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) - (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, free movement of capital, investment company, securities

C 311 E/302

EN

Official Journal of the European Communities

31.10.2000

Amended proposal for a Directive of the European Parliament and of the Council amending
laws, regulations and administrative provisions
Directive 85/611/EEC on the coordination of

relating to undertakings for collective investment in transferable securities (UCITS) (1)

(2000/C 311 E/21)

(Text with EEA relevance)

COM(2000) 329 final (cid:151) 98/0243(COD)

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

(1) OJ C 280, 9.9.1998, p. 6.

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 the scope of Council Directive 85/611/EEC (1), as
last amended by Directive 88/220/EEC (2), was confined
initially to collective investment undertakings of
the
open-ended type which promote the sale of their units
to the public in the Community and the sole object of
which is investment
in transferable securities (UCITS);
whereas it was envisaged in the preamble to Directive
85/611/EEC that undertakings falling outside its scope
would be the subject of co-ordination at a later stage;

(2) Whereas, taking into account market developments, it is
desirable that
the investment objective of UCITS is
widened in order to permit them to invest in financial
assets, other
securities, which are
sufficiently liquid;

than transferable

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

by Directive

95/26/EC (3), was

(1) The scope of Council Directive 85/611/EEC (2), as last
confined
amended
initially to collective investment undertakings of
the
open-ended type which promote the sale of their units
to the public in the Community and the sole object of
which is investment in transferable securities (UCITS); it
was envisaged in the preamble to Directive 85/611/EEC
that undertakings falling outside its scope would be the
subject of coordination at a later stage;

(2) Taking into account market developments, it is desirable
that
the investment objective of UCITS is widened in
order to permit them to invest in financial assets, other
than transferable securities, which are sufficiently liquid;
financial instruments which are eligible to be investment
assets of the portfolio of the UCITS are stated in Article
19(1); the (cid:145)Securities lending(cid:146) mentioned in Article 21 is
not an (cid:145)instrument for investment(cid:146) but a technique to
improve the return of the portfolio; the investment of a
portfolio according to an index is
a management
technique; the instruments bought in order to replicate
the index are transferable securities or derivatives and
are covered in Article 19(1);

___________
(1) OJ C 116, 28.4.1999, p. 44.
(2) OJ L 375, 31.12.1985, p. 3.
(3) OJ L 168, 18.7.1995, p. 7.

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INITIAL PROPOSAL

AMENDED PROPOSAL

(3) Whereas the definitions of

furthermore,

transferable securities and
money market instruments included in this Directive are
valid only for this Directive and consequently in no way
affect the various definitions of financial instruments used
in national legislation for other purposes such as taxation;
whereas,
transferable
securities covers negotiable instruments only; whereas,
consequently, shares and other securities equivalent
to
shares issued by bodies, such as building societies and
industrial and provident
the ownership of
which cannot in practice be transferred except by the
issuing body buying them back, are not covered by this
definition;

the definition of

societies,

(4) Whereas money market instruments cover those classes of
transferable instruments which are normally dealt in on
the money market,
for example treasury and local
authority bills, certificates of deposit, commercial paper
and bankers’ acceptances; whereas Member States should
have the option of choosing the list of eligible money
market instruments on the basis of objective criteria to
take account of the existing structural differences in the
money markets of different countries;

(5) Whereas it is desirable to permit a UCITS to invest its
assets in units of other collective investment undertakings
of the open-ended type which also invest in transferable
securities and which operate on the principle of risk
spreading; whereas the requirement of risk spreading for
UCITS investing in other collective investment under-
takings is indirectly respected since such UCITS can only
invest
in units issued by collective investment under-
takings complying with the risk-spreading criteria of
Directive 85/611/EEC; whereas, it is important that such
UCITS adequately disclose to investors the fact that they
invest in units of other collective investment undertakings;

(6) Whereas to take market developments into account and in
consideration of the completion of the EMU it is desirable
to permit UCITS to invest in bank deposits;

(3) The definition of transferable securities including money
market instruments traded on regulated markets included
in this Directive is valid only for this Directive and
consequently in no way affect the various definitions of
financial instruments used in national legislation for other
purposes such as taxation; furthermore, the definition of
transferable securities covers negotiable instruments only;
consequently, shares and other securities equivalent
to
shares issued by bodies, such as building societies and
industrial and provident
the ownership of
which cannot in practice be transferred except by the
issuing body buying them back, are not covered by this
definition;

societies,

(4) Money market instruments cover also those transferable
instruments which are normally not traded on regulated
markets but dealt in on the money market, for example
treasury and local authority bills, certificates of deposit,
commercial paper and bankers’ acceptances;

(5) It is useful to ensure that the concept of regulated markets
in Directive
corresponds

to that

in this directive
93/22/EEC (1);

(6) It is desirable to permit a UCITS to invest its assets in
units of UCITS and/or other collective investment under-
takings of the open-ended type which also invest in trans-
ferable securities and which operate on the principle of
risk spreading; UCITS or other collective investment
undertakings in which a UCITS invests should also be
subject to effective supervision;
investments in units of
UCITS and/or other collective investment undertakings
funds; UCITS shall
shall not
adequately disclose to investors if they invest in units of
UCITS and/or other collective investment undertakings;

in cascades of

result

(7) To take market developments

the EMU it

into account and in
consideration of
is
the completion of
desirable to permit UCITS to invest in bank deposits; to
ensure adequate liquidity of the investments in deposits
the terms of these deposits should include a break clause;
if the deposits are made with a credit institution situated
in a non-Member State, the credit institution should be
subject to effective supervision;

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

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INITIAL PROPOSAL

AMENDED PROPOSAL

incorporation,

according to its

(7) Whereas, in addition to the case in which a UCITS invests
in bank deposits
fund rules or
it may be necessary to
instruments of
allow all UCITS to hold ancillary liquid assets, such as
bank deposits at sight and/or cash; whereas the holding
for
of
such ancillary liquid assets may be justified,
to cover
example,
current or unexpected payments; in the case of sales, for
the time necessary to reinvest in transferable securities
and/or
in other financial assets provided for by this
Directive; for a period of time strictly necessary when,
the
because
investment
and in other
securities
financial assets needs to be suspended;

in the following cases:

unfavourable market

in transferable

conditions,

in order

of

(8) Whereas,

for prudential

reasons, UCITS should avoid
assuming an excessive concentration in deposits with a
single credit institution;

it

the risks

involved are adequately covered,

(9) Whereas UCITS should be permitted to invest their assets
in standardised options and futures contracts dealt in on
regulated derivatives markets; whereas, in order to ensure
is
that
necessary that such UCITS hold at any time assets of
sufficient value and of the right kind (i.e. securities,
if
the exposure is in terms of securities; cash or securities
which are, or, on being turned into money in the right
currency, if the exposure is in terms of money); whereas,
such UCITS too have to operate on the principle of risk
the
spreading; whereas, considering that
portfolio of
such
UCITS should address only experienced investors or
investors whose financial situation allows them to bear
the risks involved in the investment
in units of such
UCITS; whereas the risks involved should be adequately
disclosed
in the UCITS’
investing public
prospectuses and in any promotional literature;

such UCITS may fluctuate widely,

the value of

the

to

(10) Whereas new portfolio management

and

recognised

techniques

for
collective investment undertakings investing primarily in
shares are based on the replication of
stock-indices;
is desirable to permit UCITS to replicate
whereas it
well-known
stock-indices; whereas
therefore it is necessary to introduce more flexible risk-
spreading rules for UCITS investing in shares; whereas in
order to ensure transparency of the stock-indices which
replicable by
the Member
consider
harmonised UCITS and a wide acceptance of
such
indices, it is desirable to provide for adequate publication
of the list of replicable stock-indices;

to be

States

(8) In addition to the case in which a UCITS invests in bank
deposits according to its fund rules or instruments of
incorporation, it may be necessary to allow all UCITS to
hold ancillary liquid assets, such as bank deposits at sight
and/or cash; the holding of such ancillary liquid assets
may be justified, for example, in the following cases: in
in the
order to cover current or unexpected payments;
case of sales, for the time necessary to reinvest in trans-
ferable securities and/or in other financial assets provided
for by this Directive; for a period of time strictly necessary
when, because of unfavourable market conditions,
the
and in other
securities
investment
financial assets needs to be suspended;

in transferable

(9) For prudential reasons, UCITS should avoid assuming an
excessive concentration in deposits with a single credit
institution or with institutions belonging to the same
group;

investment policy and/or

in standardised and over-the-counter

(10) UCITS should be explicitly permitted to invest, as part of
their general
for hedging
purposes,
(OTC)
in regard to the OTC
financial derivative instruments;
derivatives, additional requirements must be set in terms
the eligibility of counter-parties and instruments,
of
liquidity and on-going assessment of
the
purpose of such additional requirements is to ensure an
adequate level of investor protection which is close to that
of derivatives dealt in on regulated markets;

the position;

it

securities;

techniques

for collective
(11) New portfolio management
investing primarily in shares
investment undertakings
stock-indices and/or
are based on the replication of
indices on debt
is desirable to permit
UCITS to replicate well-known and recognised stock-
indices and/or debt indices; therefore it is necessary to
introduce more flexible risk-spreading rules for UCITS
investing in shares and/or debt securities;
in order to
ensure transparency of
the indices which the Member
States consider to be replicable by harmonised UCITS
and a wide acceptance of such indices, it is desirable to
provide for adequate publication of the list of replicable
indices
updated
information can be obtained, possibly by electronic
means; UCITS may also replicate the index by appropriate
investments in other instruments, such as standardised
derivatives; UCITS tracking an index may also dedicate a
part of their portfolio to counteract adverse movements of
the replicated index in accordance with their disclosed
investment objectives and within the limit set by this
Directive;

about where

indication

and

an

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INITIAL PROPOSAL

AMENDED PROPOSAL

(11) Whereas the employment of techniques and instruments
for the purpose of efficient portfolio management may
never be permitted if they do not comply with the prin-
ciples enshrined in the Directive and if they hinder the
competent authorities from exercising effectively their
supervisory functions;

an
in order

efficient
to ensure

(12) Whereas, considering the new portfolio management tech-
niques which have been developed in recent years, it is
desirable to permit UCITS to make use of all sorts of
portfolio
derivative
for
instruments
investor
management; whereas,
protection,
it is necessary to provide for a harmonised
framework for the utilisation of financial derivatives and
for an adequate cover for exposure deriving from such
transactions; whereas, transactions on financial derivatives,
in on specialised derivatives markets (over-
not dealt
the-counter
risks;
whereas therefore the counter-parties for such transactions
shall be
among qualified institutions
approved by the UCITS’ competent authorities;

chosen only

counter-party

derivatives)

involve

(13) Whereas,

it

41

notwithstanding Article

of Directive
85/611/EEC,
is desirable to permit UCITS to enter
into securities lending transactions for the purposes of
efficient portfolio management; whereas,
to
is
limit
necessary to regulate the conditions under which a
UCITS may be permitted to act as a lender in securities
lending transactions;

involved in such transactions,

in order
it

the risks

(12) Operations

in particular to ensure risk-spreading,

in derivatives may never be used to
circumvent the principles and regulations set out in this
Directive;
limits
must apply to derivatives on the basis of the underlying;
concerning OTC derivatives additional risk-spreading rules
must apply to exposures to a single counter-party or
to ensure
group of counter-parties;
and commitments
constant
arising
and to check
compliance with investment limits, a UCITS will have to
measure and monitor risks and commitments arising from
derivatives transactions on an ongoing basis;

awareness of
from derivative

risks
transactions

in order

finally,

the

(13) In order to ensure investor protection, it is necessary to
limit a UCITS’
commitments arising from financial
derivatives so that they do not exceed certain percentages
in terms of the total net value of the UCITS’ portfolio; in
order to ensure investor protection through disclosure,
UCITS shall describe their
techniques and
investment limits governing derivatives operations in the
relevant documents available to the public and to the
competent authorities;
furthermore UCITS investing in
derivatives shall make it clear in a risk-warning to the
investors that a proportion of the UCITS will
potential
be
allowing
investors to make an informed decision as regards the
in units of
level of risk involved with the investment
such UCITS;

in OTC derivatives

strategies,

invested

thereby

(14) Notwithstanding Article 41 of Directive 85/611/EEC, it is
desirable to permit UCITS to enter into securities lending
transactions; in order to limit the risks involved in such
transactions,
is necessary to regulate the conditions
under which a UCITS may be permitted to act as a
lender in securities lending transactions; considering the
need for liquidity of a UCITS’ portfolio, securities lending
transactions shall only be carried out on parts of
the
portfolio and on a temporary basis;

it

(15) The development of opportunities for a UCITS to invest in
investment undertakings
collective
UCITS and other
should be facilitated;
it is therefore essential to ensure
that such investment activity does not diminish investor
protection; taking into account the nature of investments
in sufficiently diversified collective investment under-
takings, it may be necessary to restrict the possibility for
a UCITS to combine its direct investments in a liquid
financial asset with the investments made through these
UCITS and/or other collective investment undertakings;
because of the enhanced possibilities for UCITS to invest
in units of other UCITS and/or collective investment
undertakings,
it is necessary to lay down certain rules
on quantitative limits and disclosure of information to
prevent the cascade phenomenon;

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INITIAL PROPOSAL

AMENDED PROPOSAL

(14) Whereas collective investment undertakings falling within
the scope of this Directive shall not be used for purposes
other than the collective investment of the money raised
from the public according to the rules laid down in this
Directive; whereas, in the cases identified by this Directive,
a UCITS may hold subsidiaries only when necessary to
that UCITS certain
carry out effectively on behalf of
activities, also identified by this Directive; whereas it is
necessary to ensure an effective supervision of UCITS;
whereas therefore the establishment of a UCITS’ subsidiary
in third countries should be permitted only in the cases
the conditions identified in the Directive;
and under
whereas
solely in the
interest of unit-holders and,
in particular, the objective
to increase cost efficiencies, never justify a UCITS under-
taking measures which may hinder the competent auth-
orities
supervisory
functions;

the general obligation to act

from exercising

effectively

their

(16) Collective investment undertakings

falling within the
scope of this Directive shall not be used for purposes
other than the collective investment of the money raised
from the public according to the rules laid down in this
Directive; in the cases identified by this Directive, a UCITS
may hold subsidiaries only when necessary to carry out
effectively on behalf of that UCITS certain activities, also
identified by this Directive; it is necessary to ensure an
effective supervision of UCITS; therefore the establishment
of a UCITS’
subsidiary in third countries should be
permitted only in the cases and under the conditions
identified in the Directive; the general obligation to act
solely in the interest of unit-holders and, in particular, the
justify a
objective to increase cost efficiencies, never
UCITS undertaking measures which may hinder
the
competent authorities from exercising effectively their
supervisory functions;

(17) For prudential

reasons, a UCITS should, whether

its
in a variety of
chosen investment policy is to invest
liquid financial assets or
to specialise in a certain
category of such assets, avoid assuming an excessive
concentration in liquid financial assets issued by and/or
made with a single body;

(15) Whereas the depositary of the assets of a UCITS carries
out crucial controlling functions over the compliance of a
UCITS with the law and its fund rules or instruments of
incorporation; whereas therefore it is important to ensure
an effective
independence between the management
company and the depositary; whereas when both the
management company and the depositary belong to the
same economic group or when the depositary has a qual-
ifying holding in the management company’s capital, or
vice versa, or in all other cases in which the depositary
may exercise a significant influence over the management
company, or vice versa, it is necessary to undertake all
measures assuring the independence between the two
entities; whereas, when a management company, acting
on behalf of
investment
companies it manages, is permitted to enter into trans-
actions with the depositary, arrangements have to be
made preventing conflicts of interests and ensuring the
compliance of
the transaction with the law and the
UCITS’ fund rules or instruments or incorporation;

common funds or

the

(16) Whereas, considering the depositary’s liabilities towards
the management company and the unit-holders and the
complexity of its controlling functions, only institutions
which have adequate financial resources and an adequate
organisational
to
prudential supervision should fall within the categories
of institutions eligible to be depositaries;

and which are

structure

subject

a

has

qualifying

depositary

(18) The depositary of the assets of a UCITS carries out crucial
controlling functions over the compliance of a UCITS
with the law and its fund rules or instruments of incor-
poration; therefore it is important to ensure an effective
independence between the management company and the
depositary; when both the management company and the
depositary belong to the same economic group or when
the
the
management company’s capital, or vice versa, or in all
other cases in which the depositary may exercise a
significant influence over the management company, or
is necessary to undertake all measures
vice versa,
assuring the independence between the two entities;
when a management company, acting on behalf of the
common funds or investment companies it manages,
is
permitted to enter into transactions with the depositary,
arrangements have to be made preventing conflicts of
interests and ensuring the compliance of the transaction
with the law and the UCITS’ fund rules or instruments or
incorporation;

holding

in

it

(19) Considering

the

towards

liabilities

depositary’s

the
management company and the unit-holders and the
complexity of its controlling functions, only institutions
which have adequate financial resources and an adequate
organisational
to
prudential supervision should fall within the categories
of institutions eligible to be depositaries;

and which are

structure

subject

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INITIAL PROPOSAL

AMENDED PROPOSAL

the units of a wider

(17) Whereas, considering the need to ensure the free cross-
border marketing of
range of
collective investment undertakings, while providing a
uniform minimum level of investor protection; whereas,
therefore, only a binding Community Directive laying
down agreed minimum standards
the
desired objectives; whereas this Directive effects only the
minimum harmonisation required,

can achieve

(20) Considering the need to ensure the free cross-border
marketing of
the units of a wider range of collective
investment undertakings, while providing a uniform
minimum level of investor protection; therefore, only a
binding Community Directive
down agreed
minimum standards can achieve the desired objectives;
this Directive effects only the minimum harmonisation
required;

laying

(21) The measures necessary for the implementation of this
scope within the
Directive are measures of general
meaning of Article 2 of Council Decision 1999/468/EC
of 28 June 1999 laying down the procedures for the
exercise of
conferred to the
Commission (1), they should be adopted by use of the
regulatory procedure provided for in Article 5 of that
Decision;

implementing powers

(22) The Commission may consider proposing codification in

due time after adoption of the proposals,

HAVE ADOPTED THIS DIRECTIVE:

Unchanged

Article 1

Directive 85/611/EEC is amended as follows:

1. In Article 1(2), the first indent shall be replaced by the

following:

(cid:145)(cid:151) the sole object of which is the collective investment in
transferable securities and/or in other liquid financial
assets mentioned in Article 19 of this Directive of
capital raised from the public and which operates
on the principle of risk-spreading.(cid:146);

(cid:145)(cid:151) the sole object of which is the collective investment in
transferable securities and/or in other liquid financial
assets mentioned in Article 19(1) of this Directive of
capital raised from the public and which operates on
the principle of risk-spreading, and(cid:146);

2. In Article 1 the following paragraph shall be added:

Unchanged

(cid:145)8.

For the purpose of this Directive

For the purpose of this Directive

(a) transferable securities shall mean:

transferable securities shall mean

(cid:151) shares in companies and other securities equivalent

(cid:151) shares in companies and other securities equivalent to

to shares in companies,

shares in companies ((cid:147)shares(cid:148)),

(cid:151) bonds and other forms of securitised debt,

(cid:151) bonds and other

forms of

securitised debt

((cid:147)debt

securities(cid:148)),

(cid:151) money market

in on
regulated markets within Article 19(1)(a), (b) or (c), and

instruments normally dealt

___________
(1) OJ L 184, 17.7.1999, p. 23.

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(cid:151) any other negotiable securities which carry the
right to acquire any such transferable securities by
subscription or exchange,

(cid:151) any other negotiable securities which carry the right to
acquire any such transferable securities by subscription
or exchange.(cid:146)

excluding the techniques and instruments referred to in
Article 21;

Deleted

(b) money market instruments, which, for the purposes of
transferable
regarded as
this Directive
securities,
transferable
shall mean those classes of
instruments normally dealt in on the money market
which Member States consider to:

shall be

(cid:151) be liquid, and

(cid:151) have a value which can be accurately determined at
any time or at least with the frequency stipulated in
and
Article
instruments referred to in Article 21.(cid:146);

techniques

excluding

34,

the

3. In Article 19 the following shall be added to paragraph 1:

3. In Article 19 paragraph 1, subparagraph (a) shall be

replaced by the following:

(cid:145)(a) transferable securities admitted to or dealt

in on a
regulated market within the meaning of Article 1(13)
of Directive 93/22/EEC in a Member State; and/or(cid:146)

4. In Article 19 the following shall be added to paragraph 1:

(cid:145)(e) units of other collective investment undertakings
within the meaning of the first and second indent
of Article 1(2)

(cid:145)(e) units of UCITS and/or other collective investment
undertakings within the meaning of
the first and
second indent of Article 1(2) provided that the latter:

(cid:151) is authorised under laws which provide that it is
subject to supervision considered by the UCITS’
to that
competent authorities to be equivalent
laid down in Community law, and that cooperation
between authorities is sufficiently ensured;

(cid:151) the level of protection for unitholders in the other
collective investment undertaking is equivalent to
that provided for unit-holders in a UCITS, and in
lending,
particular that the rules on borrowing,
and uncovered sales of transferable securities are
equivalent to the requirements of this Directive;

(cid:151) the business of

the other collective investment
undertaking is reported in half-yearly and annual
reports to enable an assessment to be made of the
assets and liabilities, income and operations over
the reporting period; and/or

(cid:151) and/or

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(f) deposits with credit institutions and/or

(f) deposits with credit institutions which are repayable on
to be withdrawn, and
demand or have the right
maturing in no more than 12 months, provided that
the credit
institution has its registered office in a
Member State or, if the registered office of the credit
institution is situated in a non-Member State, provided
that it is subject to prudential rules considered by the
UCITS’ competent authorities as equivalent to those
laid down in Community law; and/or

(g) standardised

contracts,
financial-futures
equivalent cash-settled instruments, dealt
the
regulated market mentioned
sub-paragraphs (b) and (c); and/or

in

including
in on a
previous

(g) standardised financial derivative instruments, including
equivalent cash-settled instruments, dealt
in on a
previous
the
regulated market mentioned
((cid:147)standardised
sub-paragraphs
and
derivatives(cid:148));
in particular,
options on currency and on interest rates dealt in on
the mentioned markets; and/or

in
(c)
category includes,

this

(a),

(b)

(h) standardised options to acquire or dispose of any
instruments
falling within this Article,
including
equivalent cash-settled instruments, dealt
in on a
regulated market mentioned
the
previous
in
subparagraphs (b) and (c). This category includes,
particular, options on currency and on interest rates,

in

(h) financial

in
the-counter ((cid:147)OTC derivatives(cid:148)), provided that

instruments

derivative

dealt

over-

(cid:151) the counter-parties to OTC derivative transactions
are institutions subject to prudential supervision,
and belonging to the categories approved by the
UCITS’ competent authorities,

(cid:151) the underlying consists of instruments covered by
rates,
Article 19(1),
financial
foreign exchange rates or currencies,
in which
the UCITS may invest according to its investment
objectives as stated in the UCITS’ fund rules or
instruments of incorporation, and

indices,

interest

(cid:151) the OTC derivatives are subject

to reliable and
verifiable valuation and can be sold or liquidated
on a daily basis;

and/or

and/or

(i) money market instruments which are not dealt in on a
regulated market, unless the issue of such instruments
is
the purpose of protecting
investors and savings, and provided that they are:

regulated for

itself

(i) money market instruments other than those dealt in on
a regulated market, which fall under Article 1(8) third
indent, unless the issue of such instruments is itself
regulated for the purpose of protecting investors and
savings, and provided that they are:

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INITIAL PROPOSAL

AMENDED PROPOSAL

(cid:151) issued by a central, regional or local authority, a
central bank of a Member State,
the European
the
the
Central Bank,
European Investment Bank, a non-Member State
or, in the case of a Federal State, by one of the
members making up the federation, or by a public
international body to which one or more Member
States belong, or

European Union or

Unchanged

(cid:151) issued by an undertaking any securities of which
are admitted to official listing on a stock exchange
or are dealt in on other regulated markets which
operate regularly, are recognised and are open to
the public, or

(cid:151) issued by an undertaking any securities of which
are admitted to official listing on a stock be dealt
in on other
regulated markets mentioned in
sub-paragraphs (a), (b) or (c), or

(cid:151) issued or guaranteed by an establishment subject to
prudential supervision, in accordance with criteria
defined by Community law or by an establishment
which are subject to and comply with prudential
rules considered by the competent authorities to be
those laid down by
least as
at
Community law.(cid:146);

stringent as

Unchanged

4. Article 19(2)(b), and (3) shall be deleted;

5. Article 19(2)(b), and (3) shall be deleted;

5. Article 20 shall be deleted;

6. Article 20 shall be replaced by the following:

(cid:145)1.
The Member States shall send to the Commission in
due time all information which is required to be provided
according to the relevant Articles of this Directive. They
shall also furnish any amendments to the information
indicate a source where up-to-date
concerned and shall
information can be obtained or accessed.
Information
covered by this Article shall be disclosed to the public
on request by any holder of the information if it is not
made public on a general basis.

the

forward

The Commission

received
shall
2.
information to the other Member States together with
any comments which it considers appropriate. Such
communications may be the subject of exchanges of
view within the Contact Committee in accordance with
the procedure laid down in Article 53(4). The Commission
shall publish the received information and updated thereto
in an adequate form in the Official Journal of the European
Communities or make such information publicly available
in an appropriate manner.(cid:146)

31.10.2000

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INITIAL PROPOSAL

AMENDED PROPOSAL

6. In Article 21, the following paragraphs shall be added:

7. Article 21 shall be replaced by the following:

(cid:145)3.
In this context, a UCITS may carry out transactions
in financial derivative instruments, also other than those
mentioned in Article 24b, provided that
the exposure
relating to such instruments is covered according to the
rules laid down in Article 24b.

Deleted

If the UCITS carries out transactions in financial derivative
instruments which are not dealt in on a regulated market
(over-the-counter derivatives), the counter-parties to such
transactions must be qualified institutions belonging to the
categories approved by the UCITS’ competent authorities.(cid:146)

in the

Further,

efficient portfolio
4.
management, a UCITS may enter into securities lending
transactions in which it acts as a lender, provided that
the following conditions are fulfilled:

context of

(cid:145)On a limited basis prescribed by the Member States, a
UCITS may enter into securities lending transactions in
which it acts as a lender, provided that
the following
conditions are fulfilled:

recognised

(a) securities lending transactions may be concluded only
with a
clearing house or
securities
exchange, or with a counter-party which is an auth-
orised person specialised in that type of transaction
and subject to prudential supervision at Community
level; or is a Zone A credit institution as defined in
Directive 89/647/EEC or an investment firm as defined
is a recognised third
in Directive 93/22/EEC; or
to and
subject
country investment
rules considered by the
complies with prudential
UCITS’
as
authorities
competent
stringent as those laid down in Directive 93/6/EEC;

firm which is

to be

least

at

recognised

(a) securities lending transactions may be concluded only
with a
clearing house or
securities
exchange, or with a counter-party which is an auth-
orised person specialised in that type of transaction
and subject to prudential supervision at Community
level; or is a Zone A credit institution as defined in
Directive 89/647/EEC (1) or an investment
firm as
defined in Directive 93/22/EEC; or is a recognised
third country investment firm which is subject to and
rules considered by the
complies with prudential
UCITS’
as
authorities
competent
stringent as those laid down in Directive 93/6/EEC (2);

to be

least

at

(b) in relation to each securities lending transaction appro-
priate collateral shall be given covering the risk of
default of the borrower. The value of collateral must
be, during the entire period of the contract, at least
equal to the total value of the financial instruments lent

(b) in relation to each securities lending transaction appro-
priate collateral shall be given covering the risk of
default of the borrower. The value of collateral must
be, during the entire period of the contract, at least
equal to the total value of the financial instruments lent
and must be kept as collateral,

(c) if the securities lending transaction is carried out by
recognised security clearing houses and/or exchanges,
collateral must be provided in accordance with the
relevant rules of these entities; the collateral must be
kept as collateral and may not be used by the UCITS
for further investments,

When a UCITS is permitted to conclude securities lending
transactions with the depositary which performs for that
UCITS the duties mentioned in Articles 7 and 14 of this
Directive, the competent authorities shall ensure that the
collateral
the
contract, with a third party custodian and that measures
are undertaken preventing the depositary from using it.(cid:146);

is entrusted, during the entire period of

Unchanged

___________
(1) OJ L 386, 30.12.1989, p. 14.
(2) OJ L 141, 11.6.1993, p. 1.

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INITIAL PROPOSAL

AMENDED PROPOSAL

8. Article 22(1), (2) and the second sub-paragraph of (5) shall

be replaced by the following:

(cid:145)1.
A UCITS may invest no more than 5 % of its assets
in each of the following instruments issued by or made
with the same body or to which the same body is the
counter-party:

(cid:151) transferable securities,

(cid:151) money market

instruments

according

to Article

19(1)(i),

(cid:151) deposits,

(cid:151) OTC financial derivative instruments.

Member States may allow to cumulate investments in
instruments with the same body/counter-party
different
up to a limit of 15 %. Companies within the same group
are regarded as a single body for the purpose of calculating
the limits contained in this Article.

2.
The Member States may raise the limit laid down in
paragraph 1 sentence 1 to a maximum of 10 %, and in
to a maximum of 15 %;
case of group investments
paragraph 1 sentence 2 does not apply. However,
the
total value of the UCITS’ investments in the instruments
mentioned in paragraph 1 with one body/counter-
party/group in each of which it invests more than 5 %
of its assets must not then exceed 40 % of the value of
its assets.

5.

(. . .)

The limits provided for in paragraphs 1, 2, 3 and 4 may
not be combined, and thus investments in the instruments
mentioned in Article 19(1) with one body/counter-
party/group carried out in accordance with paragraphs 1,
2, 3 and 4 shall under no circumstances exceed in total
35 % of the assets of a UCITS.(cid:146)

7. The following Article 22a shall be inserted:

9. The following Article 22a shall be inserted:

(cid:145)Article 22a

Unchanged

1. Without prejudice to the limits laid down in Article
25, the Member States may raise the limits laid down in
Article 22 to a maximum of 35 % for investment in shares
issued by the same body when, according to the fund rules
or instruments of incorporation, the aim of the UCITS’
investment policy is to replicate the composition of a
certain stock index.

1. Without prejudice to the limits laid down in Article
25, the Member States may raise the limits laid down in
Article 22 to a maximum of 20 % for investment in shares
and/or debt securities issued by the same body when,
instruments of
according to the fund rules or
incor-
poration, the aim of the UCITS’
investment policy is to
replicate the composition of a certain stock or debt
securities
recognised by the UCITS’
competent authorities, on the following basis:

index which is

31.10.2000

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INITIAL PROPOSAL

AMENDED PROPOSAL

Replicable stock indices

2.
Member States consider to:

shall be indices which

Deleted

(cid:151) its investment policy reflects the composition of that

index,

(cid:151) have a composition which is sufficiently diversified,

(cid:151) its composition is sufficiently diversified,

(cid:151) be easy to replicate,

Deleted

(cid:151) represent an adequate benchmark for the equity market

(cid:151) the index represents an adequate benchmark for the

to which they refer,

market to which it refers,

(cid:151) be published in an appropriate manner.

(cid:151) it is published in an appropriate manner.

3.
Each Member State shall send to the Commission the
list of stock-indices which they consider replicable by
UCITS, together with details of the characteristics of such
stock-indices. A similar communication shall be effected in
respect of each change to the aforementioned list. The
Commission shall publish the complete list of replicable
stock-indices and updates thereto in the Official Journal of
the European Communities at least once a year. This list may
be subject
to exchanges of views within the Contact
Committee in accordance with the procedure laid down
in Article 53(4).

As laid down in Article 20(1), each Member State
2.
shall
the purpose of
send to the Commission for
information and with a view to facilitate a common
approach to which indices are recognised, a list of the
indices which they consider replicable by UCITS, together
with details of
the characteristics of such indices. The
procedure laid down in Article 20(2) shall apply.(cid:146)

The UCITS fund rules or

4.
incor-
poration, its prospectuses and any promotional literature
shall describe the characteristics of the replicated stock-
index.

instruments of

Deleted

These documents shall also contain a prominent statement
drawing attention to the fact that the aim of the UCITS’
investment policy is to replicate a certain stock-index and
that therefore it may invest a relevant part of its assets in
shares issued by the same issuer;(cid:146)

8. Article 24 shall be replaced by the following:

10. Article 24 shall be replaced by the following:

(cid:145)Article 24

Unchanged

A UCITS may acquire the units of other collective
1.
investment undertakings within the meaning of the first
and second indent of Article 1(2), provided that
it
invests no more than 10 % of its own assets in units of
a single UCITS.

A UCITS may acquire the units of UCITS and/or
1.
other collective investment undertakings mentioned in
Article 19(1)(e), provided that no more than 10 % of its
assets are invested in units of a single UCITS or other
collective investment undertaking. The Member States
may raise the limit to a maximum of 20 %.

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INITIAL PROPOSAL

AMENDED PROPOSAL

2.
The Member States may raise the limit laid down in
paragraph 1 to a maximum of 35 %. However, in that case
the UCITS must invest in at least five different collective
investment undertakings mentioned in paragraph 1.

Investments made in units of collective investment
in

2.
undertakings other
aggregate, 30 % of the assets of the UCITS.

than UCITS may not exceed,

The Member States may allow that, when a UCITS has
acquired units of UCITS and/or other collective investment
undertakings, the assets of the respective UCITS or other
collective investment undertaking do not have to be
combined to the limits laid down in Article 22.

A UCITS may not

3.
in units of a collective
invest
investment undertaking within the meaning of the first
and second indent of Article 1(2), which invests more
than 10 % of its own assets in units of other collective
investment undertakings.

3.
A UCITS may not invest in units of another UCITS
and/or other collective investment undertaking which
invests itself more than 10 % in units of other UCITS
and/or other collective investment undertakings.

4.
Investment in the units of a unit trust managed by
the same management company or by any other company
linked by
with which the management company is
common management or control, or by a substantial
direct or indirect holding, shall be permitted only in the
case of a unit trust which, in accordance with its rules, has
specialised in investment in a specific geographical area or
is
economic sector, and provided that such investment
authorised by the competent authorities. Authorisation
shall be granted only if the unit trust has announced its
intention of making use of that option and if that option
has been expressly stated in its rules.

A management company may not charge any fees or costs
on account of transactions relating to a unit trust’s units
where some of a unit trust’s assets are invested in the units
of another unit trust managed by the same management
company or by any other company with which the
management company is linked by common management
or control or by a substantial direct or indirect holding.

5.
Paragraph 4 shall also apply where an investment
company acquires units in another investment company
to which it is linked within the meaning of the previous
subparagraph.

Paragraph 4 shall
company acquires units of a unit
linked or where a unit
investment company to which it is linked.

also apply where
trust

an investment
is
to which it
trust acquires units of an

The UCITS’

fund rules or

6.
incor-
poration, its prospectuses and any promotional literature
shall describe the characteristics of
the other collective
investment undertakings in the units of which the UCITS
is authorised to invest.

instruments of

Unchanged

Deleted

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INITIAL PROPOSAL

AMENDED PROPOSAL

These documents shall also contain a prominent statement
drawing attention to the fact that the UCITS invests a part
of or all its assets in units of other collective investment
undertakings.(cid:146);

9. The following Articles 24a and 24b shall be inserted:

11. The following Articles 24a and 24b shall be inserted:

(cid:145)Article 24a

Unchanged

1.
Notwithstanding the provision laid down in Article
19(4), a UCITS may invest its assets in deposits with credit
institutions furnishing sufficient financial and professional
guarantees, provided that the UCITS places nor more than
10 % of its assets in deposits with the same credit insti-
tution or with credit institutions within the same group.

laid down in
2. Member States may raise the limit
paragraph 1 to a maximum of 35 %. However,
in that
case a UCITS must invest in deposits with at least five
different credit institutions. For the purpose of this rule,
credit
institutions belonging to the same group are
considered to be one single institution.

If the UCITS’
intends to invest its assets in instruments
other than transferable securities, the UCITS’ fund rules
or instruments of incorporation, its prospectuses and any
promotional literature shall

(cid:151) in the case of investments according to Article 22a:
describe the characteristics of
the replicated index
and contain a prominent statement drawing attention
to the fact that the aim of the UCITS’ investment policy
is to replicate a certain index and that therefore it may
invest a relevant part of its assets in securities issued by
the same issuer,

The UCITS’

fund rules or

3.
incor-
poration, its prospectuses and any promotional literature
must include a prominent statement drawing attention to
the fact that the UCITS invests all or a part of its assets in
deposits with credit institutions.

instruments of

4. Member States shall not permit UCITS to invest in
deposits with a credit institution which performs for that
UCITS the duties of a depositary mentioned in Articles 7
and 14.

(cid:151) in the case of

investments according to Article 24:
include a clear statement drawing the attention to the
fact that the UCITS invests in units of UCITS and/or
other collective investment undertakings and describe
the other UCITS or other
the
collective investment undertakings
in the units of
which the UCITS is authorised to invest,

characteristics of

that

(cid:151) in the case of investments according to Article 24b:
include a clear statement drawing attention to the
the UCITS invests in standardised and/or
fact
those
OTC derivatives and contain a warning that
investments may be more risky and therefore are
only
and for
investors whose financial situation allows them to
bear the risks involved in the investment in units of
such UCITS,

experienced investors

suitable

for

(cid:151) in the case of

investments in deposits:

include a
prominent statement drawing attention to the fact
that the UCITS invests all or a part of its assets in
deposits with credit institutions,

(cid:151) in case the net asset value of a UCITS is likely to have a
high volatility due to its portfolio composition or the
management techniques used: include a clear statement
referring to this feature of the UCITS.

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INITIAL PROPOSAL

AMENDED PROPOSAL

Article 24b

Unchanged

in

financial-futures

1.
Notwithstanding the provisions laid down in Article
21, a UCITS may invest, as a part of its general investment
policy,
options
mentioned in Article 19(1)(g) and (h), provided that the
maximum potential exposure relating to the conclusion
of each such derivative transaction is covered, during the
entire period of the contract, by assets belonging to the
UCITS of the right kind and sufficient in value

contracts

and

The UCITS’

fund rules or

instruments of

2.
incor-
poration, its prospectuses and any promotional literature
must include a prominent statement drawing attention to
the fact that the UCITS invests, as a part of its general
in the financial-futures contracts and
investment policy,
options.

These documents shall also contain a warning that the
investment in the units of such a UCITS is only suitable
for experienced investors and for investors whose financial
situation allows them to bear the risks involved in the
investment in units of such UCITS.(cid:146)

its general
A UCITS may invest, as a part of
and/or
in
instruments mentioned in Article

1.
investment policy
financial derivative
19(1)(g) and (h), provided that

for hedging purposes,

(cid:151) the management or investment company has a risk-
management process which enables
to daily
the
the material
monitor
positions and their contribution to the overall risk
profile of the portfolio,

it
risk of

and measure

(cid:151) the management or investment company has a process
for accurate and independent assesment of the value of
OTC derivative instruments.

2. When a UCITS intends to invest, as part of its general
investment policy and/or for hedging operations,
in the
instruments mentioned in Article
financial derivative
19(1)(g) and (h),
it must disclose this intention in the
it
documents referred to in Article 24a.
must list which instruments can be dealt in and the deriva-
tives’ contribution to the risks and returns of the entire
portfolio. Information must also be given on quantitative
limits, as provided for either in this directive or in the
UCITS’
investment objectives, for daily exposure in such
instruments, and the methodologies used to calculate such
limits.

In particular,

3.

In any case:

(cid:151) the amount of all the commitments entered into by the
UCITS through financial derivatives operations must
not exceed the total net value of the UCITS’ portfolio.
In calculating the value of the commitments, reference
must be made to the current value of the underlying;
and,

(cid:151) the amount of all the commitments entered into by the
UCITS through OTC derivatives operations must not
exceed 30 % of
the UCITS’
portfolio. When calculating on a daily basis the value
of such commitments, reference must be made to the
current value of the underlying.

the total net value of

instruments

financial derivative
4. When the underlying of a
for which the
consists of
instrument
Directive sets quantitative limits, the underlying must be
taken into account in the calculation of such limits. When
a transferable security embeds a derivative, the latter must
be
taken into account when complying with the
requirements of this Article.

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INITIAL PROPOSAL

AMENDED PROPOSAL

5.

Under no circumstances:

(cid:151) shall the use of derivatives cause the UCITS to diverge
from its investment objectives as laid down in the
UCITS’ prospectus,

(cid:151) shall

the UCITS carry out deals

in the financial
derivative instruments mentioned in Article 19(1)(g)
and (h), which correspond to uncovered sales of trans-
ferable securities.

For the purpose of calculating the limits set out in
6.
Article 22 for counter-party risk,
the management or
investment company must calculate a UCITS’ counter-party
exposure for OTC financial derivatives according to the
methodology described in annex II, paragraph 5 of
Directive 93/6/EEC as amended by Directive 98/33/EC (1),
counter-
without
party-risk.(cid:146);

the weightings

application of

for

10. In Article 25(2), the following indent shall be added:

12. In Article 25(2), the third indent shall be replaced and the

following fourth indent shall be added:

(cid:145)(cid:151) 10 % of the units of any single UCITS and/or other
collective investment undertaking within the meaning
of the first and second indent of Article 1(2);

(cid:145)(cid:151) 10 % of the money market instruments of any single

(cid:151) 10 % of the money market instruments according to

issuing body.(cid:146);

Article 19(1)(i) of any single issuing body.(cid:146);

11.

In Article 25(2), the second sentence shall be replaced by
the following:

13.

In Article 25(2), the second sentence shall be replaced by
the following:

(cid:145)The limits laid down in the second and fourth indents
may be disregarded at the time of acquisition if at that
time the gross amount of the debt securities or of the
money market instruments, or the net amount of
the
securities in issue cannot be calculated.(cid:146);

(cid:145)The limits laid down in the second, third and fourth
indents may be disregarded at the time of acquisition if
at that time the gross amount of the debt securities or of
the money market instruments, or the net amount of the
securities in issue cannot be calculated.(cid:146):

12. Article 25(3)(e) shall be replaced by the following:

14. Article 25(3)(e) shall be replaced by the following:

(cid:145)e)

shares held by an investment company in the capital
of subsidiary companies incorporated in a Member
State carrying on the business of management,
advice or marketing exclusively on its behalf.(cid:146);

(cid:145)e)

shares held by an investment company or investment
companies in the capital of subsidiary companies
carrying on only the business of management,
advice or marketing in the country where the
subsidiary is located, in regard to the repurchase of
units at unit-holders’ request exclusively on its or their
behalf.(cid:146);

___________
(1) OJ L 204, 21.7.1998, p. 29.

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INITIAL PROPOSAL

AMENDED PROPOSAL

13. Article 26(1), second sentence shall be replaced by the

15. Article 26(1), second sentence shall be replaced by the

following:

following:

(cid:145)While ensuring observance of
risk
spreading, the Member States may allow recently auth-
orised UCITS to derogate from Articles 22, 22a, 23, 24,
24a and 24b for six months following the date of their
authorisation.(cid:146);

the principle of

(cid:145)While ensuring observance of
risk
spreading, the Member States may allow recently auth-
orised UCITS to derogate from Articles 22, 22a, 23, 24
and 24b for six months following the date of their auth-
orisation.(cid:146);

the principle of

14. Article 41(2), shall be replaced by the following:

16. Article 41(2), shall be replaced by the following:

(cid:145)2.
Paragraph 1 shall not prevent such undertakings
from acquiring transferable securities or other financial
instruments mentioned in Article 19(1)(e), (g), (h) and (i)
which are not fully paid.(cid:146);

Unchanged

15. Article 42 shall be replaced by the following:

17. Article 42 shall be replaced by the following:

(cid:145)Article 42

Neither

Unchanged

(cid:151) an investment company, nor

(cid:151) a management company or depositary acting on

behalf of a unit trust

may carry out uncovered sales of transferable securities or
of other
instruments mentioned in Article
19(1)(e), (g), (h) and (i).(cid:146);

financial

16. After Article 53 the following Article 53a is inserted:

18. After Article 53 the following Article 53a is inserted:

(cid:145)Article 53a

Unchanged

The technical modifications to be made to this Directive in
the following areas shall be adopted in accordance with
the procedure to be regulated at a later stage by a
Directive amending this Directive:

1.
In addition to its functions provided for in Article
53(1), the Contact Committee may also meet as a Regu-
latory Committee within the meaning of Article 5 of
the Commission in
Decision 1999/468/EC to assist
regard to the technical modifications to be made to this
Directive in the following areas:

(cid:151) clarification of

the definitions in order to ensure
uniform application of this Directive throughout the
Community,

Unchanged

(cid:151) adaptation of the ceilings referred to in Section V and
in Article 36(2) in order to take account of devel-
opments on financial markets, where such adaptations
will not lead to stricter requirements for the UCITS,

Deleted

(cid:151) alignment of terminology on and the framing of defi-
nitions in accordance with subsequent acts on UCITS
and related matters.(cid:146)

(cid:151) alignment of terminology on and the framing of defi-
nitions in accordance with subsequent acts on UCITS
and related matters.

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C 311 E/319

INITIAL PROPOSAL

AMENDED PROPOSAL

The regulatory procedure laid down in Article 5 of
in compliance with

2.
Decision 1999/468/EC shall apply,
Article 7(3) and Article 8 thereof.

The period provided for in Article 5(6) of Decision

3.
1999/468/EC shall be three months.(cid:146)

Article 2

Unchanged

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 3

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

Article 4

This Directive is addressed to the Member States.