(9) Directive 85/611/EEC limits the scope of management
companies to the sole activity of management of unit
trusts/common funds
companies
and of
in order to take into
(collective portfolio management);
account recent developments in national
legislation of
Member States and to permit such companies to achieve
important economies of scale, it is desirable to revise this
restriction;
such
companies to carry out also the activity of management
of portfolios of
investments on a client-by-client basis
the
(individual
management of pension funds as well as some specific
non-core activities linked to the main business; such an
extension of the scope of the activity of the management
such
company would not prejudge the stability of
companies; however, specific rules shall be introduced
preventing
interest when management
companies are authorised to carry on both the business
of collective and individual portfolio management.

portfolio management)

conflicts of

including

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Official Journal of the European Communities

31.10.2000

INITIAL PROPOSAL

AMENDED PROPOSAL

(10) Whereas the activity of management of portfolios of
investments is an investment service already covered by
Directive 93/22/EEC (Investment Services Directive (cid:151)
ISD) (1) whereas, in order to ensure a homogeneous regu-
it is desirable to subject
latory framework in this area,
management
authorisation of which
the
covers also that service to the operating conditions laid
down in the ISD.

companies

(10) The activity of management of portfolios of investments is
service already covered by Directive
an investment
93/22/EEC (Investment Services Directive (cid:151) ISD) (1);
in
order to ensure a homogeneous regulatory framework in
this area, it is desirable to subject management companies
the authorisation of which covers also that service to the
operating conditions laid down in the ISD.

(11) Whereas a home Member State may, as a general rule,
than those laid down in this
establish rules
Directive, in particular as regards authorisation conditions,
prudential requirements and the rules of reporting and
prospectuses.

stricter

(11) A home Member State may, as a general rule, establish
in
rules stricter than those laid down in this Directive,
particular as regards authorisation conditions, prudential
requirements and the rules of reporting and prospectuses.

(12) Whereas it is desirable to lay down rules defining the
pre-conditions under which a management company
may delegate, on the basis of mandates, specific tasks
and functions to third parties so as to increase the effi-
ciency of the conduct of its business; whereas, in order to
ensure the correct functioning of the principles of mutual
recognition of the authorisation and of the home country
control, Member States permitting such delegations shall
the management company to which they
ensure that
granted an authorisation does not delegate globally its
functions to one or more third parties, so as to become
an empty entity, and the existence of mandates does not
the management
hinder an effective supervision over
the
that
fact
the
however,
company; whereas,
management company delegated own functions shall
in
no case affect the liabilities of that company and of the
depositary vis-(cid:224)-vis the unit holders and the competent
authorities.

(12) It

is

to

lay

defining

desirable

down rules

the authorisation and of

the
pre-conditions under which a management company
may delegate, on the basis of mandates, specific tasks
and functions to third parties so as to increase the effi-
ciency of the conduct of its business; in order to ensure
the correct functioning of the principles of mutual recog-
nition of
the home country
control, Member States permitting such delegations shall
the management company to which they
ensure that
granted an authorisation does not delegate globally its
functions to one or more third parties, so as to become
an empty entity, and the existence of mandates does not
hinder an effective supervision over
the management
the management
that
fact
company; however,
company delegated own functions shall in no case affect
the liabilities of
the depositary
that company and of
vis-(cid:224)-vis the unit holders and the competent authorities.

the

(13) Whereas

it

take

into
it

developments

in particular,

account
of
to
information techniques,
is desirable to revise the
current information framework provided for in Directive
85/611/EEC; whereas,
is desirable to
introduce,
in addition to the existing full prospectus, a
new type of prospectus for UCITS (simplified prospectus);
whereas such a new prospectus should be designed to be
investor-friendly and should therefore represent a source
of valuable information for the average investor; whereas
such a prospectus should give key information about the
UCITS in a clear, synthetic and easily understandable way;
whereas, however, the investor must always be informed,
by an appropriate statement
to be included in the
simplified prospectus, that more detailed information is
contained in the full prospectus and in the UCITS yearly
and half-yearly report, which can be obtained free of
simplified
charge
prospectus shall always be offered free of charge to
subscribers before
contract;
whereas this shall be a sufficient pre-condition to meet
the legal obligation under
this Directive to provide
information to subscribers before the conclusion of the
contract.

request; whereas

conclusion of

at his/her

the

the

the

in Directive 85/611/EEC;

(13) To take into account developments of information tech-
niques,
it is desirable to revise the current information
in
framework provided for
particular, it is desirable to introduce, in addition to the
existing full prospectus, a new type of prospectus for
UCITS (simplified prospectus); such a new prospectus
should be designed to be investor-friendly and should
therefore represent a source of valuable information for
the average investor; such a prospectus should give key
information about the UCITS in a clear, synthetic and
easily understandable way; however,
the investor must
always be informed, by an appropriate statement to be
included in the simplified prospectus, that more detailed
information is contained in the full prospectus and in the
UCITS yearly and half-yearly report, which can be
obtained free of charge at his/her request; the simplified
prospectus shall always be offered free of charge to
subscribers before
contract;
whereas this shall be a sufficient pre-condition to meet
the legal obligation under
this Directive to provide
information to subscribers before the conclusion of the
contract.

conclusion of

the

the

___________
(1) OJ L 141, 11.6.1993, p. 27.

___________
(1) OJ L 141, 11.6.1993, p. 27.

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INITIAL PROPOSAL

AMENDED PROPOSAL

(14) Considering the need to ensure the level playing field
among intermediaries in the financial services area when
providing the same services and a harmonised minimum
degree of
investor protection; a harmonised minimum
degree of harmonisation of the conditions for taking up
business and operating conditions represents the essential
pre-condition to complete the internal market for these
operators, therefore, only a binding Community Directive
laying down agreed minimum standards can achieve the
desired objectives; this Directive effects only the minimum
harmonisation required.

(15) The Commission may consider proposing codification in

due time after adoption of the proposals,

(14) Whereas, considering the need to ensure the level playing
field among intermediaries in the financial services area
when providing the same services and a harmonised
investor protection; whereas a
minimum degree of
harmonised minimum degree of harmonisation of
the
conditions
operating
and
essential pre-condition to
conditions
these operators,
complete
whereas, therefore, only a binding Community Directive
laying down agreed minimum standards can achieve the
desired objectives; whereas this Directive effects only the
minimum harmonisation required.

for
represents
the

the
internal market

up business

taking

for

(15) Whereas,

Directive

97/9/EC (1)

for compensation arrangements

for the time being, no harmonised rules for
compensation arrangements for unit-holders exist when
a management company or an investment company is
unable to redeem or to repurchase the units from unit-
provides
holders;
whereas
harmonised rules
for
investors demanding investment services from investment
firms (including banks); whereas, according to Article 14
of that Directive, the Commission will submit no later
than 31 December 1999 to the Council
and the
Parliament a report on the application of the Directive;
whereas, depending on the outcome of that report, the
Commission might consider it appropriate to submit a
proposal
compensation
introduction
arrangements for unit-holders.

the

for

of

HAVE ADOPTED THIS DIRECTIVE:

Unchanged

Article 1

Directive 85/611/EEC is amended as follows:

1. The following Article 1(a) is inserted:

(cid:145)Article 1(a)

For the purposes of this Directive:

1. depositary shall mean any institution entrusted with
the duties mentioned in Articles 7 and 14 and subject
to the other provisions laid down in Sections III and
IV;

___________
(1) OJ L 84, 26.3.1997, p. 22.

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INITIAL PROPOSAL

AMENDED PROPOSAL

2. management company shall mean any company the
regular business of which is the management of unit
trusts/common funds and of
investment companies
(collective portfolio management);

2. management company shall mean any company the
regular business of which is the management of the
assets of UCITS in the form of unit trusts/common
(collective
funds and/or of
portfolio management of UCITS),
this includes the
functions mentioned in Annex II;

investment companies

3. a management company’s home Member State shall
mean the Member State in which is situated the
management company’s registered office;

Unchanged

4. a management company’s host Member State shall
than the home
mean the Member State, other
territory of which a
Member State, within the
management company has a branch or provides
services;

5. a UCITS home Member State shall mean:

(a) with regard to a UCITS constituted as unit trust/
the Member State in which is
registered

common fund,
situated the management company’s
office;

(b) with regard to a UCITS constituted as investment
company, the Member State in which is situated
the investment company’s registered office,

6. a UCITS host Member State shall mean a Member
State in which the units of the common fund/unit
trust or of the investment company are marketed;

7. branch shall mean a place of business which is a part
the management company, which has no legal
of
for
personality and which provides
which the management company has been authorised;
all the places of business set up in the same Member
State by a management company with headquarters in
another Member State shall be regarded as a single
branch;

services

the

8. competent authorities

shall mean the authorities
which each Member State designates under Article
49 of Directive 85/611/EEC;

9. close links shall mean a situation as defined in Article

2, paragraph 1 of Directive 95/26/EC (1);

___________
(1) OJ L 168, 8.7.1995, p. 7.

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INITIAL PROPOSAL

AMENDED PROPOSAL

10. qualifying holdings shall mean any direct or indirect
holding in a management company which represents
10 % or more of the capital or of the voting rights or
which makes it possible to exercise a significant
influence over the management of the management
company in which that holding subsists.

For the purpose of this definition, the voting rights
referred to in Article 7 of Directive 88/627/EEC (1)
shall be taken into account;

11.

ISD shall mean Directive 93/22/EEC of 10 May 1993
on investment services (2).(cid:146)

in

described

12. group shall mean issuers/bodies which are connected
as
of Directive
Article
83/349/EEC (3); issuers/bodies situated in non-Member
States which are linked in a similar way either to
issuers/bodies in a Member State or to such in a
non-Member State shall be included.(cid:146)

1(1)

2. Article 4(3) shall be replaced by the following:

Unchanged

the directors of

The competent authorities may not authorise a
(cid:145)3.
UCITS if
the management company does not comply
with the pre-conditions laid down in Section III of this
Directive. Moreover the competent authorities may not
the investment
authorise a UCITS if
the depositary are not of sufficiently
company or of
good repute or
the
lack the experience required for
performance of their duties. To that end, the names of
the directors of
the
depositary and of every person succeeding them in office
must be communicated forthwith to the competent auth-
orities.

the investment company and of

the directors of

The competent authorities may not authorise a
(cid:145)3.
UCITS if
the management company does not comply
with the pre-conditions laid down in Section III of this
Directive. Moreover the competent authorities may not
the investment
authorise a UCITS if
company or of
the depositary are not of sufficiently
good repute or are not sufficiently experienced also in
relation to the type of UCITS to be managed. To that
end,
the investment
the depositary and of every person
company and of
succeeding
communicated
forthwith to the competent authorities.

them in office must be

the directors of

the names of

Directors shall mean those persons who, under the law or
the instruments of incorporation, represent the investment
company or the depositary, or who effectively determine
the policy of the investment company or the depositary.(cid:146)

Unchanged

3. Articles 5 and 6 shall be replaced by the following:

(cid:145)SECTION III

Obligations regarding management companies

___________
(1) OJ L 348, 17.12.1988, p. 62.
(2) OJ L 141, 11.6.1993, p. 27.

___________
(3) OJ L 193, 18.7.1983, p. 1.

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INITIAL PROPOSAL

AMENDED PROPOSAL

Title A

Conditions for taking up business

Article 5

1.
The access to the business of management companies
is subject to prior official authorisation to be granted by
the home Member State’s competent authorities. Author-
isation granted under this Directive to a management
company shall be valid for all Member States.

2.
No management company may engage in activities
other than the management of unit trusts/common funds
and of investment companies

2.
No management company may engage in activities
other than the management of UCITS in the form of unit
trusts/common funds and of investment companies except
the additional management of other collective investment
undertakings which are not covered by this Directive and
thus cannot be marketed in other Member States under
this Directive.

The activity of management of unit trusts/common funds
and of investment companies includes, for the purpose of
this Directive, the activities mentioned in Annex II

The activity of management of unit trusts/common funds
and of investment companies includes, for the purpose of
this Directive, the functions mentioned in Annex II which
is not exhaustive.

By the way of derogation of paragraph 2, Member
3.
States may authorise management companies to provide,
in addition to the management of unit
trusts/common
funds and of investment companies, the following services:

By way of derogation from paragraph 2, Member
3.
States may authorise management companies to provide,
in addition to the management of unit
trusts/common
funds and of investment companies, the following services:

(cid:151) management of portfolios of

investments,

including
those owned by pension funds,
in accordance with
mandates given by investors on a discretionary, client-
by-client basis, where such portfolios include one or
more of the instruments listed in Section B of
the
Annex of the ISD,

Unchanged

(cid:151) as non-core services:

(a) investment advice concerning one or more of the
instruments listed in Section B of the annex of the
ISD,

(b) safekeeping and administration in relation to units

of collective investment undertakings.

(b) safekeeping and administration in relation to units
of collective investment undertakings which are
managed by the management company.

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INITIAL PROPOSAL

AMENDED PROPOSAL

Management companies may in no case be authorised
under
services
this Directive
mentioned in this paragraph.

to provide only

the

this Directive

Management companies may in no case be authorised
under
services
the
to provide non-core
mentioned in this paragraph or
services without being authorised for
the service of
paragraph 3 first indent.

to provide only

Articles 2(4), 8(2), 10, 11, 12(1) and 13 of the ISD
4.
shall apply to management companies, the authorisation of
which covers
the discretionary portfolio management
service mentioned in the first indent of paragraph 3.

Articles 2(4), 8(2), 10, 11, 12(1) and 13 of the ISD
4.
shall apply to the provision services mentioned in
paragraph 3 by management companies.

5.
The competent authorities shall not grant author-
isation if the UCITS is legally prevented (e.g. through a
provision in the fund rules or articles of incorporation)
from marketing its units in its home Member State.

Article 5(a)

Unchanged

1. Without prejudice to other conditions of general
application laid down by national law, the competent auth-
orities shall not grant authorisation to a management
company unless:

(cid:151) it has sufficient initial capital of the following amount:

(cid:151) it has sufficient initial capital of EUR 125 000; and it
maintains in respect of each of the following situations
an additional amount of capital of:

(a) if

is authorised to manage only unit

funds

and

investment

trusts/
companies,

it
common
ECU 50 000;

in instruments other

(a) if the management company manages UCITS which
than transferable
invest
securities: 0,05 % of
the UCITS’
portfolio under management, up to an amount of
capital of EUR 10 000 000 at the maximum,

the amount of

(b) if

service mentioned

its authorisation covers also the discretionary
in
portfolio management
Article 5(3), first indent, in addition to the capital
mentioned in the previous letter (a), an amount of
capital to be determined in accordance with the
rules laid down in Article 3, paragraphs 1 and 2
of Directive 93/6/EEC (1) having regard to the
nature of the service in question;

(b) if the management company also provides services
according to Article 5(3) first indent: an additional
initial capital of EUR 125 000 which Member
States
the
to
management company is not authorised to hold
securities; and additional
client’s money and/or
to be calculated according to
ongoing capital
Annex IV of Directive 93/6/EEC (1).

EUR 50 000

reduce

can

if

(cid:151) the persons who effectively direct the business of a
management company are of sufficiently good repute
and are sufficiently experienced also in relation to the
type of UCITS managed by the management company.
The direction of a management company’s business
two persons meeting
must be decided by at
these conditions;

least

Unchanged

___________
(1) OJ L 141, 11.6.1993, p. 1.

___________
(1) OJ L 141, 11.6.1993, p. 1.

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(cid:151) the application for authorisation is accompanied by a
programme of activity setting out, inter alia, the organi-
sational structure of the management company;

(cid:151) both is head office and its registered office are located

in the same Member State.

company

2. Moreover, where close links exist between the
management
legal
persons,
the competent authorities shall grant author-
isation only if those do not prevent the effective exercise
of their supervisory functions.

and other natural or

The competent authorities shall also refuse authorisation if
the laws, regulations or administrative provisions of a
non-member country governing one or more natural or
legal persons with which the management company has
close links, or difficulties involved in their enforcement
prevent
supervisory
functions.

exercise of

effective

their

the

competent authorities

require management
The
companies to provide them with the information they
require
conditions
referred to in this indent on a continuous basis.

compliance with the

to monitor

shall

3.
An applicant shall be informed, within six months of
the submission of a complete application, whether or not
authorisation has been granted. Reasons shall be given
whenever an authorisation is refused.

A management company may commence business as

4.
soon as authorisation has been granted.

The competent authorities may withdraw the author-
5.
isation issued to a management company subject to this
Directive only where that company:

(a) does not make use of

the authorisation within 12
months, expressly renounces the authorisation or has
ceased the activity covered by this Directive more than
six months previously unless
the Member State
concerned has provided for authorisation to lapse in
such cases;

(b) has obtained the

authorisation by making false

statements or by any other irregular means;

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(c) no longer fulfils the conditions under which author-

isation was granted;

(d) no longer complies with Directive 93/6/EEC if its auth-
discretionary portfolio
first

orisation covers
also the
management service mentioned in Article 5(3),
indent;

(e) has

seriously

and

systematically

infringed

the

provisions adopted pursuant to this Directive;

(f)

falls within any of
provides for withdrawal.

the cases where national

law

Article 5(b)

take

up the

The competent authorities shall not grant author-
1.
isation to
of management
companies until they have been informed of the identities
of the shareholders or members, whether direct or indirect,
natural or legal persons, that have qualifying holdings and
of the amounts of those holdings.

business

The competent authorities shall refuse authorisation if,
taking into account the need to ensure the sound and
prudent management of a management company,
they
are not satisfied as to the suitability of the aforementioned
shareholders or members.

commencing or

2.
In the case of branches of management companies
that have registered offices outside the European Union
the
and are
Member States shall not apply provisions that result in
treatment more
to
branches of management companies that have registered
offices in Member States.

carrying on business,

than that

favourable

accorded

3.
The competent authorities of the other Member State
involved shall be consulted beforehand on the author-
isation of any management company which is:

(cid:151) a subsidiary of another management company, an
investment firm or a credit institution authorised in
another Member State,

(cid:151) a subsidiary of

the parent undertaking of another
management company, an investment firm or a credit
institution authorised in another Member State,

or

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(cid:151) controlled by the same natural or legal persons as
control another management company, an investment
institution authorised in another
firm or a credit
Member State.

Title B

Relations with third countries

Article 5(c)

1.
Relations with third countries are regulated according
to the relevant rules laid down in Article 7 of Directive
93/22/EEC.

firm(cid:148) and (cid:147)investment

For the purpose of this Directive, the expressions (cid:147)firm/
firms(cid:148) contained in
investment
Article 7 of the ISD shall be read respectively as (cid:147)man-
agement company(cid:148) and (cid:147)management companies(cid:148);
the
expression (cid:147)providing investment services(cid:148) in Article 7(2)
of the ISD shall be read as (cid:147)providing services(cid:148).

The Member States shall also inform the Commission
in

2.
of any general difficulties which UCITS encounter
marketing their units in any third country.

Title C

Operating conditions

Article 5(d)

The

competent

authorities of

1.
company’s home Member State shall require that
management
complies at all
Articles 5 and 5(a)(1) and (2) of this Directive.

the management
the
authorised
times with the conditions imposed in

company which they have

supervision of

The prudential

the home Member

a management
2.
company shall be the responsibility of the competent auth-
orities of
the
management company establishes a branch or provides
services
in another Member State or not, without
prejudice to those provisions of this Directive which give
responsibility to the authorities of the host country.

State, whether

Article 5(e)

1.
Qualifying holdings in management companies shall
be subject to the same rules as those laid down in Article 9
of the ISD.

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For the purpose of this Directive, the expressions (cid:147)firm/
investment
firms(cid:148) contained in
Article 9 of the ISD shall be read respectively as (cid:147)man-
agement company(cid:148) and (cid:147)management companies(cid:148).

firm(cid:148) and (cid:147)investment

2.
For the purpose of this Directive, the expressions
(cid:147)firm/investment firm(cid:148) and (cid:147)investment firms(cid:148) contained
in Article 9 of the ISD shall be read respectively as (cid:147)man-
agement company(cid:148) and (cid:147)management companies(cid:148).

Article 5(f)

Unchanged

Each home Member State shall draw up prudential
1.
rules which management companies, the authorisation of
which covers only the activity of management of unit
trusts/common funds and investment companies, shall
observe at all times.

company,

accounting

procedures,

a management

the competent authorities of

the home
In particular,
the
Member State having regard also to the nature of
UCITS managed by
shall
require that each such company has sound administrative
safeguard
and
arrangements for electronic data processing and adequate
internal control mechanisms ensuring, inter alia, that the
the unit
assets of
the
investment
companies managed by the management
company are invested according to the fund rules or the
instruments of incorporation and the legal provisions in
force.

trusts/common funds or of

control

and

and

control

company,

accounting

procedures,

the competent authorities of

the home
In particular,
the
Member State having regard also to the nature of
UCITS managed by a management
shall
require that each such company has sound administrative
safeguard
and
arrangements for electronic data processing and adequate
internal control mechanisms ensuring, inter alia, that each
transaction involving the fund may be reconstructed
according to its origin, the parties to it,
its nature, and
the time and place at which it was effected provided this
information is accessible to the management company, and
that the assets of the unit trusts/common funds or of the
investment
companies managed by the management
company are invested according to the fund rules or the
instruments of incorporation and the legal provisions in
force.

2.
Each management company the authorisation of
which covers also the discretionary portfolio management
service mentioned in Article 5(3), first indent:

Unchanged

(cid:151) shall not be permitted to invest all or a part of the
investor’s portfolio in units of unit
trusts/common
funds or of investment companies it manages, unless
it receives prior general approval from the client,

(cid:151) shall not be permitted to provide the discretionary
portfolio management service to the depositary which
performs for that management company the duties
mentioned in Articles 7 and 14 of this Directive,

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(cid:151) shall be subject to the provisions laid down in Directive

97/9/EC on investor-compensation schemes (1).

(cid:151) shall be subject

in regard to services according to
Article 5 (3) to the provisions laid down in Directive
97/9/EC on investor-compensation schemes (1).

Article 5(g)

1. When a Member State permits a management
company to delegate to third parties, on the basis of
specific mandates and for
the purpose of a more
efficient conduct of the company’s business, to carry out
on its behalf one or more of the functions included in the
activity of collective portfolio management mentioned in
Annex II, each mandate must be submitted to the
competent authorities for prior approval.

The competent authorities shall approve the mandate
compliance with the

2.
only after having verified the
following pre-conditions:

(cid:151) the mandate shall not prevent

the effectiveness of

supervision over the management company,

(cid:151) in order to prevent conflicts of interest, the mandate
shall not be given to the depositary and to persons
having
the management
company’s or the depositary’s capital or to any other
person whose interests may conflict with those of the
management company or the unit-holders,

qualifying

holdings

in

1. When a Member State permits a management
company to delegate to third parties for the purpose of
a more efficient conduct of the company’s business, to
their own
carry out on its behalf one or more of
functions mentioned in Annex II,
the management
company shall notify the competent authorities of each
investment
mandate.
management, management
delegate
specific investment decisions to intermediaries which are
subject
in accordance with
supervision,
investment-allocation criteria periodically laid down by
the management companies.

the core function of

companies may

to prudential

In case of

The competent authorities

in

compliance with

shall ensure that
the

the
following

2.
mandate
pre-conditions:

is

(cid:151) the mandate shall not prevent

the effectiveness of
supervision over the management company, and in
the management
particular
the UCITS from being
company from acting, or
managed, in the best interests of its investors,

it must not prevent

(cid:151) where the mandate is given to a third-country inter-
mediary which is subject to supervision, cooperation
between
authorities
prudential
concerned must be ensured,

supervisory

the

(cid:151) in order to prevent conflicts of interest, a mandate in
regard to the core function of investment management
shall not be given to the depositary and to persons
having
the management
company’s or the depositary’s capital or to any other
person whose interests may conflict with those of the
management company or the unit-holders,

qualifying

holdings

in

(cid:151) measures shall exist which enable the persons who
direct the business of the management company to
monitor at any time the activity of
the person to
whom the mandate is given,

(cid:151) measures shall exist which enable the persons who
direct the business of the management company to
effectively monitor at any time the activity of
the
person to whom the mandate is given,

(cid:151) the mandate shall not prevent the persons who direct
the business of the management company to give at
any time further instructions to the person to whom
functions are delegated and to withdraw the mandate at
any time,

Unchanged

___________
(1) OJ L 84, 26.3.1997, p. 22.

___________
(1) OJ L 84, 26.3.1997, p. 22.

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(cid:151) having regard to the nature of the functions to be
the person to whom functions will be
furnish sufficient professional and

delegated,
delegated must
financial guarantees,

(cid:151) having regard to the nature of the functions to be
delegated,
the person to whom functions will be
delegated must be qualified and capable to undertake
the functions in question, and

(cid:151) the UCITS’ prospectuses and any promotional literature
list the functions which the management company has
been permitted to delegate.

(cid:151) the UCITS’ prospectuses list the functions which the
management company has been permitted to delegate.

In no case shall the management company’s and the
3.
depositary’s liabilities be affected by the fact
the
management company delegated own functions to third
parties.

that

In no case shall the management company’s and the
3.
depositary’s liabilities be affected by the fact
the
management company delegated any functions to third
parties.

that

Article 5(h)

Deleted

The Council and the Parliament note the Commission’s
statement to the effect that, based on the outcome of the
report the Commission will submit, according to Article 14
of Directive 97/9/EC on investor compensation schemes no
later than 31 December 1999 to the Council and the
Parliament, it may, if appropriate, propose the introduction
of compensation arrangements for unit-holders of UCITS.

Title D

Unchanged

The right of establishment and the freedom to provide
services

Article 6

shall ensure that a management
1. Member States
company, authorised in accordance with this Directive by
the competent authorities of another Member State, may
carry on within their territories the activity for which it
has been authorised, either by the establishment of a
branch or under the freedom to provide services.

2. Member States may not make the establishment of a
branch or the provision of the services subject to any
authorisation requirement, to any requirement to provide
endowment capital or
to any other measure having
equivalent effect.

Article 6(a)

1.
In addition to meeting the conditions imposed in
Article 5 and 5(a), any management company wishing to
establish a branch within the territory of another Member
State shall notify the competent authorities of its home
Member State.

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shall

2. Member States
require every management
company wishing to establish a branch within the
the
territory of
following information and documents, when effecting the
notification provided for in paragraph 1:

another Member State

to provide

I. General information:

(a) the Member State within the territory of which the
management company plans to establish a branch;

(b) a programme of

the activity envisaged and the

organisational structure of the branch;

(b) a programme of operations setting out the activities
and services according to Article 5 (2) and (3)
envisaged and the organisational structure of
the
branch;

(c) the address in the host Member State from which

Unchanged

documents may be obtained;

(d) the names of those responsible for the management

of the branch.

II. Information concerning the distribution, by the branch,
of the units of the unit trusts/common funds and of the
investment companies subject to this Directive which
are managed by the management company:

II. a list of

the UCITS managed by the management
the
company and notified according to Article 46,
units of which shall be marketed through the branch
in the host Member State

(a) details about the planned distribution and of the
arrangements made for the marketing of the units
in that other Member State;

Deleted

concerned:

(b) for each unit trust/common fund and investment
the
the prospectuses
its latest annual report

company
instruments of
and, where appropriate,
and any subsequent half-yearly report;

the
incorporation;

rules or

fund

Unchanged

Unless

3.
the home
the competent authorities of
Member State have reason to doubt the adequacy of the
administrative structure or the financial situation of a
management company, taking into account the activities
envisaged, they shall, within three months of receiving
all
2,
referred
in
information to the competent auth-
communicate that
orities of
inform the
management company accordingly.

the host Member State and shall

information

paragraph

the

to

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AMENDED PROPOSAL

They shall also communicate:

(cid:151) details of any compensation scheme intended to protect

(cid:151) details of any compensation scheme intended to protect

investors,

investors

Deleted

Unchanged

Before

the competent authorities of

the branch of a management

company
4.
commences business,
the
host Member State shall, within two months of receiving
the information referred to in paragraph 2, prepare for the
supervision of the management company and, if necessary,
indicate the conditions, including the rules mentioned in
Articles 44 and 45 in force in the host Member State and
the rules of conduct
to be respected in the case of
provision of the portfolio management service mentioned
in Article 5(3) and of investment advisory services and
custody, under which,
the general
good,
that business must be carried on in the host
Member State.

in the interest of

Unchanged

(cid:151) an attestation for each unit

trust/common fund or
investment company, the units of which are distributed
in the host country,
the conditions
imposed by this Directive.

fulfils

that

it

Where the competent authorities of the home Member
State refuse to communicate the information referred to
in paragraph 2 to the competent authorities of the host
Member State, they shall give reasons for their refusal to
the management company concerned within two months
of receiving all the information. That refusal or failure to
reply shall be subject to the right to apply to the courts in
the home Member State.

Before

the competent authorities of

the branch of a management

company
4.
commences business,
the
host Member State shall, within two months of receiving
the information referred to in paragraph 2, prepare for the
supervision of the management company and, if necessary,
indicate the conditions, including the rules mentioned in
Articles 44 and 45 in force in the host Member State and
the rules of conduct
to be respected in the case of
provision of the portfolio management service mentioned
in Article 5(3), under which, in the interest of the general
good, that business must be carried on in the host Member
State.

the management

On receipt of a communication from the competent
5.
authorities of the host Member State or on the expiry of
the period provided for in paragraph 4 without receipt of
any communication from those authorities,
the branch
may be established and commence business. From that
company may also begin
moment
trusts/common funds
distributing the units of
and of
to this
investment
the
Directive which it manages, unless the competent auth-
orities of the host Member State establish, in a reasoned
decision taken before the expiry of that period of two
months (cid:151) to be communicated to the competent auth-
orities of the home Member State (cid:151) that the arrangements
made for the marketing of the units do not comply with
the provisions referred to in Article 44(1) and 45.

companies

the unit

subject

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In

of

of

the

any

event

change

6.
particulars
communicated in accordance with paragraphs 2(I)(b), (c)
or (d) and subparagraph II, a management company shall
give written notice of that change to the competent auth-
orities of the home and host Member States at least one
month before implementing the change so that
the
competent authorities of
the home Member State may
take a decision on the change under paragraph 3 and
the competent authorities of the host Member State may
do so under paragraph 4.

a

In the

event of
in

7.
communicated
subparagraph of paragraph 3,
home Member State shall
host Member State accordingly.

change
accordance with

in the particulars
second
the authorities of
the
inform the authorities of the

the

Article 6(b)

Any management company wishing to carry on
1.
business within the territory of another Member State for
the first time under the freedom to provide services shall
communicate the following information to the competent
authorities of its home Member State:

I. General information:

Deleted

(a) the Member State within the territory of which the

Unchanged

management company intends to operate;

(b) a programme of the activity envisaged.

(b) a programme of operations stating the activities and
services according to Article 5 (2) and (3) envisaged;

II. Information concerning the distribution,

in the host
Member State, of units of
trusts/common
funds and of the investment companies subject to this
Directive which are managed by the management
company:

the unit

Deleted

(a) details about the planned distribution and of the
arrangements made for the marketing of the units
in that other Member State;

concerned;

(b) for each unit trust/common fund and investment
the
the prospectuses
its latest annual report

company
instruments of
and, where appropriate,
and any subsequent half-yearly report.

the
incorporation;

rules or

fund

2.
The competent authorities of the home Member State
shall, within one month of receiving the information
referred to in paragraph 1, forward it to the competent
authorities of the host Member State.

Unchanged

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They shall also communicate:

(cid:151) details of any compensation scheme intended to protect

(cid:151) details of any compensation scheme intended to protect

investors

Deleted

3.
The management company may then commence
business in the host Member State notwithstanding the
provisions of Article 46.

investors,

(cid:151) an attestation for

each trust/common fund or
investment company, the units of which are distributed
in the host country,
the conditions
imposed by this Directive.

fulfils

that

it

the unit

3.
The management company may then commence
business in the host Member State. The distribution of
the units of
trusts/common funds and the
investment companies subject to this Directive may begin
one month after the host Member State’s competent auth-
orities receive of the information referred to in paragraphs
1 and 2, unless the competent authorities of
the host
Member State establish,
in a reasoned decision taken
that period of one month to be
before the expiry of
communicated to the competent authorities of the home
Member State,
the
marketing of the units do not comply with the provisions
referred to in Articles 44(1) and 45.

the arrangements made for

that

When appropriate, the competent authorities of the host
Member State shall, on receipt of the information referred
to in paragraph 1, indicate to the management company
the conditions,
to be
respected in the case of provision of
the portfolio
management
service mentioned in Article 5(3), with
which, in the interest of the general good, the management
company must comply in the host Member State.

including the rules of conduct

When appropriate, the competent authorities of the host
Member State shall, on receipt of the information referred
to in paragraph 1, indicate to the management company
the conditions,
to be
respected in the case of provision of
the portfolio
management service mentioned in Article 5(3) and of
investment advisory services and custody, with which, in
the interest of the general good, the management company
must comply in the host Member State.

including the rules of conduct

4.
Should the content of the information communicated
in accordance with paragraph 1(I)(b) and (II) be amended,
company shall give notice of
the management
the
amendment
in writing to the competent authorities of
the home Member State and of the host Member State
before implementing the change, so that the competent
if necessary,
authorities of the host Member State may,
inform the company of any change or addition to be
made to the information communicated under paragraph
2.

shall

company

Should the content of the information communicated
4.
the
in accordance with paragraph 1(I)(b) be amended,
the
give
management
amendment
in writing to the competent authorities of
the home Member State and of the host Member State
before implementing the change, so that the competent
if necessary,
authorities of the host Member State may,
inform the company of any change or addition to be
made to the information communicated under paragraph
2.

notice

of

5.
A management company shall also be subject to the
notification procedure laid down in this Article in the case
where it entrusts a third party with the marketing of the
units in a host Member State.

Unchanged

Article 6(c)

Host Member States may,

1.
for statistical purposes,
require all management companies with branches within
their territories to report periodically on their activities in
those host Member States to the competent authorities of
those host Member States.

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their

In discharging

2.
this
Directive, host Member States may require branches of
management companies to provide the same particulars
as national management companies for that purpose.

responsibilities under

Host Member States may require management companies,
carrying on business within their territories under the
freedom to provide services, to provide the information
necessary for the monitoring of
their compliance with
the standards set by the host Member State that apply to
them, although those requirements may not be more
than those which the same Member State
stringent
imposes on established management companies for the
monitoring of their compliance with the same standards.

3. Where the competent authorities of a host Member
State ascertain that a management company that has a
branch or provides services within its territory is in
breach of the legal or regulatory provisions adopted in
that State pursuant to those provisions of this Directive
which confer powers on the host Member State’s
competent authorities, those authorities shall require the
management company concerned to put an end to its
irregular situation.

If the management company concerned fails to take
4.
the necessary steps, the competent authorities of the host
Member State shall
inform the competent authorities of
the home Member State accordingly. The latter shall, at
the earliest opportunity, take all appropriate measures to
ensure that the management company concerned puts an
end to its irregular situation. The nature of those measures
shall be communicated to the competent authorities of the
host Member State.

the

in violating the legal or

5.
If, despite the measures taken by the home Member
State or because such measures prove inadequate or are
not available in the State in question, the management
company persists
regulatory
provisions referred to in paragraph 2 in force in the host
Member State,
informing the
latter may,
competent authorities of
the home Member State, take
appropriate measures to prevent or to penalise further
irregularities and, in so far as necessary, to prevent that
management company from initiating any further trans-
action within its
shall
ensure that within their territories it is possible to serve
the legal documents necessary for
those measures on
management companies.

territory. The Member States

after

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6.
The foregoing provisions shall not affect the powers
of host Member States to take appropriate measures to
to penalise irregularities committed within
prevent or
their territories which are contrary to legal or regulatory
provisions adopted in the interest of the general good. This
shall
the possibility of preventing offending
management companies from initiating any further trans-
actions within their territories.

include

7.
Any measure adopted pursuant to paragraphs 4, 5 or
6 involving penalties or restrictions on the activities of a
management company must be properly justified and
communicated to the management company concerned.
Every such measure shall be subject to the right to apply
to the courts in the Member State which adopted it.

Before

following the procedure

8.
laid down in
paragraphs 3, 4 or 5 the competent authorities of the
host Member State may,
any
precautionary measures necessary to protect the interests
of investors and others for whom services are provided.
The Commission and the competent authorities of
the
other Member States concerned must be informed of
such measures at the earliest opportunity.

in emergencies,

take

After consulting the competent authorities of the Member
States concerned, the Commission may decide that the
Member State in question must amend or abolish those
measures.

9.
In the event of the withdrawal of authorisation, the
competent authorities of the host Member State shall be
informed and shall take appropriate measures to prevent
the management company concerned from initiating any
further transactions within its territory and to safeguard
investors’ interests. Every two years the Commission shall
submit a report on such cases to the Contact Committee
set up according to Article 53.

10.
The Member States shall inform the Commission of
the number and type of cases in which there have been
refusals pursuant to Article 6(a) or measures have been
taken in accordance with paragraph 5. Every two years
the Commission shall submit a report on such cases to
the Contact Committee set up according to Article 53 of
this Directive.(cid:146)

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4. Before Article 7 the following shall be included:

(cid:145)SECTION IIIa

Obligations regarding the depositary(cid:146)

5. Article 27(1) shall be replaced by the following:

(cid:145)1.
An investment company and, for each of the unit
trusts it manages, a management company, must publish:

(cid:151) a simplified prospectus,

(cid:151) a full prospectus,

(cid:151) an annual report for each financial year, and

(cid:151) a half-yearly report covering the first six months of the

financial year.(cid:146)

6. Article 28(1) shall be replaced by the following:

(cid:145)1.
Both the simplified and the full prospectuses must
include the information necessary for investors to be able
the investment
to make an informed judgement of
proposed to them.

The

shall

contain at

full prospectus

2.
the
information provided for in Schedule A annexed to this
Directive, in so far as that information does not already
appear in the fund rules or instruments of incorporation
annexed to the full prospectus in accordance with Article
29(1).

least

(cid:145)1.
Both the simplified and the full prospectuses must
include the information necessary for investors to be able
the investment
to make an informed judgement of
proposed to them, and,
risks
the
attached thereto. The latter shall include, independent of
the instruments invested in, a clear and easily under-
standable explanation of the fund’s risk profile.

in particular, of

Unchanged

3.
The simplified prospectus shall contain synthetically
at least the key information provided for in Schedule C
annexed to this Directive. It shall be structured and written
in such a way that it can be easily understood by the
average investor. Member States may permit
the
simplified prospectus be attached to the full prospectus
as a removable part of it.

that

It

3.
The simplified prospectus shall contain in summary
form the key information provided for in Schedule C
annexed to this Directive.
shall be structured and
written in such a way that it can be easily understood
by the average investor. Member States may permit that
the simplified prospectus be attached to the full prospectus
as a removable part of it. The simplified prospectus can be
used as a marketing tool designed to be used in all
Member States without alterations except
translation.
Member States may therefore not require any further
documents or additional information to be added.

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4.
Both the full and the simplified prospectus can be
incorporated in a written document or in any durable
legal status approved by
medium having an equivalent
the competent authorities.(cid:146)

Unchanged(cid:146)

7. Article 29 shall be replaced by the following:

(cid:145)Article 29

The

fund

company’s
1.
instruments of incorporation shall form an integral part
of the full prospectus and must be annexed thereto.

an investment

rules or

2.
The documents referred to in paragraph 1 need not,
however, be annexed to the full prospectus provided that
the unit-holder is informed that on request he or she will
those documents or be apprised of
be sent
the place
where,
in each Member State in which the units are
placed on the market, he or she may consult them.(cid:146)

8. Article 30 shall be replaced by the following:

(cid:145)Article 30

The essential elements of
prospectuses must be kept up to date.(cid:146)

the simplified and the full

9. Article 32 shall be replaced by the following:

(cid:145)Article 32

UCITS must send their simplified and full prospectuses and
any amendments thereto, as well as their annual and half-
yearly reports, to the competent authorities.(cid:146)

10. Article 33 shall be replaced by the following:

(cid:145)Article 33

The

1.
simplified prospectus must be offered to
subscribers free of charge before the conclusion of the
contract.

In addition, the full prospectus and the latest published
supplied to
annual and half-yearly reports
subscribers free of charge on request.

shall be

The annual and half-yearly reports shall be supplied

2.
to unit-holders free of charge on request.

The annual and half-yearly reports must be available
3.
to the public at
the places, or through other means
approved by the competent authorities, specified in the
full and simplified prospectus.(cid:146)

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11. Article 35 shall be replaced by the following:

(cid:145)Article 35

All publicity comprising an invitation to purchase the units
of UCITS must indicate that prospectuses exist and the
places where they may be obtained by the public or
how the public may have access to them.(cid:146)

12. Article 46 shall be replaced by the following:

(cid:145)Article 46

If an investment company proposes to market its units in a
Member State other than that in which it is situated,
it
must first inform the competent authorities of that other
Member State accordingly. It must simultaneously send the
latter authorities:

if an investment company, proposes

If a management company in regard to the UCITS it
manages or
to
market its units in a Member State other than that in
it must first inform the competent
which it is situated,
It
authorities of
must simultaneously send the latter authorities:

that other Member State accordingly.

(cid:151) an attestation by the competent authorities to the effect
that it fulfils the conditions imposed by this Directive,

Unchanged

(cid:151) its instruments of incorporation,

(cid:151) its fund rules or its instruments of incorporation,

(cid:151) its full prospectus and its simplified prospectus,

Unchanged

(cid:151) where appropriate,

its latest annual report and any

subsequent half-yearly report, and

(cid:151) details of the arrangements made of the marketing of

its units in that other Member State.

the authorities of

An investment company may begin to market its units in
that other Member State one month after such communi-
the Member States
cation, unless
in a reasoned decision taken before
concerned establish,
the expiry of
the
arrangements made for the marketing of units do not
comply with the provisions referred to in Articles 44(1)
and 45.(cid:146)

that period of one month,

that

An investment company or a management company may
begin to market its units in that other Member State one
month after such communication, unless the authorities of
the Member States concerned establish,
in a reasoned
decision taken before the expiry of that period of one
month, that the arrangements made for the marketing of
units do not comply with the provisions referred to in
Articles 44(1) and 45.(cid:146)

13. Article 47 shall be replaced by the following:

Unchanged

(cid:145)Article 47

If a UCITS markets its units in a Member State other than
that in which it is situated, it must distribute in that other
Member State, in accordance with the same procedures as
those provided for in the home Member State:

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1.

2.

the simplified prospectus and the other information
provided for in Articles 29 and 30 of this Directive
in a language which is easily understandable for the
investors concerned in the host Member State;

in one of

language or

languages of

the full prospectus and the annual and half-yearly
the
reports in the official
official
the host Member State or in
another language, provided that in the Member State
in question that other language is customary in the
sphere of
finance, accepted by the competent auth-
orities and, when appropriate, such further conditions
as they may impose are complied with.(cid:146)

14. After Article 52 the following Articles shall be added:

(cid:145)Article 52(a)

1. Where, through the provision of services or by the
company
establishment of branches,
the
operates
competent
States
authorities
concerned shall collaborate closely.

in one or more host Member States,
all

a management

the Member

of

They shall supply one another on request with all the
information concerning the management and ownership
of such management companies that is likely to facilitate
their supervision and all information likely to facilitate the
the auth-
monitoring of such companies.
the home Member State shall cooperate to
orities of
ensure that
the host Member State
collect the particulars referred to in Article 6(c)(2).

the authorities of

In particular,

They shall supply one another on request with all the
information concerning the management and ownership
of such management companies that is likely to facilitate
their supervision and all information likely to facilitate the
the auth-
monitoring of such companies.
the home Member State shall co-operate to
orities of
ensure that
the host Member State
collect the particulars referred to in Article 6(c)(2).

the authorities of

In particular,

2.
In so far as it is necessary for the purpose of exer-
cising their powers of supervision, the competent auth-
orities of the home Member State shall be informed by
the competent authorities of the host Member State of
any measures taken by the host Member State pursuant
to Article 6(c)(6) which involve penalties imposed on a
management company or restrictions on a management
company’s activities.

Unchanged

Article 52(b)

1.
Each host Member State shall ensure that, where a
management company authorised in another Member State
carries on business within its territory through a branch,
the competent authorities of the management company’s
home Member State may, after informing the competent
authorities of
themselves or
the host Member State,
through the intermediary of persons they instruct for the
purpose,
the
information referred to in Article 52(a).

carry out on-the-spot

verification of

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2.
The competent authorities of the management company’s
home Member State may also ask the competent authorities of
the management company’s host Member State to have such
verification carried out. Authorities which receive such requests
must, within the framework of their powers, act upon them by
carrying out the verifications themselves, by allowing the auth-
orities who have requested them to carry them out or by
allowing auditors or experts to do so.

This Article shall not affect the right of the competent
3.
authorities of
in discharging their
responsibilities under this Directive, to carry out on-the-spot
verifications of branches established within their territory.(cid:146)

the host Member State,

15. Schedule A of the Annex shall be amended as follows:

Under the column (cid:145)Information concerning the investment
company(cid:146), after paragraph 1.2 the following shall be added:

(cid:145)1.3. In the case of investment companies having different
the

the indication of

investment compartments,
compartments.(cid:146)

Under the column (cid:145)Information concerning the investment
company(cid:146), in paragraph 1.13 the following sentence shall
be added:

(cid:145)In the case of
investment compartments,
holder may pass from one compartment
and the charges applicable in such cases.(cid:146)

investment companies having different
information on how a unit-
into another

After paragraph 4 the following paragraphs 5 and 6 shall
be added:

(cid:145)5. Other investment information

5.1. Historical performance of the unit trust/common fund
or of the investment company (where applicable);

5.2. Profile of the typical investor for whom the unit trust/
is
the

investment

company

common fund or
designed.

6. Economic information

6.1. Possible expenses or fees, other than the charges
mentioned in paragraph 1.17, distinguishing between
those to be paid by the unit-holder and those to be
paid out of the unit trust’s/common fund’s or of the
investment company’s assets.(cid:146)

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Transitional and final provisions

Article 2

1.
Investment firms, as defined in Article 1(2) of the ISD,
authorised to carry out only the services provided for in
Section A(3) and in Section C(1) and (6) of the Annex to
Directive 93/22/EEC, may obtain authorisation under
this
Directive to manage unit trusts/common funds and investment
companies
(cid:145)management
companies(cid:146). In that case, such investment firms must give up
the authorisation obtained under the ISD.

to qualify

themselves

and

as

2. Management companies already authorised before 31
December 2002, in their home Member State under Directive
and
85/611/EEC to manage unit
investment companies shall be deemed to be authorised for
the purposes of this Directive if the laws of those Member
to take up such activity they must
States provide that
comply with conditions equivalent
to those imposed in
Articles 5(a) and 5(b).

trusts/common funds

3. Management companies, already authorised before 31
December 2002, which are not
included among those
referred to in paragraph 2 may continue such activity
than 31 December 2005 and
provided that, no later
pursuant to the provisions of their home Member State, they
obtain authorisation to continue such activity in accordance
with the provisions adopted in implementation of
this
Directive.

Only the grant of
such authorisation shall enable such
management companies to qualify under the provisions of
this Directive on the right of establishment and the freedom
to provide services.

Article 3

No later than 30 June 2002 Member States shall adopt the
laws, regulations and administrative provisions necessary for
them to comply with this Directive.

These provisions shall enter
than 31
December 2002. The Member States shall forthwith inform
the Commission thereof.

into force no later

When Member States adopt these provisions they shall include
a reference to this Directive or accompany them with such a
reference on the occasion of
their official publication. The
manner in which such references are to be made shall be
laid down by the Member States.

Article 4

This Directive shall enter into force 20 days after the date of
publication in the Official Journal of the European Communities.

Article 5

This Directive is addressed to the Member States.

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ANNEX I

Schedule C

Unchanged

CONTENTS OF THE SIMPLIFIED PROSPECTUS

Brief presentation of the UCITS

(cid:151) when the unit trust/common fund or the investment company was
created and indication of the Member State where the unit trust/
common fund or the investment company has been registered/
incorporated,

(cid:151) management company (when applicable),

(cid:151) expected period of existence (when applicable),

(cid:151) depositary,

(cid:151) auditors

(cid:151) financial group (e.g. a bank) promoting the UCITS.

Investment information

(cid:151) short definition of the UCITS’ objectives,

(cid:151) in the case of investment companies having different investment

compartments, the indication of this circumstance,

(cid:151) the unit

trust’s/common fund’s or

the investment company’s

investment policy,

(cid:151) the unit

trust’s/common fund’s or
the investment company’s
risk
investment policy and a brief assessment of
profile (including, if applicable, information according to Article
24a and Article 24b),

the fund’s

(cid:151) historical performance of the common fund/investment company

(cid:151) historical performance of the unit trust/common fund/investment

(where applicable),

company (where applicable),

(cid:151) profile of the typical investor the unit trust/common fund or the

(cid:151) Unchanged

investment company is designed for

Economic information

(cid:151) tax regime,

(cid:151) entry and exit commissions,

(cid:151) other possible expenses or fees, distinguishing between those to be
paid by the unit-holder and those to be paid out of the unit
trust’s/common fund’s or the investment company’s assets.

Commercial information

(cid:151) how to buy the units,

(cid:151) how to sell the units,

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(cid:151) in the case of investment companies having different investment
compartments how to pass from one investment compartment into
another and the charges applicable in such cases,

(cid:151) when and how dividends (if applicable) are distributed,

(cid:151) frequency and where/how prices are published or made available,

(cid:151) indication of a contact point

(person/department,

timing, etc.)

where additional explanations may be obtained if needed.

Additional information

(cid:151) statement that, on request, the full prospectus, the annual and
half-yearly reports may be obtained free of charge before the
conclusion of the contract and afterwards.

Functions included in the activity of collective portfolio management

ANNEX II

(cid:151) Investment activity:

(a) investment management;

(b) investment administration (such as: instructing brokers, arranging settlement, instructing the depositary on the

exercise of voting rights).

(cid:151) Marketing:

(a) production of literature;

(b) distribution of the units of the unit trusts/common funds and of the investment companies managed by the

management company;

(c) relations with distribution agents.

(cid:151) Administration:

(a) legal and fund management accounting services;

(b) customer inquiries;

(c) valuation and pricing (including tax returns);

(d) regulatory compliance monitoring;

(e) maintenance of unit-holder register;

(f) distribution of income;

(g) unit issues and redemptions;

(h) contract settlements (including certificate dispatch);

(i) record keeping.