COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on facilitating cross-border distribution of collective investment funds and amending Regulations (EU) No 345/2013 and (EU) No 346/2013 Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2009/65/EC of the European Parliament and of the Council and Directive 2011/61/EU of the European Parliament and of the Council with regard to cross-border distribution of collective investment funds.
Date: 2018-03-12
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: European Securities and Markets Authority, UCITS fund, alternative investment, capital market, financial legislation, investment transaction, marketing

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  EN 

   EUROPEAN COMMISSION  Brussels, 12.3.2018  SWD(2018) 55 final  COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT  Accompanying the document Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL on facilitating cross-border distribution of collective investment funds and amending Regulations (EU) No 345/2013 and (EU) No 346/2013 Proposal for a DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Directive 2009/65/EC of the European Parliament and of the Council and Directive 2011/61/EU of the European Parliament and of the Council with regard to cross-border distribution of collective investment funds.  {COM(2018) 92 final} - {COM(2018) 110 final}  - {SWD(2018) 54 final}  
 
 
Impact assessment on the initiative on reducing barriers to cross-border distribution of investment funds  

Executive Summary Sheet 

Why? What is the problem being addressed?  

A. Need for action 

European legislation allows asset managers to passport their investment funds across the EU, with the objective 
of  creating  a  single  market  for  investment  funds.  While  cross-border  distribution  of  EU  investment  funds  has 
grown,  the  EU  investment  fund  market  is  still  predominantly  organised  along  national  lines:  70%  of  the  total 
Assets under Management held by investment funds registered for sale only in its domestic market1. Only 37% 
of UCITS and about 3% of AIFs are registered for sale to more than 3 Member States.  

Moreover, even though the EU market is smaller, there are considerably more funds in the EU than in the US, 
implying  a  significantly  smaller  average  fund  size  in  the  EU.  This  has  a  negative  impact  on  the  economies  of 
scale that can be realised by asset managers in the EU and on the fees investors have to pay. The evaluation 
has shown that regulatory barriers represent a significant disincentive to cross-border distribution. These barriers 
concern  national  marketing  requirements,  regulatory  fees,  administrative  requirements  and  notification 
requirements. 

What is this initiative expected to achieve?  

The  initiative  aims  at  reducing  regulatory  barriers  to  cross-border  distribution  by  removing  unnecessary 
complexity  and  burdensome  requirements  and  improving  transparency  of  national  requirements,  while 
safeguarding investor protection.  

Removing inefficiencies in the functioning of the single market for investment funds should reduce the costs for 
cross-border  distribution.  This  should  accelerate  the  growth  of  cross-border  distribution  in  the  EU,  reducing 
market  fragmentation,  increasing  competition,  and  ultimately  providing  for  more  investment  opportunities  for 
investors in the EU. 

What is the value added of action at the EU level?  

National  implementation  of  UCITS  and  AIFM  Directives  have  resulted  in  differing  interpretations  of  the  rules 
applicable to the use of the marketing passports under these two Directives. Although Member States have the 
ability  to  adress  the  problem  by  (voluntarily)  amending  national  legislation  or  practices,  uniformity  and  legal 
certainty regarding the use of the passport can be better ensured by taking action at EU level.  Previous efforts 
to  converge  national  (supervisory)  practices  in  this  area  through  ESMA,  have  not  succeeded  in  solving  the 
identified problem. Therefore, the remaining barriers to cross-border distribution of investment funds across the 
EU can be most efficiently addressed at EU level. 

B. Solutions 

What  legislative  and  non-legislative  policy  options  have  been  considered?  Is  there  a  preferred 
choice or not? Why?  

The policy options that have been considered aim to address unnecessary complexity and legal uncertainty of 
the existing rules for cross-border distribution of funds, increase the transparency of these rules, and safeguard 
investor protection. Given the technical and detailed nature of the regulatory framework that is being addressed, 
specific policy options have been developed for each problem driver. Both legislative and non-legislative options 
were considered. For some problem drivers the preferred option was to increase transparency at national level 
and/or European level, while for others more harmonisation was identified as the best way forward. The policy 
options retained are as follows: 

  As to the lack of transparency regarding national requirements, transparency is improved at national and EU 

1 This includes so-called 'round-trip' funds, i.e. where a manager domiciles a fund in another Member State and 

then distributes it only back into the market where they are based. 

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level with respect to national marketing requirements and regulatory fees. 

  As to diverging national marketing requirements, a harmonised definition of pre-marketing is introduced2 and 

the process of checking of marketing material is framed more clearly.  

  As to diverging regulatory fees, high-level principles are introduced in order to ensure more consistency in the 

way regulatory fees are determined. 

  As  to  administrative  requirements,  the choice of  how  facilities  to  support  local  investors are  provided (local 
presence or electronically) is left to the asset manager, but with the introduction of safeguards for investors3. 

  As  to  notification  requirements,  further  harmonisation  of  the  procedures  and  requirements  for  updating 

notifications and de-notification of use of the marketing passport is introduced.  

Who supports which option?  

Asset managers are strongly in favour of reducing regulatory barriers. However, they are divided on whether this 
could  best  be  achieved  through  legislative  or  non-legislative  action.  Investors'  associations  also  support  the 
elimination  of  regulatory  barriers  to  increase  investor  choice;  this  however  under  the  condition  that  investor 
protection is safeguarded. National competent authorities and Member States also support reducing regulatory 
barriers  to  cross-border  distribution  of  funds.  Nonetheless,  most  competent  authorities  would  prefer  non-
legislative  measures.  Furthermore,  they  stressed  the  importance  of  retaining  their  ability  to  ensure  investor 
protection, including in host jurisdictions. 

C. Impacts of the preferred option 

What are the benefits of the preferred option (if any, otherwise main ones)?  

The benefits of the preferred options are tangible both for asset managers and investors: 

  The  preferred  options  will  significantly  reduce  compliance  costs  by  further  harmonising  and  increasing  the 
level of transparency regarding national requirements. For existing cross-border funds, the preferred options 
are expected to lead to costs savings of at least € 306 million per year. Moreover, it is expected that more 
asset  managers  will  chose  to  distribute  their  funds  cross-border  or  increase  their  existing  cross-border 
activities. 

  The  preferred  options  safeguard  investor  protection  and  should  ultimately  increase  investors'  choice.  This 
effect will benefit in particular investors from Member States with markets that currently offer limited choice 
and are strongly dominated by domestic products.   

What are the costs of the preferred option (if any, otherwise main ones)?  

The  preferred  options  have  no  significant  negative  economic,  social  or  environmental  impact.  The  preferred 
options do result in limited enforcement costs. These costs concern national competent authorities and ESMA. 
For example, ESMA will be tasked with setting up a database on cross-border notifications and a regulatory fees 
calculator. However, national competent authorities and ESMA will also benefit from the notification database, as 
it will allow them to better analyse cross-border distribution of investment funds. 

How will businesses, SMEs and micro-enterprises be affected?  

Reducing regulatory barriers will decrease the costs of distributing funds across borders. These cost reductions 
will  benefit  in  particular  small  fund  managers,  as  the  costs  associated  with  regulatory  barriers  have  a  bigger 
impact on these managers.  

Although the proposed policy options do not have a direct impact on small and medium enterprises (SMEs), they 
will indirectly benefit from the initiative as increased cross-border distribution of investment funds would increase 
the availability of financing for SMEs offered through these investment funds – in particular venture capital funds.   

Will there be significant impacts on national budgets and administrations?  

Enforcement costs at national level will be minor.  

2 This concerns only the AIFM Directive. 
3 This concerns only the UCITS Directive. 

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Will there be other significant impacts?  

There are no other significant impacts.  

D. Follow up 

When will the policy be reviewed?  
No sooner than five years after the date of transposition of the Directives forming part of this legislative initiative 
(UCITS and AIFM Directives), the Commission shall carry out an evaluation of the application of the Directive 
and the Regulation. The Commission will rely on a public consultation and discussions with ESMA and 
competent authorities. The evaluation shall be conducted according to the Commission's better regulation 
Guidelines.  

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