COMMISSION STAFF WORKING DOCUMENT 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

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 12.3.2018  SWD(2018) 54 final  COMMISSION STAFF WORKING DOCUMENT  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) 55 final}  
 
 
Table of Contents 

GLOSSARY ................................................................................................................................... 3 

1. 

INTRODUCTION: POLITICAL AND LEGAL CONTEXT ............................................................. 6 

1.1.  Background ...................................................................................................................... 6 

1.2. 

The EU investment fund market and its legal framework .............................................. 8 

2.  PROBLEM DEFINITION ...................................................................................................... 14 

2.1. 

In-scope problem drivers .............................................................................................. 14 

2.1.1.  Marketing requirements ........................................................................................... 15 

2.1.2. 

Regulatory fees .......................................................................................................... 15 

2.1.3. 

Administrative requirements .................................................................................... 16 

2.1.4.  Notification requirements ......................................................................................... 17 

2.1.5.  Out-of-scope problem drivers ................................................................................... 17 

2.2.  Problems ........................................................................................................................ 19 

2.3.  Consequences ............................................................................................................... 23 

2.4.  Groups affected by the problem ................................................................................... 29 

2.5.  Baseline scenario ........................................................................................................... 29 

2.6. 

Evaluation ...................................................................................................................... 32 

3.  THE EU'S RIGHT TO ACT AND JUSTIFICATION ................................................................... 32 

4.  OBJECTIVES ....................................................................................................................... 33 

5.  POLICY OPTIONS AND ANALYSIS OF IMPACT .................................................................... 34 

5.1.  Methodology ................................................................................................................. 34 

5.2.  Options addressing differences regarding national marketing requirements ............. 35 

5.3.  Options addressing lack of transparency over national requirements ......................... 38 

5.4.  Options regarding differences and complexity of how regulatory fees are set and their 
collection .................................................................................................................................. 42 

5.5.  Options  regarding  administrative  requirements  (local  facilities)  under  the  UCITS 
Directive ................................................................................................................................... 44 

5.6.  Options regarding notification requirements ............................................................... 46 

6.  OVERALL IMPACT OF THE PROPOSED OPTIONS ............................................................... 50 

7.  OTHER SPECIFIC IMPACTS OF THE RETAINED POLICY OPTIONS ....................................... 55 

8.  MONITORING AND EVALUATION ...................................................................................... 56 

ANNEX 1: Procedural information ............................................................................................ 58 

ANNEX 2: Stakeholder consultation ......................................................................................... 60 

ANNEX 3: Who is affected by the initiative and how? ............................................................. 64 

ANNEX 4: Methodological approach, analytical methods, and limitations ............................. 65 

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ANNEX 5: Evaluation of relevant provisions in AIFM and UCITS Directives ............................ 72 

ANNEX 6: Statistical analysis of impact on cross-border distribution ..................................... 95 

ANNEX 7: Synopsis report open consultation on cross-border distribution of funds ............. 97 

ANNEX  9:    Number  of  investment  funds  (broken  down  by  Member  State,  data  source  and 
type) ....................................................................................................................................... 137 

ANNEX 10:  Statistical data from ESMA on cross-border marketing activity ......................... 138 

ANNEX 11: Mapping of the regulatory fees charged in the EEA ............................................ 139 

ANNEX 12: Costs and cost reductions .................................................................................... 147 

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GLOSSARY 

Alternative Investment Fund (AIF): is a legal structure to pool assets and hold investments. 
It usually has no economic life on its own; the key decisions in relation to the management 
and  marketing  of  AIF  are  taken  by  the  AIFM.  AIF  span  a  wide  range  of  legal  structures, 
including closed and open-end funds and partnerships. 

Alternative  Investment  Fund  Manager  (AIFM):  is  responsible  for  the  management  of 
investment  portfolios  of  AIFs.  Typical  tasks  include,  for  example,  the  provision  of  internal 
governance  structures,  risk  management,  the  delegation  of  functions  to  third  parties  and 
relations with investors. 

Alternative Investment Fund Manager Directive (AIFMD): The AIFMD was voted by the 
co-legislator  in  2011  and  entered  into  application  in  July  2013.  This  Directive  covers 
managers  of  alternative  investment  schemes  designed  for  professional  investors.  AIFs  are 
funds that are not regulated by the UCITS Directive. They include hedge funds, private equity 
funds, real estate funds and a wide range of other types of institutional funds. 

Anti-Money  Laundering  (AML)  Directive:  The  main  objectives  of  the  AMLD  are  to 
strengthen  the  internal  market  by  reducing  complexity  across  borders  and  to  safeguard  the 
interests of society from criminality and terrorist acts. 

Assets under management: value of assets that an investment company manages on behalf 
of investors. 

Asset  weighted  expense  ratio:  weighted  average  is  simply  a  matter  of  calculating  the 
expense  ratio  you  are  incurring  on  two  or  more  funds.  It  takes  into  account  not  only  the 
different expense ratios that apply to each fund, but also the amount of your holdings. 

Capital  Market  Union  (CMU):  CMU  is  a  plan  of  the  European  Commission  to  mobilise 
capital  in  Europe.  It  will  channel  it  to  all  companies,  including  SMEs,  and  infrastructure 
projects that need it to expand and create jobs. 

Competent authority: Any organization that has the legally delegated or invested authority, 
capacity, or power to perform a designated function. In this impact assessment it refers to the 
body which is in charge of supervising securities markets. 

ELTIF: European Long Term Investment Fund.  

EFAMA: European Funds and Asset Managers Association 

ESMA:  The  European  Securities  and  Markets  Authority  (ESMA)  was  founded  as  a  direct 
result  of  the  recommendations  of  the  2009  de  Larosière  report  which  called  for  the 
establishment  of  a  European  System  of  Financial  Supervision  (ESFS)  as  decentralised 
network.  It  began  operations  on  1  January  2011  and  replaced  the  Committee  of  European 
Securities  Regulators  (CESR).    ESMA  is  an  independent  EU  Authority  that  contributes  to 
safeguarding  the  stability  of  the  European  Union's  financial  system  by  enhancing  the 
protection of investors and promoting stable and orderly financial markets. It achieves this by: 
assessing risks to investors, markets and financial stability, completing a single rulebook for 
EU  financial  markets,  promoting  supervisory  convergence. As  well  as  fostering  supervisory 
convergence  amongst  securities  regulators  by  working  closely  with  the  other  European 
Supervisory  Authorities  competent  in  the  field  of  banking  (European  Banking  Authority  – 
EBA)  and  Insurance  and  occupational  pensions  (European  Insurance  and  Occupational 
Pensions Authority - EIOPA).  http://www.esma.europa.eu  

EuSEF: European Social Entrepreneurship Fund. 

3 

 
 
EuVECA: European Venture Capital Fund. 

Expense ratio: the expense ratio is the annual fee that funds charge.  

Home competent authority: refers to the competent authority of the Member State where the 
fund is domiciled or authorised/registered. 

Host competent authority: refers to the competent authority of the Member State where the 
fund  is  marketed  other  than  the  Member  State  where  the  fund  is  domiciled  or 
authorised/registered. 

Key  information  Document  (KID):  refers  to  the  document  under  the  PRIIP  Regulation, 
containing the key information necessary for retail investors to make an informed investment 
decision and compare different PRIIPs.  

Key  Investor  information  Document  (KIID):  refers  to  the  document  under  the  UCITS 
Directive containing appropriate information about the essential characteristics of the UCITS 
concerned, which is to be provided to investors so that they are reasonably able to understand 
the nature and the risks of the investment product that is being offered to them.  

Know  Your  Customers  (KYC):  is  a  process  to  confirm  a  customer's  identification  and 
profile. 

MiFID:  This  Directive  is  a  cornerstone  of  the  EU'  regulation  of  financial  markets.  The 
directive  was  initially  introduced  in  2011  and  reviewed  once.  It  governs  the  provision  of 
investment services in financial instruments by banks and investment firms and the operation 
of traditional stock exchanges and alternative trading venues. 

MiFID  2:  The  Directive  on  markets  in  financial  instruments  was  voted  15  May  2014 
amending the Directives of 2002 and 2011.  

MiFIR: The Regulation on markets in financial instruments was voted 15 May 2014 which 
complements MiFID 2. 

MMF: Money Market Funds are collective undertakings that invest in short-term assets and 
have  distinct  or  cumulative  objectives  offering  returns  in  line  with  money  market  rates  or 
preserving the value of the investment. 

Net  Asset  Value  (NAV):  value  of  a  fund's  total  assets,  minus  its  liabilities.  The  NAV  per 
share is used to determine prices available to investors for redemptions and subscriptions. 

Open-ended fund: is a collective investment scheme which can issue and redeem shares at 
any time. Investors can buy or sell shares directly from the fund. 

PRIIPs: Packaged Retail Investment and Insurance Products. 

Round  Trip  Fund:  means  the  situation  where  a  manager  domiciles  a  fund  in  another 
Member  State  and  then  distributes  it  only  back  into  the  market  where  the  management 
company is domiciled. 

Transferable security: means classes of securities which are negotiable on the capital market 
such  as  shares  in  companies  and  other  investments  equivalent  to  shares  in  companies, 
partnerships or other entities or capital return and interest investments known as bonds. 

UCITS:  Undertakings  for  Collective  Investment  in  Transferable  Securities,  a  standardised 
and regulated type of asset pooling. 

UCITS  Directive:  the  UCITS  Directive  is  the  main  European  framework  covering  retail 
collective  investment  schemes.  The  first  UCITS  Directive  was  adopted  in  1985,  and  since 
then the framework has continuously developed. The last amendment took place in 2014 with 

4 

 
the  UCITS  V  Directive,  where  the  role  and  mission  of  the  depositary  was  clarified  and 
strengthened.  The  UCITS  Directive  is  seen  as  the  benchmark  in  terms  of  retail  investment 
funds, as the Directive requires strict diversification rules and eligible assets are restrictive to 
transferable  securities  in  order  to  ensure  that  retail  investors  can  easily  redeem  their 
investment. 

5 

 
 
 
1.  INTRODUCTION: POLITICAL AND LEGAL CONTEXT 

1.1. Background 

The  initiative  under  consideration  aims  at  reducing  the  regulatory  barriers  to  cross-border 
distribution  of  investment  funds  within  the  EU,  by  addressing  unnecessary  complexity  and 
legal  uncertainty  associated  with  cross-border  distribution.  This  should  reduce  the  cost  of 
going cross-border and should support deepening the single market for EU investment funds.  

This  initiative fits  in  with  the more general  objective of creating  a deeper single market  for 
capital  –  a  Capital  Markets  Union  (CMU)1  –  which  is  one  of  the  European  Commission’s 
priorities.  It  is  also  a  key  element  of  the  Investment  Plan  for  Europe2,  which  aims  to 
strengthen Europe’s economy and encourage investment in all 28 Member States. The CMU 
is  intended  to  mobilise  capital  in  Europe  and  channel  it  to  companies  in  order  to  facilitate 
stronger  economic  growth  and  job  creation.  Deeper  and  integrated  capital  markets  will 
improve  the  access  to  capital  for  companies  while  aiding  in  the  development  of  new 
investment opportunities for savers. 

Investment  funds  have  an  important  role  to  play  in  achieving  the  aim  of  CMU.  Investment 
funds are investment products created with the sole purpose of pooling investors' capital, and 
investing that capital collectively through a portfolio of financial instruments such as stocks, 
bonds  and  other  securities.  As  such,  investment  funds  are  first  an  important  instrument  to 
foster  investment  and  increase  funding  possibilities  for  companies.  Secondly,  investment 
funds that are distributed cross-border will help to allocate capital efficiently across the EU, 
and  contribute  to  deep  and  more  integrated  capital  markets.  Increased  competition  across 
national markets will in turn help to deliver greater choice and better value for investors. 
The CMU Action Plan3 envisages that the Commission would gather evidence on the barriers 
to the cross-border distribution of investment funds. Following an open consultation that was 
conducted  for  this  purpose  from  July  until  October  2016,  the  Commission  announced  in  its 
Communication on the CMU Mid-Term Review4 that it would launch an impact assessment 
with a view to considering a possible legislative proposal to better facilitate the cross-border 
distribution of investment funds. 

In  the  EU,  investment  funds  can  be  broadly  categorised  as  UCITS  (Undertakings  for 
Collective Investment in Transferable Securities)5 and AIFs (Alternative Investment Funds)6. 
EU  investment  funds  have  seen  rapid  growth,  resulting  in  a  total  of  €14,310  billion  asset 
under management (AuM) in June 2017, of which 60.8% is invested in UCITS and 39.2% in 
AIFs.7  The  creation  of  a  single  market  for  investment  funds  –  which  started  with  the 
introduction of the UCITS Directive8 in 1985 – has resulted in a strong and quickly expanding 
EU  investment  fund  industry.  Although  the  market  is  increasingly  organised  on  a  pan-
European basis, it has not exploited its full potential in terms of cross-border distribution: only 

1 https://ec.europa.eu/info/business-economy-euro/growth-and-investment/capital-markets-union_en 
2 http://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1507119651257&uri=CELEX:52014DC0903 
3 http://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1507119301191&uri=CELEX:52015DC0468 
4 http://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1507119301191&uri=CELEX:52017DC0292 
5 http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32014L0091 
6 http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32011L0061 
7 EFAMA, Quarterly Statistical Release Q2 2017.   
8 http://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1507119586151&uri=CELEX:31985L0611 

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37% of UCITS are registered for sale to more than 3 Member States. For AIFs, available data 
suggests that only about 3% of AIFs are registered for sale in more than 3 Member States.9   

Industry  feedback  indicates  that  regulatory  barriers  represent  a  significant  disincentive  to 
cross-border  distribution.  These  barriers  have  been  identified  in  response  to  the  Capital 
Markets  Union5  green  paper,  the  Call  for  Evidence  on  the  EU  Regulatory  Framework  for 
Financial  Services6  and  the  public  consultation  on  barriers  to  cross-border  distribution  of 
investment  funds10  as 
including  (national)  marketing  requirements,  regulatory  fees, 
requirements.  Eliminating  unjustified 
administrative 
(regulatory) barriers would support fund managers to engage more in cross-border distribution 
of their funds, increase competition and choice, and potentially reduce costs for investors.  

requirements  and  notification 

In addition to this initiative  – that focuses solely on cross-border distribution of funds  – the 
Commission has just started an overall review of the Alternative Investment Fund Managers 
Directive (AIFMD). The review started with a tender for an external study on the functioning 
of the Directive, which was awarded to a contractor in September 2017. An overall review of 
the  UCITS  Directive  may  take  place  once  enough  experience  is  gained  with  the  practical 
application  of  elements  introduced  with  the  most  recent  amendments  to  the  Directive.  For 
both reviews, therefore, there is not enough evidence to be able to decide at this point whether 
any  legislative  changes  would  be  merited.  This  is  the  reason  why  this  initiative  on  cross-
border  distribution  of  funds  is  clearly  delineated  and  will  be  pursued  now  on  a  stand-alone 
basis. The potential to make significant progress in reducing barriers and bolstering the single 
market for investment funds – thus providing a tangible contribution to CMU in the short term 
– justifies taking action now instead of waiting for the broader reviews.  

Feedback  to  the  consultations  indicates  that,  besides  regulatory  barriers,  other  factors  also 
provide  significant  disincentives  to  cross-border  distribution  of  investment  funds.11  These 
include the impact of vertical distribution channels, cultural preferences for domestic products 
(home  and  familiarity  bias),  and  national  tax  rules.  Results  from  the  randomized  follow-up 
survey which focuses on differences between large and small funds shows that fund managers 
agree on the importance of regulatory barriers and taxation as important barriers, while there 
is less consensus regarding the importance of local demand and vertical distribution channels.  

Given that factors related  to  vertical distribution channels, cultural preferences for domestic 
products  and  national  tax  rules  are  out  of  the  scope  of  this  initiative,  there  are  inherent 
limitations to the impact of this initiative. However, other actions under the CMU Action Plan 
aimed  at  facilitating  cross-border  investment  and  fostering  retail  investment  will  seek  to 
(partially)  address  these  factors.  Ongoing  work  streams  in  this  area  include  a  study  on 
distribution  systems  of  retail  investment  products  across  the  EU12;  work  by  the  European 
Supervisory Authorities (ESAs) on increasing the transparency and comparability of costs and 
performance  of  retail  investment  and  pension  products13;  and  the  work  with  national  tax 
experts on best practice and a code of conduct for withholding tax relief principles. 

9 Source: Morningstar database - June 2017. 
10 https://ec.europa.eu/info/publications/consultation-cross-border-distribution-investment-funds_en  
11 This is supported by the regression analysis in annex 6 which demonstrate that both cost considerations and 
factors related to the attractiveness of the local market affect the cross-border distribution of funds.  
12 Results of the study on distribution systems of retail investment products across the EU are expected by the 
end of 2017. 
13 There will be recurrent reporting by the ESAs of cost and performance of the principal categories of long-term 
retail investment and pension products. Furthermore, a feasibility study on the development of a centralised hub 
for mandatory disclosure requirements and related services will be launched in the near future.  

7 

 
                                                 
The  impact  assessment  aims  at  providing  an  unbiased,  comprehensive  and  evidence-based 
assessment  of  cross-border  distribution  of  funds  and  possible  barriers,  in  spite  of  some 
inherent  limitations.14  We  rely  on  3  methodological  approaches  (desk  research,  qualitative 
analysis and quantitative analysis) to provide a comprehensive impact assessment. Details are 
presented in Annex 4. The stakeholder consultation strategy relies on 3 types of stakeholder 
consultation, being (i) an open public consultation, (ii) a randomized sampling-based survey 
and  (iii)  targeted  individual  consultations  to  ensure  that  the  impact  assessment  is  open  to 
stakeholders'  views.  Each  of  the  methodological  approaches  has  its  merits  but  we  are  also 
confronted with  some  limitations. A detailed discussion  of the methodological approach, its 
limitations, and the steps undertaken to mitigate its effect is presented in Annex 4. In general 
terms, limitations are related to the representativeness of data inputs and lack of (historical) 
data coverage, especially for alternative investment funds (AIFs), unavailability of total cost 
data and granular data on cost components for individual Member States.  

Significant efforts have been undertaken to support the analysis of cross-border distribution of 
funds in the EU and the evaluation of policy options based on 3 methodological approaches. 
Each of them has its merits but also its limitations and we discussed our approach to mitigate 
the effect and its effect on the analysis.  

Overall, the collective evidence stemming from the various methodological approaches can be 
considered to be sufficiently sound as a basis for the impact assessment.  

1.2. The EU investment fund market and its legal framework 

The  fund  market  in  the  EU  can  be  divided  into  UCITS  funds  and  all  other  funds  that  are 
labelled Alterntative Investment Funds (AIFs) 

Since its origin in 1985, the UCITS Directive has been the basis on which the success of the  
European investment fund market has been built.  The UCITS Directive introduced – for the 
first  time  -  a  genuine  European  retail  investment  fund  'product',  providing  a  strong  investor 
protection  framework  which  ensures  that  funds  are  suitable  for  retail  investors.  UCITS  are 
open-ended funds with strict transparency requirements toward their investors15. They need to 
invest in a diversified manner in transferrable securities or in other liquid assets. Ever since  
the  introduction  of  the  UCITS  framework,  eligible  funds  benefit  from  a  cross-border 
marketing passport with the aim of allowing them to market without barriers to all investors 
across the EU while using the UCITS label. Since 1985 the UCITS Directive has been revised 
several  times.  With  the  introduction  of  UCITS  IV16  managers  also  benefit  from  a  fully-
fledged management passport, allowing them to be domiciled anywhere in the EU. 
In 2013, the AIFM Directive17 introduced a framework for the authorisation, supervision and 
oversight of managers of non-UCITS funds (AIFs18). Managers whose aggregate assets under 
management are above a certain threshold19 are subject to authorisation and compliance with 
reporting  and  operational  requirements  set  out  in  the  AIFMD.  In  exchange,  EU  managers 

14 The impact assessment is constructed according to the Commission's Better Regulation Guidelines.   
15 The UCITS III Directive introduced the simplified prospectus, while the UCITS IV Directive went one step 
further with the concept of the Key Investor Information Document. 
16 Directive 2009/65/EC 
17 Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011. 
18 Alternative Investment Funds (AIF) cover all the investment funds that are not UCITS such as private equity 
funds, hedge funds, venture capital funds but also more traditional funds. 
19 The threshold is €100 million for managers managing leveraged funds and for manager managing unleveraged 
funds with no redemption rights for a period of at least 5 years the threshold is €500 million. 

8 

 
                                                 
benefit from an EU-wide passport to manage and market AIFs to professional investors on a 
cross-border basis. Managers below the thresholds are subject to a set of minimum rules and 
consequently do not benefit from the passport, unless they opt in and fully apply the AIFMD. 
Unlike UCITS, marketing to retail investors is only possible at Member State discretion.  

Figure  1  provides  an  overview  of  the  complete  EU  legislative  framework  for  investment 
funds.  More  details  on  the  Regulations  for  European  Venture  Capital  funds  (EuVECA), 
European  Social  Entrepreneurship  Funds  (EuSEF),  European  Long  Term  Investment  Funds 
(ELTIF) and Money Market Funds (MMF) can be found in Annex 6. 

Figure 1 – EU legislative framework for investment funds in June 20172021 

Source: European Commission and EFAMA Quarterly Statistical Release Q2 2017 for the figures 

In total, in June 2017, the European investment fund industry (AIFs and UCITS) represented 
€14,310 billion AuM – of which 60.8% was invested in UCITS and 39.2% in AIFs22.  

In  particular  UCITS  has  developed  into  a  strong  brand  over  the  years  and  is  nowadays 
recognised globally. This success is evidenced by the rapid growth of assets that are managed 
in  UCITS  compliant  funds.  Total  assets  under  management  (AuM)  in  the  EU  grew  from 
€3,403 billion at the end of 2001 to €8,704 billion by June 201723.  

AIFs have not yet reached the same take-up as UCITS but there is evidence that the market 
for AIFs is growing steadily. Total assets under management grew from €4,075 billion at the 
end of 2014 to  €5,606 billion by June  201724. Before 2014, the asset under management of 
non-UCITS funds were less than €3,000 billion.25 This may be due at least in part to the fact 
that the AIFMD framework does not have a long history compared to the UCITS framework 
as it came into application only on 22 July 2013. 

A  breakdown  of  the  EU  investment  fund  market  shows  that  equity  and  bonds  are  asset 
managers’  preferred  holdings  for  UCITS,  while  AIFs  are  a  more  heterogenous  class  of 

20 This chart takes into account the recently adopted review of the EuVECA and EuSEF Regulations. 
21 See footnote 19.  
22 Source: EFAMA European Quarterly Statistical Release Q2 2017. 
23 Source: EFAMA European Quarterly Statistical Release Q2 2017 
24 Source: EFAMA European Quarterly Statistical Release Q2 2017 
25 The AuM for non-UCITS was about €2,922bn by end 2013 and €2,686bn by end 2012. 

9 

 
                                                 
investment  funds,  investing  in  a  wider  variety  of  asset  types  (see  figure  2)  and  employing 
different 
include,  hedge  funds,  private  equity  funds, 
infrastructure funds, commodity funds and real estate funds. 

investment  strategies.  These 

Figure 2 – Breakdown of UCITS and AIF by investment type (based on net assets)

UCITS  

38% 

5% 

13% 

27% 

Equity funds

Multi-asset funds

Bond fonds

Money Market funds

17% 

Other UCITS

AIFs 

12% 

25% 

18% 

32% 

11% 

2% 

Equity funds

Multi-asset funds

Bond funds

Money Market funds

Real Estate funds

Other AIFs

Source: EFAMA Quarterly Statistical Release Q2 2017 

To understand the importance and potential of investment funds as an investment opportunity 
for savers across the EU, it is useful to provide some insight on investment fund ownership. 
By  end  of  2016,  institutional  investors  (insurance  companies,  pension  funds,  and  monetary 
financial  institutions,  and  other  financial  institutions)  together  held  most  (66%)  of  the 
investments  in  investment  funds.  Households  accounted  for  a  quarter  of  all  investments  in 
funds,  making  them  the  second  largest  holder  of  investment  funds  after  other  financial 
institutions (see figure 3).  

Figure 3– Investment Fund Ownership end 2016   

Monetary financial 
institutions 
4% 

Pension 
funds 
14% 

Insurance 
companies 
22% 

Other financial 
institutions 
26% 

Households 
25% 

General 
government 
3% 

Non-financial 
corporations 
6% 
Source: EFAMA Fact Book 2017  

Nevertheless,  a  closer  look  at  households'  financial  assets  shows  that  banking  deposits  and 
insurance and pension fund reserves still dominate household savings in the EU (see figure 4 
and  5),  representing  about  70%  of  households'  total  financial  assets.  In  the  US,  households 
hold only half of their total financial assets in the form of currency and deposits and insurance 
and pension fund reserves.  

While investment funds also play an important role in households' financial assets in the EU, 
most  of  the  investment  in  investment  funds  currently  goes  through  insurance  and  pension 

10 

 
 
products,  compared  to  the  US,  where  households  have  more  direct  holdings  of  equity  and 
investment funds units (see figure 4).  

Figure 4 – Comparison EU versus US for households' financial assets (share in total, end 2015) 

Source: ECB, EFAMA 

About  71%  of  UCITS  are  domiciled  in  five  Member  States,  with  Luxembourg  being  the 
largest domicile (33%), followed by Ireland (14%), France (11%), the United Kingdom (7%) 
and Germany (6%). These represent 84% of the UCITS assets under management. For AIFs 
this  picture is  slightly  different,  with  75%  of  AIFs  domiciled  in  the  following  five Member 
States:  France  (28%),  Luxembourg  (17%),  Germany  (15%),  Ireland  (9%),  and  the 
Netherlands (6%). These represent 77% of the AIFs assets under management.26  

Investment fund domiciles 

It is common for both UCITS and AIFs to be administered and domiciled in a different Member State 
than the one from where they are managed. For example, a German UCITS manager may choose to 
domicile a fund range in Luxembourg and to market them in France and Spain. In that case the home 
domicile of the fund is Luxembourg and the host domiciles of the funds are France and Spain. There 
are a number of reasons why the manager may choose such a structure, including legal and regulatory 
factors (regulatory approach of the domicile, expertise and responsiveness of the supervisor, range of 
fund  vehicles),  financial  and  business  factors  (favourable  tax  environment,  costs  of  doing  business, 
concentration of fund administration expertise and services) and market and distribution factors (speed 
to market, investors' perceptions, reputation and longevity as funds centre).  

Although the EU investment fund market is the worlds' second largest market behind the US 
in  terms  of  AuM27,  there  are  considerably  fewer  funds  in  the  US  (15,415)  than  in  the  EU 
(58,125)28,  implying  a  significantly  smaller  average  fund  size.  This  has  an  impact  on  the 
economies  of  scale  that  can  be  realised  by  asset  managers  in  the  EU.  Furthermore,  EU 
investors  pay  higher  fees  than  their  counterparts  in  the  US;  the  average  asset-weighted 

26 Source: EFAMA European Quarterly Statistical Release Q2 2017. 
27 According to the Investment Company Institute (ICI) Fact Book 2017, the US investment fund market reached 
a total of $19.21 trillion (€16.21 trillion) in 2016.  
28 EFAMA Fact Book 2017.  

11 

 
 
                                                 
expense ratio of US domiciled mutual equity funds was 0.63%29 versus 1.27% for European 
domiciled equity funds in 2016.30  

As  mentioned  in  section 1.1, cross-border  distribution is  an important area where the  single 
market  has  not  exploited  its  full  potential.  This  has  been  confirmed  in  the  lost  potential 
analysis  (see  annex  5,  i.e.  evaluation  annex).  Figure  5  (below)  shows  that  cross  border 
distribution of EU investment funds has grown gradually over the last ten years. However, it 
also shows that the EU investment fund market is still predominantly organised along national 
lines,  with  70%  of  the  total  AuM  held  by  investment  funds  registered  for  sale  only  in  its 
domestic market – which includes so-called 'round-trip' funds (see box below).    

Round-trip funds  

Where a manager domiciles a fund in another Member State and then distributes it only back into the 
market  where  they  are  based,  this  is  known  as  an  'round-trip'  fund.  This  impact  assessment 
distinguishes  between  round-trip  funds  and  more  widely  distributed  cross-border  funds.  Round-trip 
arrangements  are  legitimate  arrangements  from  which  managers  and  investors  can  both  benefit.  EU 
legislation allows for such arrangements; and they rely on availability of the managing and marketing 
passports. However, round-trip funds don't represent a re al  deepening  of  the  single  market  or  an 
increase  in  investor  choice;  a  manager  is  still  only  marketing  a  fund  in  one  Member  State  (plus  the 
fund domicile). A better indication of cross-border activity for the purpose of this exercise is where a 
fund  markets  to  at  least  one  Member  State  outside  the  home  market  of  its  manager  and  domicile. 
Therefore, for the purpose of this Impact Assessment we consider round-trip funds as domestic funds - 
even if round-trip funds are only possible because of the existence of the marketing passport.  

For the purpose of this impact assessment, only investment funds that are marketed in two or 
more Member States other than the fund domicile are considered cross-border funds. This is 
to  exclude  round-trip  funds  (see  box  above).  Although  round-trip  funds  are  legitimate 
arrangements  from  which  managers  and  investors  can  both  benefit,  they  do  not  represent  a 
true deepening of the single market.  

Figure 5 – Assets under management of cross-border investment funds  

Data on the numbers of funds marketed cross-border across the EU supports the observation 
that the European investment fund market is still fragmented. In July 2008, the Commission 
noted in its impact assessment on UCITS IV that only 20% of UCITS were notified for sale in 
at least two countries other than their fund domicile.31 By June 2017 this number reached 37% 

29 ICI Fact Book 2017; http://www.icifactbook.org/ 
30 Morningstar, "European Fund Expenses Are Decreasing in Percentage", August 2016. 
31 http://ec.europa.eu/smart-regulation/impact/ia_carried_out/docs/ia_2008/sec_2008_2263_en.pdf 

12 

 
 
                                                 
according to data from Morningstar (see figure 6). The proportion of AIFs that are registered 
for  sale  in  two  or  more  Member  States  other  than  the  fund  domicile  was  only  3%  by  June 
2017.  

Figure 6 - Percentage of UCITS and AIFs registered for sale across the EU 

Country registered for 
sale 

Number of UCITS 
registered  for sale 

Number of AIF 
registered for sale 

Domestic only 

2 countries only 

3 to 5 countries 

More than 5 countries 

TOTAL 

11,650 

4,326 

3,440 

5,897 

46% 

17% 

14% 

23% 

9,455 

91% 

586 

246 

112 

6% 

2% 

1% 

25,313 

100% 

10,399 

100% 

Source: Morningstar database, June 2017 

Figure  7  (below)  provides  an  indication  of  the  growth  rate  of  the  number  of  cross-border 
funds and registrations32 over the last twelve years. If Jersey is excluded, the number of cross-
border funds in the EU (excluding round-trip funds) was 11,380 by end of 2016. Setting this 
number off against the total number of funds in the EU by end of 2016 (58,125), indicates that 
cross-border funds accounted for less than 20% of the total number of funds – confirming that 
the single market for investment funds is still fragmented.  

Figure 7 – Evolution of cross-border distribution (numbers of funds and registrations) 

32 Regarding the number of cross-border funds, figure 7 includes investment funds domiciles outside the EU (e.g. 
Jersey  and  possibly  others).  The  same  applies  to  the  number  of  cross-border  registrations,  as  it  includes 
registrations in non-EU countries like Switzerland and other regions of the world. For an overview of the number 
of cross-border registrations in the EU, see figure 6 in this impact assessment.   

13 

 
 
 
 
                                                 
A  more  detailed  overview  and  assessment  of  cross-border  distribution  of  investment 
funds can be found in section 2.3 of this impact assessment.  

2.  PROBLEM DEFINITION 

European legislation allows asset managers to passport their investment funds across the EU, 
with the objective of creating a single market for investment funds. However, as demonstrated 
in  the  evaluation  (annex  5),  there  are  still  binding  barriers  for  asset  managers  to  distribute 
their  investment  funds  cross-border  across  the  EU.    As  a  case  in  point,  in  the  randomized 
survey  at  least  69%  of  the  fund  managers  indicated  that  a  positive  change  in  each  of  the 
barriers  separately33  (regulatory  barriers,  taxation,  local  demand  or  the  distibution  network) 
would  increase  their  level  of  cross-border  activity.  Relatively  speaking,  large  funds  found 
local demand factors more important than small funds. 

This  initiative  aims  to  reduce  the  regulatory  barriers  to  cross-border  distribution  of  funds 
within  the  EU.  This  section  describes  the  underlying  drivers  of  this  problem,  assesses  the 
magnitude of the problem and explains the consequences that necessitate action at EU level.  

A  fund  manager's  decision  to  distribute  a  fund  cross-border  will  be  influenced  by 
discretionary  strategic  considerations  on  the  one  hand  and  the  attractiveness  of  the  local 
market on the other hand. The latter include the (i) marginal costs of going cross-border to a 
specific national market; (ii) structural factors of the local market; and (iii) expected demand.  

In  this  initiative  we  focus  on  regulatory  cost,  while  factors  related  to  (ii)  and  (iii)  are 
considered out of scope. A problem tree that summarizes the problem drivers, problems and 
consequences under consideration in this impact assessment can  be found  at the end of this 
section.  

2.1. In-scope problem drivers 

Feedback  to  the  consultations  indicate  that  there  are  a  range  of  national  requirements  and 
regulatory practices regarding the use of the EU marketing passports for investment funds that 
diverge and can be hard to find and interpret for fund managers. Furthermore, responses from 
industry  suggest  that  certain  (national)  requirements  regarding  the  use  of  the  EU  marketing 
passports  are  burdensome,  but  have  little  added  value.  The  areas  which  were  identified  by 
respondents  to  the  consultations and  consequently  qualify  as  the  problem  drivers  within the 
scope of this initiative are: (D1) 

  Marketing requirements; 
  Regulatory fees; 
  Administrative requirements; 
  Notification requirements.  

Relatively  speaking, results  from  the  randomized  survey  show  that  national  marketing  rules 
were considered the most important barrier, closely followed by the existence of a local agent. 
Regulatory fees and notification requirements were deemed relatively less important.34 

A brief description of the problem drivers is presented below; a more detailed description can 
be found in the evaluation annex (see annex 5).  

33  Under  ceteris  paribus  conditions  (i.e.  without  any  change  in  the  other  barriers  than  the  single  one  under  
consideration. 
34  Total  score  for  these  barriers  were  25%  lower  than  the  one  for  national  marketing.  Overall,  results  also 
indicated towards the fact that other barriers are considered to be important.  

14 

 
                                                 
2.1.1.  Marketing requirements  

National  marketing  requirements  and  supervisory  practices  differ  and  are  sometimes 
unnecessarily  burdensome  -  When  EU  funds  are  marketed  cross  border  to  investors  in 
another EU Member State, they are required to comply with the host Member State's national 
marketing requirements, including national implementation of the requirements in the UCITS 
and AIFM Directives. Respondents to the open consultation indicated that in practice, there is 
a  wide  divergence  in  the  activities  Member  States  considered  to  be  marketing  for  both 
Directives. Activities which may or may not be considered to be marketing depending on the 
Member  State  practices  include,  for  example,  pre-marketing35  and  reverse  solicitation36.  A 
considerable majority of industry respondents considered this to have a material impact upon 
the cross-border distribution of investment funds.  

Using  the  marketing  passports,  asset  managers  can  start  marketing  funds  without  any 
marketing  material  and  just  rely  on  the  documents  which  meet  their  legal  obligations 
concerning  information  to  be  provided  to  investors37.  However,  in  practice  asset  managers 
generally also use marketing material, such as flyers, websites, e-mails and radio/TV spots. In 
at  least  six  Member  States38  national  competent  authorities  check  or  approve  marketing 
material to retail investors for some or  all funds on an ex-ante basis. The ex-ante checks or 
approval can, according to some industry respondents, be significantly more time-consuming 
in  some  Member  States  than  others  and  can  take  up  to  four  months,  delaying  marketing 
activities  and  rendering  the  material  outdated  when  informing  clients  on  evolving  market 
conditions.  However,  this  is  not  supported  by  feedback  from  competent  authorities,  which 
indicate that pre-checks or pre-approval of marketing material usually only take a few days, 
and exceptionally up to 15 days.  

Lack  of  transparency  over  national  marketing  requirements  –  As  outlined  in  the 
evaluation  annex,  fund  managers  and  industry  associations  responding  to  the  open 
consultation  indicated  that  it  is  often  not  clear  at  first  glance  which  (national)  marketing 
requirements apply exactly unless a manager or distributor has very detailed knowledge of the 
applicable  local  law.  National  regulators  and  supervisors  often  give  additional  guidance  on 
how to interpret local law which is not always in a single rule book. There are also Member 
States that refer to non-financial legislation (such as regulation on advertising and marketing 
practices). In practice this means that external counsel needs to be engaged to determine how 
to  comply  with  national  rules.  Regular  changes  to  marketing  requirements  introduce 
additional cost, meaning such costs are incurred on an ongoing and recurring basis.  

2.1.2.  Regulatory fees 

Regulatory  fees  differ  and  can  be  complex  –  When  asset  managers  make  use  of  the 
marketing passport, 21 Member States require paying regulatory fees to competent authorities 
of  the  host  Member  State  when  funds  are  marketed  to  investors  on  a  cross-border  basis. 
Respondents to the Call for Evidence and the CMU Green Paper have referred to the range of 
regulatory  fees  charged  by  host  Member  States  as  hindering  the  development  of  the  cross-

35  Pre-marketing  is  a  market  practice  used  in  particular  asset  management  segments  targeting  professional 
investors or high net worth individuals, such as private equity or venture capital, and is used to test investors' 
appetite for upcoming investment opportunities or strategies.   
36  Reverse  solicitation  is  where  an  prospective  investor  contacts  a  management  company  on  his/her  own 
initiative, seeking to purchase units of shares of a fund without having been first marketed to by that company. 
37 E.g. for UCITS this covers the prospectus, periodic reports and key information. 
38 Belgium, Italy, France, Greece, Bulgaria, Finland, and Spain.  

15 

 
                                                 
border  marketing  of  funds  across  the  EU.  A  preliminary  assessment  by  the  Commission 
services showed that the level of fees levied by host Member State on asset managers varies 
considerably,  both  in  absolute  amount  and  how  they  are  calculated  (see  Annex  8).  This 
implies that the process to determine the level of fees that have to be paid by an asset manager 
when marketing his fund cross-border can be very complex.  

Lack  of  transparency  over  regulatory  fees  –  As  outlined  in  the  evaluation  annex,  the 
majority of industry respondents to the open consultation did not consider the requirement to 
pay  regulatory  fees  as  such  as  a  significant  barrier,  but  rather  the  lack  of  transparency  over 
how these fees are calculated and levied. Respondents indicated that it is difficult to find out 
and  understand  what  the  regulatory  fees  in  a  certain  host  Member  State  are,  as  this 
information is often not available on the website of the national supervisor or only in the local 
language. As a result, asset managers need the services of external counsel to determine the 
exact level and structure of regulatory fees. Furthermore, some asset managers responding to 
the open consultation indicated that they did not receive invoices for regulatory fees. This can 
create accounting difficulties and even delay the passporting process as a proof of payment is 
required by some host competent authorities to be sent to them before marketing commences. 

2.1.3.  Administrative requirements 

National  requirements  to  have  local  facilities  are  costly,  but  have  limited  added  value 
given  use  of  digital  technology  -  Where  UCITS  are  marketed  across  borders  to  retail 
investors, at least 17 Member States require – as part of the transposition of Article 92 of the 
UCITS  Directive  –  that  facilities  are  present  in  their  territory  for  making  payments  to  unit-
holders, repurchasing or redeeming units and making available the information which funds 
are required to provide.39 A few Member States also require these local facilities to perform 
additional tasks, like handling complaints or serving as local distributor (e.g. GR) or being the 
legal representative (including vis-à-vis the national competent authority, e.g. DK).  

As  outlined  in  the  evaluation  annex,  responses  by  industry  to  the  consultations  suggest  that 
the costs to comply with the requirement to have local facilities present in each Member State 
are significant. Feedback from industry also suggests that the appointment of local facilities is 
time-consuming  and  can  lead  to  significant  delays  in  marketing  funds,  as  negotiating  the 
agreement involves the management company's legal and business teams as well as the fund's 
depository and operational oversight teams. 

While the costs of local facilities are significant, asset managers and one investor association  
indicated that in practice facilities nowadays mostly play a passive role and are rarely used by 
the  investors,  as  the  preferred  method  of  contact  has  shifted  to  direct  contacts  with  the 
manager and payments and redemptions are done through other channels, either online or by 
telephone.  Besides  questioning  the  need  to  have  local  facilities  nowadays,  many  industry 
respondents also considered the diverging requirements between Member States regarding the 
appointment and role of local facilities a barrier.  

39  Article  92  of  the  UCITS  Directive  requires  UCITS  to,  in  accordance  with  the  laws,  regulations  and 
administrative  provisions  in  force  in  the  Member  State  where  their  units  are  marketed,  take  the  measures 
necessary  to  ensure  that  facilities  are  available  in  that  Member  State  for  making  payments  to  unit-holders, 
repurchasing or redeeming units and making available the information which UCITS are required to provide. 

16 

 
                                                 
2.1.4.   Notification requirements 

Requirements  for  updating  notifications  are  either  not  standardised  or  applied 
differently  across  the  EU  and  types  of  funds  –  Before  a  fund  manager  can  use  the 
marketing  passport  under  the  UCITS  and  AIFM  Directives,  it  is  required  to  notify  the 
competent  authority  of  the  home  Member  State  of  its  intention  to  market  the  fund(s)  cross-
border  in  another  Member  State.  As  outlined  in  the  evaluation  annex,  whereas  feedback 
through  the  consultations  on  the  initial  notification  process  was  rather  positive,  industry 
respondents  found  the  process  for  updating/  modifying  documentation  burdensome.  A 
majority  of  these  responses  reported  difficulties  with  the  UCITS  process  for  updating 
notifications, as this process is managed by the host Member State and is not harmonised or 
standardised.  As  for  AIFs,  several  industry  respondents  noted  that  the  requirement  under 
AIMFD to update notifications when there are material changes40 can create difficulties as it 
is  unclear  which  timeframe  is  applicable  to  the  notification;  what  constitutes  a  material 
change; and whether marketing activities are allowed during that period. 

No harmonised de-notification process – Another issue highlighted by industry stakeholders 
in the open consultation was the absence of a de-notification process in some Member States, 
as  well  as  differences  between  existing  national  de-notification  procedures.  More  precisely, 
when  a  fund  wishes  to  stop  its  marketing  activity  and  exit  the  market  of  one  or  several 
Member States41, different procedures can apply across Member States depending on whether 
there are still local investors in the fund and on whether the number of investors drops below 
a specific threshold.  In addition, five Member States allow de-notification only after certain 
publication requirements are fulfilled. According to responses from industry, difficulties with 
de-notification result in a lack of an exit strategy, which considerably influences the decision 
of a fund manager to access a market in the first place.  

2.1.5.  Out-of-scope problem drivers  

There are other significant problem drivers that impact the problem under consideration. As 
indicated in the introduction of this section, the decision to go cross-border is determined by 
cost considerations and factors related to the attractiveness of the market. This is supported by 
the  regression  analysis  in  annex  6  which  demonstrates  that  both  cost  considerations  and 
factors related to the attractiveness of the local market affect the cross-border distribution of 
funds. 

The  out-of-scope  drivers  are  summarised  briefly  below,  together  with  an  explanation  why 
they are considered to be out of scope.  

Taxation (D2) – Many industry representatives and asset managers responding to the CMU 
Green Paper and open consultation on cross-border distribution of funds pointed to taxation as 
an  important  barrier.  Respondents  reported  that  investment  funds  often  lack  or  have 
difficulties with obtaining access to double tax treaties, due to their tax status in the territory 
where  they  are  domiciled  or  because  they  cannot  demonstrate  that  their  investors  meet 
particular  residence  or  nationality  requirements.  When  they  did  have  access  to  double  tax 
treaties,  respondents  reported  several  difficulties  due  to  inconsistent  and  burdensome 
withholding tax recovery processes, which are defined and applied at a national level.  

Other tax issues highlighted by industry respondents and investors were diverging national tax 
reporting  requirements  –  in  particular  reporting  on  investor  income  tax  –  and  tax 

40 Article 32(7) and Annex IV AIFMD 
41 The fund continues to exist and pursues its marketing activities in one or several other Member States. 

17 

 
                                                 
discrimination  of  non-domestic  investment  funds,  which  discourages  (retail)  investors  from 
investing cross-border.  

Taxation barriers are out of scope as these would need  to be addressed on a different treaty 
base and are already the subject of other Commission work streams. This includes the work 
with  national  tax  experts,  which  has  led  in  December  2017  to  the  publication  of  a  code  of 
conduct on more efficient WHT relief and refund principles as part of the CMU Action Plan.   

Market structure (D3) - The closed architecture of distribution and intermediation channels 
has also been cited by industry representatives, investor associations and national competent 
authorities as a significant barrier for cross-border distribution. In many Member States banks 
and  insurance  companies  are  the  biggest  distributors  of  retail  investment  funds,  offering  in 
some cases predominantly in-house funds. Economic research42 indicates that financial advice 
might be biased when financial advisors also act as sellers of financial products, thereby not 
improving  investors'  portfolio  allocations43.  In  Europe,  such  dependent  advisors  are  also 
unlikely to consider cross-border funds from other distributors (on an equal footing). 

Market structure is out of scope of this initiative for two reasons: 

  Recent  legislative  initiatives:  MiFID  II  and  PRIIPs  are  intended  to  alter  inducement 
incentives and provide greater clarity over costs. The impact of these measures will need to 
be evaluated before further steps are considered. 

  As  part  of  the  CMU  Action  Plan,  a  follow-up  to  study  on  distribution  systems  of  retail 
investment  products  across  the  EU  is  currently  underway  and  further  steps  will  be 
considered following this. 

Investors'  behaviour  (D4)  –  Economic  research44  has  demonstrated  that  fund  investors  are 
subject to several behavioural biases, including home and familiarity bias. It is argued  - and 
indirect  evidence  is  provided  -  that  investors  might  be  willing  to  buy  high  fee  funds  with 
which  they  have  become  familiar,  possibly  through  localized  marketing  efforts.  As  such, 
home  and  familiarity  bias  have  a  negative  impact  on  the  demand  from  investors  for  cross-
border funds, as they are more likely to invest in domestic funds.  

These behavioural biases also act as a disincentive for managers to engage in the cross-border 
distribution of funds: fee competition could not be as effective as these investors are willing to 
pay  higher  fees  for  funds  they  are  familiar  with  and  may  therefore  not  switch  funds  solely 
because of lower fees. In addition, it will require more (marketing) efforts for non-domestic 
funds to be as noticeable in a market as local funds, making it difficult to sufficiently increase 
investors' familiarity with their fund.  

The broader issue of (retail) investors' behaviour is out of scope as this cannot be addressed 
through  this  targeted  initiative.  Recent  legislative  initiatives,  like  PRIIPs,  already  aim  to 
address investors' behaviour more broadly by providing simpler and comparable information 
on investment products, which is expected to significantly improve investors’ decisions.45  

42  See  e.g.  Bolton,  P.,  Freixas,  X.,  &  Shapiro,  J.  (2007).  Conflicts  of  interest,  information  provision,  and 
competition in the financial services industry. Journal of Financial Economics, 85(2), 297-330. 
43  See  e.g.  Bergstresser,  D.,  Chalmers,  J.  M.  R.,  &  Tufano,  P.  (2009).  Assessing  the  Costs  and  Benefits  of 
Brokers  in  the  Mutual  Fund  Industry.  The  Review  of  Financial  Studies,  22(10),  4129-4156.  doi: 
10.1093/rfs/hhp022 
44  See  e.g.  Bailey,  W.,  Kumar,  A.,  &  Ng,  D.  (2011).  Behavioural  biases  of  mutual  fund  investors.  Journal  of 
Financial Economics, 102(1), 1-27. 
45 Consumer Decision-Making in Retail Investment Services: A Behavioural Economics Perspective, November 
2010; http://ec.europa.eu/consumers/archive/strategy/docs/final_report_en.pdf 

18 

 
                                                 
Online and direct distribution (D5) – Divergent, paper-based requirements, such as Know-
Your-Customer (KYC) and Anti-Money Laundering (AML) checks in many Member States 
were  reported  by  a  significant  number  of  asset  managers  as  a  costly  complication  where 
managers are seeking to market directly online across borders. The current process is regarded 
as  costly  and  labour-intensive,  requiring  renewing  and  maintaining  Know  Your  Customer 
processes, monitoring, maintenance of sanctions lists, on-site visits etc.  

An additional factor is the need for managers of existing funds to maintain relationships with 
their  existing  distributors  when  launching  online  or  other  direct  distribution  channels.  A 
number  of  managers  have  reported  that  this  can  act  as  a  disincentive  either  to  launch  these 
channels  or severely limits the possibility to compete by offering  lower prices. See also the 
section on market structure.   

KYC  and  AML  requirements  are  out  of  scope of  this  initiative  as  this  is  a  horizontal  issue, 
which  applies  to  all  financial  services.  Work  in  this  area  is  already  ongoing  on  a  broader 
basis,  for  example  by  addressing  the  interoperability  of  identity  authentication  through  the 
eIDAS initiative. In this initiative Member States cooperate in order to reach interoperability 
and security of electronic identification schemes. A shift to more online distribution in general 
may  also  have  the  potential  to  overcome  some  of  the  investor  behavioural  biases  towards 
buying funds offered across borders.  

2.2. Problems  

As  discussed  in  section  2.1  and  described  in  more  detail  in  the  evaluation  annex,  there  are 
several  areas  (corresponding  to  the  problem  drivers)  where  national  requirements  and 
regulatory  practices  regarding  the  use  of  the  EU  marketing  passports  for  investment  funds 
diverge  and  can  be  hard  to  find  and  interpret  for  fund  managers.  As  a  result,  they  add 
unnecessary complexity and legal uncertainty to  distributing  cross-border,  resulting in 
higher costs for asset managers who want to market their funds cross-border across the EU.  

Feedback  from  the  consultations  indicates  that  asset  managers  need  to  seek  legal  advice  to 
understand and comply with different national regulatory frameworks. Costs for legal advice 
are incurred on a one-off basis when first accessing the market, but also on an ongoing basis 
to  keep  up  with  changing  requirements.  Furthermore,  requirements  like  the  mandatory 
appointment  of  local  facilities  can  be  burdensome  according  to  industry  respondents,  given 
the  direct  fees  that  have  to  be  paid  to  these  facilities  and  the  time  needed  to  negotiate 
appropriate arrangements.  

In practice, this means that there are (regulatory) barriers for asset managers to distribute 
their investment funds cross-border.  

In order to get a sense of the magnitude of this problem, it is first useful to look at feedback to 
the  open  consultation,  where  respondents  –  in  particular  asset  managers  –  were  asked  to 
indicate  what  the  reasons  were  for  any  limitiation  on  the  cross-border  distribution  of  their 
funds for each Member State. Figure 8 indicates that for asset managers, the (most important) 
reasons for not distributing to a certain country differ between Member States. Nevertheless, 
for 23 Member States regulatory barriers were mentioned as a reason not to distribute in that 
country. This seems to indicate that regulatory barriers are binding for asset managers in the 
sense that they negatively influence their decision to market cross-border in the EU for almost 
all Member States. This is confirmed by the results of the randomized survey in which 77% of 
the respondents agree that a positive change with regard to regulatory barriers would increase 
their level of cross-border activity, even without any change in the other barriers. Relatively 
speaking, large funds found local demand factors more important than small funds. 

19 

 
Targeted  follow-up  consultations  of  asset  managers  and  industry  representatives  that  were 
conducted  after  the  public  consultation,  have  confirmed  that  regulatory  barriers  are  an 
important factor – and sometimes even a deciding factor – when determining their distribution 
strategy across the EU.   

Figure 8- Feedback from stakeholders 

What are the reasons for any limitation on the cross-border distribution of funds? 
(responses for each Member State and multiple answers possible) 

s
e
s
n
o
p
s
e
r

f
o

r
e
b
m
u
N

35

30

25

20

15

10

5

0

a
i
r
t
s
u
A

i

m
u
g
e
B

l

a
i
r
a
g
u
B

l

a
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t
a
o
r
C

s
u
r
p
y
C

c

i
l

b
u
p
e
R
h
c
e
z
C

Other

Tax issues

Host market too small

Lack of demand

Regulatory barriers

i

n
a
p
S

n
e
d
e
w
S

K
U

s
d
n
a
l
r
e
h
t
e
N

i

a
n
o
t
s
E

k
r
a
m
n
e
D

d
n
a
n
F

i

l

e
c
n
a
r
F

y
n
a
m
r
e
G

e
c
e
e
r
G

y
r
a
g
n
u
H

e
c
n
a
e
r
I

l

l

y
a
t
I

i

a
v
t
a
L

a
t
l
a
M

d
n
a
o
P

l

l

a
g
u
t
r
o
P

i

a
n
a
m
o
R

i

a
n
a
u
h
t
i
L

g
r
u
o
b
m
e
x
u
L

i

a
k
a
v
o
S

l

i

a
n
e
v
o
S

l

Source: Open consultation, European Commission, 2016 

The chart below (figure 9) provides an indication of the importance respondents to the open 
consultation attributed to each of the problem drivers identified in section 2.1. It suggests that 
marketing requirements and tax issues (out of scope) are the most important barriers to cross-
border  distribution  according  to  respondents,  followed  by  administrative  requirements, 
regulatory fees and notification. However, these results should also be considered in light of 
strong feedback from these respondents that rather than any individual one of these problem 
drivers being the major difficulty, it is their cumulative effect that increases complexity and in 
doing so acts as a major barrier.    

20 

 
 
 
 
 
 
Figure 9 – Feedback from stakeholders

In your experience, which of the following issues are the major barriers to the 
cross-border distribution of funds in the EU? 

6 (sixth most important)

5 (fifth most important)

4 (fourth most important)

3 (third most important)

2 (second most important)

1 (most important)

120

100

80

60

40

20

0

f
o

e
c
n
a
t
r
o
p
m

i

e
h
t
g
n
i
t
a
r

s
t
n
e
d
n
o
p
s
e
r

f
o

r
e
b
m
u
N

l

e
a
c
s

i

t
n
o
p
6
a

n
o

s
r
e
i
r
r
a
b

* Respondents could vote twice on marketing requirements; the average score was 1.9.  
** Respondents could vote four times on tax issues; the average score was 2.7.    

Source: Open consultation, European Commission, 2016 

In  order  to  confirm  the  feedback  from  the  open  and  targeted  consultations  that  regulatory 
barriers  act  as  an  important  disincentive  for  asset  managers  to  distribute  their  funds  cross-
border, a random stratified sampling was conducted among a sample of 60 funds (see annex 4 
for  details  on  the  methodology).  The  asset  managers  of  the  selected  funds  were  asked  to 
answer a questionnaire with six questions on the importance of the various barriers to cross-
border  distribution  of  funds,  including  out  of  scope  drivers.  The  responses  received  in  the 
context of the stratified sampling46 indicate that a large majority of asset managers feel that 
regulatory barriers hinder cross-border distribution. These responses also indicate that a large 
majority of managers would increase cross-border activity if regulatory barriers are reduced.  

The statistical analysis of the impact of costs on cross-border distribution set out in Annex 11 
also supports the hypothesis that costs have a negative effect on cross border distribution of 
funds. As there is only anecdotal evidence available on the overall compliance costs of cross-
border entrance, the statistical analysis only considers direct regulatory fees. The results show 
that  there  is  a  limited  but  distinct  negative  effect  on  cross  border  distribution.  The  analysis 
furthermore shows that ongoing costs have a considerably stronger impact than one-off fees.  

Based  on  the  results  of  the  analysis  of  regulatory  fees  it  can  be  deduced  that  other  costs 
arising  on  cross  border  entrance  (search  costs,  legal  fees  etc.)  will  also  have  a  significant 
effect. Given that stakeholders have indicated that regulatory fees are only a minor barrier to 
cross border distribution, this effect is likely to be larger than that of regulatory fees. Direct 
and indirect costs are therefore shown to hinder the growth rate of cross border distribution of 
funds thus lowering the potential increase in competition throughout the Member States.  

46  Due  to  the  low  response  rate,  the  results  of  the  stratified  sampling  are  statistically  not  representative.  The 
sample  size  of  60  investment  funds  was  chosen  to  provide  a  confidence  level  of  90%.  Responses  are  still 
informative given that we have an equal split between large funds and small funds. 

21 

 
 
                                                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Besides feedback from stakeholders and the statistical analysis confirming the bindingness of 
regulatory barriers as a disincentive for cross-border distribution, a quantification of the costs 
asset managers incur for marketing cross-border also provides an indication of the magnitude 
of the problem. Figure 10 (below) shows the average costs for two types of asset managers: 
Scenario A describes an asset mangement company relying on in-house legal advice and in-
house  fund  administration,  whereas  Scenario  B  shows  an  asset  management  company 
outsourcing  legal  advice  and  fund  administration  to  third  parties.  More  details  on  the  costs 
and the methodology used for calculating them can be found in Annex 12. 

Type of cost 

Compliance costs: external (legal) 
services for determining:  
  marketing requirements 
  administrative requirements 
  notification requirements  
  regulatory fees 

Compliance costs: external services 
for local facilities 
Charges: regulatory fees 
TOTAL per fund 

Figure10  

One-off 
(per fund and host jurisdiction) 
Scenario A : €4,297 
Scenario B: €8,150 

Ongoing 
(per fund and host jurisdiction) 
Scenario A: €1,146 
Scenario B: €6,983  

€ 4,930 

€ 4,930 

€ 1819 
Scenario A: €11,046 
Scenario B: €14,899 

€ 2194 
Scenario A: €8,270 
Scenario B: €14,107 

TOTAL for all cross-border funds47 

Scenario A: € 679 million 
Scenario B: €916 million 

Scenario A: € 508 million 
Scenario B: €867 million 

Estimated Costs as % of overall 
fund expenses (*) 

1-4 % in total 

(*)  According  to  estimates  provided  by  a  number  of  industry  associations  in  response  to  the 
open consultation, the different regulatory barriers sum up to total costs between 1 and 4% of 
the  overall  fund  expenses48.  Anecdotal  evidence  provided  in  response  to  the  open 
consultation,  also  indicated  that  for  a  single  asset  manager  total  costs  linked  to  national 
requirements can correspond to 2 basis points (0.02%) of its reported AuM49.A recent study 
by Morningstar of the fees charged by investment funds found that the average asset-weighted 
expense ratio for the full European fund universe was 1% (of AuM) in 2016.50  

Applying  these  industry  estimations  to  the  €4.19  trillion  AuM  held  by  cross-border 
investment  funds51  implies  fund  expenses  of  circa  €41.9  billion,  with  regulatory  barriers 
costing  somewhere  between  €419  million  to  €1.67  billion.  This  corresponds  with  the  range 

47  Source:  PwC,  Benchmark  your  Global  Fund  Distribution,  March  2017.  The  total  costs  for  all  cross-border 
funds  is  calculated  by  using  the  total  number  of  cross-border  funds  registered  in  at  least  two  Member  States 
besides its fund domicile (11,380) and the average number of EU host jurisdictions (5.4) a cross-border fund is 
registered for sale. 
48 This figure applies to funds using the expense model, as there is direct impact of costs on the Total Expense 
Ratio of the fund. The alternative model, i.e. all-in fee model, is also negatively affected by the barriers. 
49 This figure was calculated by a big European asset manager with over €1,000 billion AuM.  
50 Morningstar Research Paper, "European Fund Expenses Are Decreasing in Percentage", August 2016. 
51 Source: EFAMA Fact Book 2017.  

22 

 
 
 
 
 
                                                 
estimated in the cost calculations in figure 10, which is based on detailed anecdotal evidence 
provided by asset managers and private companies through targeted consultations.   

2.3. Consequences 

The  problems  described  in  the  section  above  lead  to  disincentives  for  asset  managers  to 
distribute  funds  on  a  cross-border  basis52.  As  a  consequence,  and  despite  a  trend  towards 
further  integration,  the  European  market  for  investment  funds  is  still  a  fragmented  market 
with less competition than one would expect in a fully functioning single market. Ultimately, 
this  leads  to  less  investment  opportunities  for  investors  in  the  EU.  This  section  provides  a 
description of these  consequences, first by exploring more in-depth  the current  cross-border 
distribution of funds (building on section 1.2), and second by estimating the lost potential for 
the single market and ultimately investors.   

To  get  a  better  indication  of  current  cross-border  distribution  of  investment  funds,  it  is 
necessary to consider cross-border distribution from two perspectives:  

  Assets  under  management  held  by  cross-border  funds  provide  the  magnitude  of 

investments in these funds compared to domestic funds.  

  The  number  of  funds  marketed  cross-border  gives  an  indication  of  choice  available  to 

investors.  

Assets under management – As illustrated in figure 5 in section 1.2, by the end of 2016, the 
proportion of AuM held in funds registered for sale in at least two other Member States other 
than their fund domicile was 30% of the total AuM of investment funds in the EU.53 This had 
grown from 20% by the end of 2006. These figures indicate that – although the AuM in cross-
border funds has grown – the EU investment fund market is still predominantly domestic.   

Although a complete overview of the proportion of AuM held by cross-border funds in each 
(domestic)  market  is  not  available,  data  from  EFAMA54  provides  some  indication  of  this. 
Available data shows that in  most Member States the market share of cross-border funds in 
terms of AuM seems to lie somewhere between 5 and 25%, with some outliers – like Italy – 
where  the  market  share  of  cross-border  funds  is  67%.  It  should  be  noted  that  this  data 
included  round-trip  funds;  hence  the  market  share  of  true  cross-border  funds  will  be 
overrepresented in most Member States.  

Number of funds – Various sources provide indications of the number of funds distributed 
cross-border. As already included in section 1.2 (see figure 6), Morningstar data indicated that 
the proportion of UCITS funds that are registered for sale in at least three Member States is 
37% (which excludes round trip funds). The proportion of AIFs that are registered for sale in 
at least three Member States is 3%.  
Recent  statistical  data  collected  by  ESMA  from  national  competent  authorities55  (see 
Annex 8),  indicates  that  on  average,  only  22%  of  UCITS  domiciled  in  a  Member  State  are 
marketed in other Member States (median 16%). However, large differences can be observed 
between  Member  States.  While  in  Luxembourg  (85%)  of  the  UCITS  domiciled  there  were 
marketed in other Member States, this percentage is significantly lower for all other Member 

52 Besides these disincentives it needs to be recognised that managers have less incentives to distribute funds, in 
Member States with limited demand, which is (partially) covered by section 2.1.5 on out of scope drivers.  
53 EFAMA Fact Book 2017 
54 EFAMA Fact Book 2017, Section Country Reports. 
55 ESMA, Notification frameworks and home-host responsibilities under UCITS and AIFMD - ESMA Thematic 
Study among National Competent Authorities, 7 April 2017.  

23 

 
                                                 
States. For example, in Germany this was only 5%. In terms of numbers of UCITS, in only 
six Member States more than 100 of the funds domiciled there were marketed cross-border. 
Five  Member  States  reported  that  none  of  the  UCITS  domiciled  in  their  territory  were 
marketed on a cross-border basis. Differences between the data from ESMA and Morningstar 
can  be explained  by the fact that  not  all  competent authorities contributed statistical data to 
ESMA, including Ireland – which is the second largest domicile for UCITS.   

Furthermore, data reported by national competent authorities to ESMA seems to confirm data 
from  Morningstar  that  uptake  of  the  AIFMD  marketing  passport  is  significantly  lower  as 
compared  to  UCITS,  with  only  three  Member  States  reporting  numbers  of  more  than  100 
AIFs marketed on a cross-border basis and 11 Member States stating that less than 10 AIFs 
domiciled in their jurisdiction were marketed across the border.  

The  distribution  of  cross-border  funds  into  individual  Member  States  can  also  be 
considered  as  an  indication  that  the  single  market  is  not  functioning  optimally,  with  some 
Member  States  receiving  relatively  few  cross-border  funds.  Figure  11,  which  collates  data 
from two different sources, illustrates that while in several Member States a high number of 
cross-border  fund  are  registered  for  sale,  in  most  Member  States  that  number  is  (relatively) 
low.   

Figure 11– Number of cross-border registrations, funds sold into a Member State (per Member State) 

9.000

8.000

7.000

6.000

5.000

4.000

3.000

2.000

1.000

0

Data PwC (Dec 2016)

Data Morningstar (July 2017)

Source: PwC, Benchmark your Global Fund Distribution – March 2017, Morningstar database – July 2017 

Estimates  made  from  EFAMA  data  (Annex  756)  suggest  that  the  proportion  of  cross-border 
funds registered for sale in  Member States compared to  domestic funds (market penetration 
rate),  strongly  vary, e.g. 12%  in  Spain, 19%  in Belgium and 76%  in  Hungary.  However, in 
practice, these figures are likely to over-represent the proportion of non-domestic funds, due 
to the inclusion of round-trip funds. 

The  open  consultation  also  provides  an  indication  of  distribution  across  the  EU  –  albeit 
anecdotal given the sample size, showing that managers choose not to market their funds in 
all Member States, with only 3 managers (15% of those responding) choosing to market in 27 

56 This annex also includes data from Morningstar. 

24 

 
 
                                                 
or 28 Member States, and with the majority of managers marketing in half or fewer Member 
States (see figure 12).  

Figure 12 – Feedback from stakeholders 

In how many Member States do you market your funds on a cross border 
basis? 

s
t
n
e
d
n
o
p
s
e
r

f
o

r
e
b
m
u
N

4

3

2

1

0

1

2

3

4

5

6

7

8

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Number of Member States 

Source: Open consultation, European Commission, 2016 

Results from the open consultation also suggest that the Member States where fund managers 
do not market at all tend to be smaller; and these markets are possibly characterised by a lack 
of demand. There is a marked difference in distribution; while 19 of the managers responding 
market to Germany, only 2 market to Latvia and Lithuania, for example (see figure 13).  

Figure 13 – Feedback from stakeholders 

In which Member States do you actively market your UCITS and AIFs? 

s
e
s
n
o
p
s
e
r

f
o

r
e
b
m
u
N

20

18

16

14

12

10

8

6

4

2

0

a
i
r
t
s
u
A

i

m
u
g
e
B

l

a
i
r
a
g
u
B

l

a
i
t
a
o
r
C

s
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r
p
y
C

h
c
e
z
C

i

a
n
o
t
s
E

k
r
a
m
n
e
D

UCITS

AIF

i

n
a
p
S

n
e
d
e
w
S

K
U

d
n
a
l
r
e
z
t
i

w
S

s
d
n
a
l
r
e
h
t
e
N

e
c
n
a
r
F

y
n
a
m
r
e
G

e
c
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e
r
G

y
r
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H

d
n
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I

l

d
n
a
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r
I

l

l

y
a
t
I

i

a
v
t
a
L

i

n
e
t
s
n
e
t
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c
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L

i

a
t
l
a
M

y
a
w
r
o
N

d
n
a
o
P

l

l

a
g
u
t
r
o
P

i

a
n
a
m
o
R

i

a
n
a
u
h
t
i
L

g
r
u
o
b
m
e
x
u
L

i

a
k
a
v
o
S

l

i

a
n
e
v
o
S

l

d
n
a
n
F

i

l

Source: Open consultation, European Commission, 2016 

In  a  fully  functioning  single  market,  it  could  be  expected  that  a  large  majority  of  managers 
would  distribute  their  funds  without  unnecessary  cost  across  the  EU.  Current  arrangements 

25 

 
 
 
 
 
 
 
 
 
clearly  fall  short  of  this.  Increased  distribution  of  cross-border  funds  has  the  potential  to 
decrease the fragmentation of the market for EU funds, to increase competition in the national 
markets through new entries and to improve investment opportunities for investors in the EU. 
For a market to be competitive, new entry should take place and the entry should affect the 
behavior of incumbents and the economic setting in which they compete.  
Economic  research57  shows  that  new  entry  impacts  incumbents  through  price  and  quantity 
competition, with the effect of new funds entering depending on competition intensity in the 
market.58  Incumbents  facing  high  competitive  intensity  engage  in  price  competition  by 
reducing management fees.  

for 

from 

incumbents, 

It  should  be  noted  that  this  research  also  concludes  that  investors  did  not  benefit  from  the 
price  competition  in  terms  of  lower  fees  as  the  lower  management  fees  were  offset  by  an 
increase  in distribution  fees. However, where funds enter the  market and face low levels of 
competition 
increased  diversification 
investors  still  profit 
opportunities.59 This is particularly the case for the smaller markets that currently benefit less 
from the cross-border distribution of funds. 
Evidence  provided  in  a  recent  analysis  by  Deloitte60  in  the  context  of  a  study  on  the  retail 
distribution  channels  in  the  EU,  indeed  suggests  that  fees  are  higher  in  markets  that  are 
underserved by asset managers. For example, in Estonia, where only 1,918 investment funds 
are available, the average fee is 2.72%, while in France - where 39,822 investment funds are 
available – the average fee is 1.59. It is possible that the differences in fees may be partly due 
to  a  lack  of  competitive  pressure  where  markets  are  underserved  by  cross-border  funds, 
though  there  are  of  course  other  significant  differences  between  jurisdictions  that  could 
explain some of the divergence in fees. 

In order to estimate the lost potential for the single market due to regulatory barriers to cross-
border distribution, an economic analysis was conducted. Even small increases in the growth 
rate  of  cross-border  funds  potentially  have  a  significant  effect  on  the  total  number  of  funds 
marketed over the course of several years. This will increase the choice for investors and will 
have positive effects on the level of competition, which will in turn put pressure on the fees 
charged by investment funds.   

Figure 14 shows the impact of increased growth rates of cross-border UCITS funds in terms 
of total number of UCITS funds marketed across the EU for 4 different scenarios (for a 1%, 
3%, 5% and 10% increased growth rate). The baseline in the graph depicts the development 
under  the  assumption  that  the  current  5-year  average  growth  rate  in  each  Member  State  is 
maintained.  Meanwhile,  the  box  plots  indicate  the  strong  dispersion  across  Member  States 
given that average 5-year growth rates vary considerably (from 1.55% in Slovakia to 11.75% 
in the United Kingdom). 

57 Wahal, S., & Wang, A. Y. (2011). Competition among mutual funds. Journal of Financial Economics, 99(1), 
40-59. 
58 The overlap in portfolio holdings is used as a measure of competitive intensity. The effect also depends on the 
extent that market entry is profitable: it was only documented in the US market after the 1990 when the US fund 
market became more saturated and the competition with incumbents for revenues and inputs intensified. 
59 This does only refer to the supply of non-overlapping investment opportunities. Retail investors are known to 
hold  under  diversified  portfolios  (see  e.g.  Goetzmann,  W.  N.,  &  Kumar,  A.  (2008).  Equity  portfolio 
diversification. Review of Finance, 433-463).  
60 Source: Deloitte Luxembourg 

26 

 
 
 
                                                 
Figure 14 – Different scenarios of increased cross-border growth rates 

Source: Morningstar data (Oct. 2017), EC calculations 

A comparison between the baseline and the different scenarios demonstrates that even a 1% 
increase  in  the  growth  rate  of  cross-border  funds  will  lead  to  a  0.5%  increase  in  the  total 
number of UCITS funds marketed across MS over the course of 5 years (this implies that 487 
additional funds would be offered). This effect becomes increasingly more pronounced as the 
increase in the growth rate rises. A 10% increase, for example, would lead to 4,944 additional 
UCITS  funds  marketed  over  the  same  time  period.  This  demonstrates  that  there  is  a 
significant  lost  potential  in  terms  of  competition  associated  with  a  lower  growth  of  cross-
border funds. The sooner the growth rate is boosted the sooner investors would benefit from 
the effects of increased competition.  

27 

 
 
DRIVERS 

PROBLEMS 

CONSEQUENCES 

Marketing requirements 
  National  marketing  requirements  and  (supervisory)  practices 

differ and are sometimes unnecessarily burdensome.  

  Lack of transparency over national marketing requirements. 

Regulatory fees 
  Regulatory fees differ, can be complex, and do not necessarily 
reflect supervisory tasks performed by competent authority. 

  Lack of transparency over regulatory fees.  
 

Administrative requirements 
  National  requirements  to  have  local  facilities  are  costly,  but 
have limited added value given use of digital technology. 

Notification requirements 
  Requirements 

for 

not 
standardised or applied differently across EU & types of fund. 

notifications 

updating 

either 

  No harmonised de-notification process for funds.  

D1 

P1 

Unnecessary 
Unnecessary 
complexity and 
complexity and 
legal uncertainty 
legal uncertainty 
for asset managers 
for asset managers 
who want to 
who want to 
market their funds 
market their funds 
cross-border 
cross-border 
across the EU 
across the EU 

Higher costs for 
asset managers 
who want to 
market their funds 
cross-border 
across the EU 

i
n
v
e
s
t

m
e
n
t

f
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d
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s

t
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i
b
u
t
e

t
h
e
i
r

C1 

Disincentives 
for asset 
managers 
who want to 
distribute 
their funds 
cross-border 
across the 
EU 

E
U
m
a
r
k
e
t
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t

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D
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g
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,

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i

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d
i
f
f
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l
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t
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r
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i
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C2 

I
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f
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i
n
g
o
f

t
h
e
S
i
n
g
l
e

M
a
r
k
e
t

Less 
competition 
across the 
EU 

Fragmented 
market for 
EU funds 

C3 

Less 
investment 
opportunities 
for investors 
in the EU 

Taxation 
 Widely  different  national  tax  rules  and  reporting  and  difficulties  with 
obtaining withholding tax relief or refunds for managers and investors. 

Market structure 
 Vertical distribution and intermediation models in some Member States 
reduce  managers'  ability  to  reach  new  (retail)  investors  and  limits 
consumer choice.  

Investors' behavior 
 Retail  investors  are  inclined  to  invest  in  domestic  funds  over  cross-

border funds (home and familiarity bias). 

Online and direct distribution   
 Anti-money 

laundering  (AML)  and  know-your-customer  (KYC) 

requirements are paper based and applied differently across the EU  

D2 

D3 

D4 

D5 

CONTEXT  
(OUT OF 
SCOPE) 

P2 

Reduced demand 
by investors for 
cross-border funds 

28 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.4. Groups affected by the problem 

Both providers of and investors in investment funds are affected by the remaining difficulties 
managers face in distributing funds cross-border: 

Investors across the EU might not be offered attractive investment opportunities that would 
be  available  to  them  in  a  fully  functioning  single  market.  While  the  data  on  cross-border 
distribution  provides  evidence  that  cross-border  funds  are  available  across  the  EU,  the 
relatively low level of investment in these funds suggests that retail investors are not able or 
willing to fully exploit this opportunity. This could be due to a number of factors, including 
both in- and out-of-scope drivers such as a preference for domestic products (home/familiarity 
bias)  or  to  the  funds  that  are  marketed  cross-border  being  insufficiently  competitive  or 
attractive.  Retail  investors  are  particularly  affected,  as  the  choice  available  to  them  is  more 
limited, and it is likely that they will respond by either investing in the funds easily available 
to them through distributor networks, or choose to invest in other types of assets, for example 
bank  deposits.  Professional  investors  are  better  able  to  access  a  wide  range  of  investment 
opportunities:  rules  regarding  marketing  to  them  are  less  strict,  and  they  generally  have  the 
resources  to  seek  out  suitable  investments  or  even  request  the  creation  of  tailor-made 
products.  However,  it  is  likely  that  they  will  also  be  disadvantaged  by  the  barriers,  which 
imply that the offer is lower than it would be in a fully functioning single market.  

Asset  managers  facing  a  significant  incremental  cost  in  marketing  to  more  Member  States 
have reported that they instead choose to limit distribution of their funds where they can be 
confident  there  is  sufficient  demand.  In  doing  so,  they  lose  the  opportunity  to  test  new 
markets  and  further  grow  their  funds.  Responses  to  the  consultation  show  relatively  few 
managers marketing to 27 or 28 Member States (3 out of 19 managers), with many choosing 
to market to roughly half this number or even fewer.    

National Competent Authorities and ESMA  are also affected by the problem as the rules 
applicable  in  each  Member  State  differ  and  this  could  create  difficulties  to  ensure  a  level 
playing field across the EU.  

2.5. Baseline scenario 

The  baseline  scenario  is  that  no  policy  action  would  be  taken  with  regard  to  regulatory 
barriers to cross-border distribution. 

Not  addressing  these  regulatory  requirements  would  mean  that  there  will  continue  to  be 
notable  regulatory  barriers  to  the  cross-border  distribution  of  funds,  lagging  behind  the 
development of a fully competitive single market for investment funds. In the absence of any 
policy action in this area, national requirements would remain unaligned and at times difficult 
to  determine,  with  associated  costs  borne  by  managers  or  (investors  in)  the  funds.  In  detail 
this would mean that:  

  marketing  requirements  would  remain  unaligned,  and  in  some  case  difficult  to  find, 
requiring  expensive  legal  advice  to  interpret.  There  are  no  indications  that  this  legal 
advice would become cheaper; 

  administrative  requirements,  including  the  mandatory  use  of  local  facilities,  would 

remain in place in many Member States; 

  regulatory fees would remain divergent and difficult to determine. 
  notification procedures and requirements would remain unaligned and a procedure for de-

registering funds is likely to be absent in some Member States. 

29 

 
In a static version of the baseline scenario, costs for cross-border distribution are unlikely to 
diminish.  These  would  continue  to  act  as  a  disincentive  to  distribution.  Although  in  this 
scenario no policy action with respect to regulatory barriers would be taken, a slow increase 
in the development of cross-border distribution could still be expected. This is due to the fact 
that  both  the  AuM  and  the  number  of  cross-border  investment  funds  has  shown  a  steady 
increase over the years – as illustrated in figures 5 and 6 – despite the barriers to cross-border 
distribution.  However,  fund  managers  and  investors  would  not  to  be  able  to  benefit  from  a 
fully  functioning  single  market.  Fund  managers  would  not  compete  as  efficiently  as  they 
would  in  case  of  a  fully  integrated  market  for  investment  funds.  Evidence  in  economic 
research61 suggests that selling a fund in 7 countries instead of only one country increases the 
total expense ratio by almost 30 basis points. Other research62 suggests that funds that do not 
engage  in  the  optimal  level  of  cross-border  distribution  are  losing  out  on  the  possibility  of 
attracting net flows and related fees from other national markets. This in turn would affect a 
fund's growth and its ability to reach its optimal scale in order to maximise benefits stemming 
from  economies  of  scale.  From  an  investor  perspective,  this  research  also  shows  that 
incumbent funds faced with competition from new funds that hold similar portfolios, decrease 
their management fees, suggesting that pre-entrance fees were possibly too high. In addition, 
incumbent funds lose inflow from investors, indicating that these new funds are attractive to 
investors. 

When taking a dynamic perspective regarding the baseline scenario, other factors need to be 
taken  into  account.  These  other  factors,  which  correspond  to  the  out-of-scope  drivers 
described in section 2.1.5., are independent from regulatory barriers and limit the cross-border 
distribution  of  investment  funds.  Although  these  factors  are  not  expected  to  change 
substantially in the short-term, there are several initiatives and developments, which can have 
an  impact  on  these  factors.  In  turn,  this  is  expected  to  have  an  indirect,  but  moderately 
positive impact on cross-border distribution of funds. However, a definite assessment of the 
impact  of  these  initiatives  is  not  possible,  as  they  are  linked  to  ongoing  developments  or 
legislation  which  has  not  yet  entered  into  force  or  has  not  yet  been  implemented.  These 
initiatives are described below. 

The  growth  of  FinTech  may  lead  to  some  greater  opportunities  for  cross-border 
distribution,  including  through  direct  distribution.    Development  of  online  platforms, 
together  with  other  reforms  such  as  eIDAS63,  will  allow  funds  to  be  marketed  more  easily 
online  or  directly  to  retail  investors,  including  on  a  cross-border  basis.  Growing  cultural 
acceptance of online purchases – currently patchy – could well support this. Since increasing 
amounts of retail services and products are offered and marketed online, the physical location 
of  providers  and  distributors  should  become  somewhat  less  prominent.  Furthermore,  online 
and direct distribution are less affected by home bias and consequently put national and EU 
funds  on  a  more  equal  footing  than  the  traditional  market  structure  and  long  established 
distribution channels do. 

However, the European financial services market still remains clearly fragmented by national 
borders, especially in retail services. The sale of financial services differs from other products 
given that trust in the financial service provider is an important determinant: providers with  
low trust have difficulties selling products with certain levels of risk.64 The success of online 

61 Lang, G. (2016). Macro Attractiveness and Micro Decisions in the Mutual Fund Industry: Springer. 
62 Wahal & Wang, (2011). 
63 Electronic identification and trust services for electronic transactions in the internal market. 
64 Cox, P. (2007). Should a financial service provider care about trust? An empirical study of retail saving and 
investment allocations. Journal of Financial Services Marketing, 12(1), 75-87. 

30 

 
                                                 
financial  services  will  thus  depend  partly  on  how  trust  can  be  established  in  online 
relationships  relative  to  face-to-face  sales.  Customer  surveys  have  shown,  for  example,  that 
factors  such  as  branch  proximity  still  play  a  key  role  in  customers'  decision  of  bank 
providers65. While there is certainly a trend towards an increasing use of online distribution 
channels, especially for transaction activities66, branches and other forms of face-to-face and 
voice-to-voice  channels  are  likely  to  maintain  an  important  role  for  sales-and-advice 
interactions67.  These  sales  and  advice  interactions  are  crucial  for  the  effective  marketing  of 
funds. How quickly and to what extent this will change will crucially depend on the quality 
and costs of internet based services and especially consumer trust.  

Other  measures  addressing  the  incentives  to  market  cross-border  may  have  a  positive 
impact in supporting wider distribution, for example: 

  The limited ban on inducements being introduced through MiFID II could contribute to 
opening up vertical distribution structures, allowing for a wider distribution of investment 
funds and supporting investors' in exercising greater choice. 

  Along the same lines, national legislative changes, for example the UK's and Netherlands' 

ban on inducements, could also support this aim. 

  Key  Information  Documents  (KID)  for  packaged  retail  and  insurance  based  investment 
products  (PRIIPs)  will  improve  transparency  and  comparability  in  particular  regarding 
costs linked with different investment products, including  transaction costs. This should 
have  a  positive  impact  on  investor's  confidence  in  packaged  investment  products, 
including investment funds and help them to take better informed investment decisions. 
The KID should also help cost-efficient products to better compete in the markets.  

ESAs review: The Commission proposal for the ESAs review foresees a more integrated EU 
supervisory  framework  to  foster  the  Capital  Markets  Union  and  financial  integration.  If 
financial activities are regulated and supervised more consistently across all Member States, it 
can  be  expected  that  cross-border  activities  can  be  conducted  more  easily.  Providers  of 
financial products will benefit from a level playing field across the single market and service 
providers may expand their product offerings and benefit from economies of scale. Users of 
financial products and services – consumers as well as business – may benefit from a wider 
choice  without  concerns  about  consumer  protection  or  market  integrity.  Additionally,  direct 
supervision  powers  for  ESMA  with  respect  to  EuVECA,  EuSEF  and  ELTIF  funds  are 
foreseen. A more integrated EU supervisory framework has the potential to reduce regulatory 
differences between Member and increase cross-border activities, including the cross-border 
distribution of investment funds,.  

WHT  relief  principles:  The  European  Commission,  helped  by  national  tax  experts,  has 
recently developed a code of conduct on more efficient WHT relief and refund principles as 
part  of  the  CMU  Action  Plan.  Once  implemented,  the  code  of  conduct  will  address  the 
longstanding  problems  of  long  delays  and  high  costs  faced  by  investors  seeking  to  claim 
withholding tax refunds. This would help avoiding double taxation, making it easier and more 
attractive for investors to make cross-border investments, including in investment funds.    

65 BCG customer centricity study 2011shows that proximity still drives about 30% of new customers acquisition 
in retail banking (FR- 28%, DE – 39%, UK – 26%)   
66 Some studies estimates that up to 66% of retail transaction activity of banks will be carried out via online 
channels in 2020 - 
https://www.bcgperspectives.com/content/articles/financial_institutions_sales_channels_distribution_2020/?chap
ter=2  
67 Idem. – The study estimates that around 60% of sales-and-advice interactions will still be handled via frontline 
face-to-face and voice-to-voice channels in 2020.  

31 

 
                                                 
The UK's withdrawal from the EU will have an impact on the EU investment fund market; 
many managers are located in the UK and it also has a large investor base. If the UK leaves 
the  single  market,  then  the  single  market  for  investment  funds  will  become  smaller,  even 
allowing  for  some  restructuring  and  relocation  of  fund  managers  to  remain  within  the  EU. 
These  changes  accentuate  the  need  to  ensure  that  the  single  market  for  funds  operates  as 
effectively and efficiently as possible. 

To sum up, given experience to-date and work to address the broader market for investment 
products,  it  is  likely  that  in  the  baseline  scenario  cross-border  distribution  of  funds  will 
continue to increase, but only moderately within a European Union of 27 Member States.   

2.6. Evaluation 

A back-to-back evaluation of the provisions affected by the initiative was conducted for the 
purpose of this impact assessment and can be found in Annex 5. The evaluation focuses on 
the rules on cross-border distribution of investment funds and provides an assessment of the 
UCITS and AIFMD Directives, focusing on the potential factors that may have prevented the 
wider  distribution  of  the  funds  as  compared  to  the  level  one  could  expect  in  a  fully 
functioning  single  market.  The  evaluation  does  not  constitute  a  full  review  of  the  two 
Directives, as both the UCITS and AIFM Directive will be subject to an overall review in the 
near future68. 

3.  THE EU'S RIGHT TO ACT AND JUSTIFICATION 

Article  114 of  the  Treaty  on  the  Functioning  of  the  European  Union  (TFEU)  confers  to  the 
European  institutions  the  competence  to  lay  down  appropriate  provisions  that  have  as  their 
objective  the  establishment  and  functioning  of  the  single  market.  The  problem  that  the 
initiative  under  consideration  aims  to  address  is  directly  related  to  the  use  of  the  marketing 
passport for investment funds as provided for in existing EU rules, and as such, concerns the 
functioning of the single market. Without solving the problem, the objectives of the UCITS 
and AIFM Directives cannot be achieved efficiently.  

Action  at  EU  level  is  appropriate  to  address  the  identified  problem,  as  feedback  from  the 
consultations clearly indicates that national implementation of UCITS and AIFM Directives 
resulted  in  differing  interpretations  of  the  rules  applicable  to  the  use  of  the  marketing 
passports  under  these  two  Directives.  In  addition,  the  randomized  survey  revealed  that  on 
average  96%  of  the  respondent  were  in  favor  of  increased  transparancy  or  increased 
harmonizaiton at the EU-level.69  

As  the  problem  relates  directly  to  the  application  of  European  and  national  legislation  and 
(supervisory)  practices  by  Member  States,  other  approaches  that  focus  on  (voluntarily) 
changing behaviour or practices of market participants would not solve the problem. Although 
Member  States  have  the  ability  to  address  the  problem  by  (voluntarily)  amending  national 
legislation or practices70, uniformity and legal certainty regarding the use of the passport can 

68 This has also been described in section 1.1 of this impact assessment. 
69 Respondents were asked to indicate whether they would favour increased transparency at the national level, at 
the EU-level or increased harmonization at the EU level to address the identified issued with marketing rules, 
regulatory  fees,  the  notification  process  and  local  agents.  Range  of  the  answers  in  support  of  increased 
transparency or harmonization was between 92%-100%. 
70  Member  States  have  exchanged  views  on  barriers  to  cross-border  distribution  of  investment  funds  in  the 
context of the Expert Group on barriers to free movement of capital. In March 2017 the Commission adopted a 
report looking at how to tackle national barriers with a view to fostering the flow of cross-border investments in 

32 

 
                                                 
 
be  better  ensured  by  taking  action  on  EU  level.  Furthermore,  previous  efforts  to  converge 
national (supervisory) practices in this area through ESMA have not succeeded to address the 
identified problem. 

Therefore, addressing the remaining barriers to cross-border distribution of investment funds 
across the EU can be most efficiently achieved at EU level in accordance with the principle of 
subsidiarity as set out in Article 5 of the TFEU. Finally, to address (parts of) the problem it 
might be necessary to amend existing EU legislation, which requires action at EU level.  

This is being pursued now on a stand-alone basis, prior to the overall reviewos of the AIFM 
and UCITS  Directives, because  for both  reviews there is  not  enough evidence to  be able to 
decide  at  this  point  whether  any  further  legislative  changes  would  be  merited.  The 
Commission  has  just  started  the  overall  review  of  the  AIFMD.  The  review  started  with  a 
tender  for  an  external  study  on  the  functioning  of  the  Directive,  which  was  awarded  to  a 
contractor in September 2017. An overall review of the UCITS Directive may take place once 
enough  experience  is  gained  with  the  practical  application  of  elements  introduced  with  the 
most recent amendments to the Directive.  

4.  OBJECTIVES 

The  general  policy  objective  of  the  initiative  under  consideration  is  to  increase  investment 
opportunities  for  investors  in  the  EU  by  removing  inefficiencies  in  the  functioning  of  the 
single market for investment funds.   

This general objective translates into the following specific policy objectives: 

 

 

removing  unnecessary  complexity  and  burdensome  requirements  regarding  cross-
border distribution of investment funds across the EU (S1); 
improving transparency of national requirements and practices regarding cross-border 
distribution of investment funds across the EU (S2); and 

  safeguarding investor protection71 (S3). 

Problem 
Barriers  for  asset  managers 
to 
distribute  their  funds  cross-border 
across the EU 

Problem drivers 
Marketing requirements 

Regulatory fees 

Administrative requirements 

Notification requirements 

S1 
Yes 

Yes 

Yes 

Yes 

S2 
Yes 

S3 
Yes 

Yes 

No 

No 

Yes 

Yes 

Yes 

The  objectives  of  the  initiative  are  consistent  with  other  EU  policies  and  initiatives  –  most 
notably CMU – that aim to strengthen Europe’s economy and encourage investment in all 28 
Member  States.  The  objective  also  reflects  the  EU's  commitment  to  complete  the  single 
market  (Articles  4(2)(a),  26,  27,  114  and  115  of  the  Treaty  on  the  Functioning  of  the 
European Union (TFEU). 

the EU. The exchange of views of the Expert Group has, where relevant, been taken into account in this impact 
assessment.   
71 Safeguarding investor protection is added to the objectives which derive from the problem tree, as the goal is 
to maintain the original objectives of UCITS and AIFM Directives. 

33 

 
 
 
 
 
                                                                                                                                                         
The EU is committed to high standards of protection of fundamental rights as laid down in the 
Charter  of  Fundamental  Rights  of  the  EU.  The  objectives  of  this  initiative  are  not  likely  to 
have an impact on fundamental rights of EU and non-EU citizens, and as such are consistent 
with EU policy.  

5.  POLICY OPTIONS AND ANALYSIS OF IMPACT 

5.1. Methodology 

This chapter describes and assesses the policy options identified to address the following 
areas:  

  Differing national marketing requirements 
  Lack of transparency regarding national requirements (concerning national marketing 

requirements and regulatory fees)  

  Complexity of regulatory fees 
  Administrative requirements (local facilities) 
  Notification requirements 

These  areas correspond to  the problem drivers identified  in section 2, with  the exception  of 
the area on the lack transparency. This area has been created to provide more clarity and ease 
the  comparison  of  options  and  groups  together  the  lack  of  transparency  regarding  national 
marketing requirements and the lack of transparency regarding regulatory fees. 

The problem drivers that have been identified are separately related to different requirements 
imposed  by  the  UCITS  and  AIFM  Directives  and  can  therefore  be  addressed  independently 
from  each  other.  There  is  also  no  interdependence  between  the  various  options  presented 
below, as each can have an effect on its own. For this reason, policy options are presented in 
each area in a detailed manner in order to provide a clear picture of which solutions have been 
considered and why certain solutions have been discarded. Nonetheless, the presented policy 
options correspond with three possible approaches to address the problems identified in this 
Impact Assessment: (1) transparency on national level, (2) transparency on EU level, and (3) 
harmonisation of national rules. 

In each area, options are described, their impact on stakeholders analysed, and compared for 
their  effectiveness  and  efficiency  with  the  'do  nothing'  option72  in  meeting  the  specific 
objectives. The coherence with existing measures is analysed, and an explanation on whether 
the options conforms to the principles of subsidiarity and proportionality is provided. Finally, 
preferred  options  are  identified.  The  preferred  options  specifically  respond  to  the  problem 
drivers.  It  is  important  to  note  that  there  is  no  one  size  fits  all  approach:  for  some  problem 
drivers the solution might be to increase transparency at national level, for others to increase 
transparency at European level, and finally for others more harmonisation might be identified 
as the best way forward. 

The set of preferred policy options is presented in chapter 6.  

72 The following schema is used: 0 (baseline scenario, no policy change), ++ (strongly positive contribution), + 
(positive  contribution),  --  (strongly  negative  contribution),  -  (negative  contribution),  ≈  (marginal/neutral 
contribution), ? (uncertain contribution), n.a. (not applicable) and 0 (neutral contribution). 

34 

 
                                                 
5.2. Options addressing differences regarding national marketing requirements 

5.2.1.  Description and assessment of the options  

The following options were considered:   

Policy option 
1. No policy action 

2. Define pre-marketing   
3. Define reverse solicitation 
4.  Harmonise  requirements  and  supervision 
process for marketing materials 

Description  
Baseline  scenario  applies.  In  specific,  leave  MS  flexibility  to 
interpret  the  definition  of  marketing  and  maintain  detailed 
differing  requirements  regarding  the  marketing  materials  and 
their approval process. 
Introduce the concept of pre-marketing for AIFs. 
Introduce a definition of reverse solicitation for AIFs. 
Complement  high-level  principles  and  ask  ESMA  to  develop 
common  detailed  marketing 
the 
supervision process of marketing material. 

requirements.  Frame 

Options 2, 3 and 4 can exist on their own, but can also be combined. 

Option 1: No policy action  

Under  this  option,  the  baseline  scenario,  the  definition  of  marketing  in  the  AIFMD  would 
remain  and  not  be  complemented  by  a  negative  definition  (i.e.  of  what  does  not  constitute 
marketing). 

Option  1  means  that  uncertainty  would  remain  for  asset  managers  and  practices  among 
Member States would still diverge. In addition, no improvement would be achieved in terms 
of harmonisation of the requirements for marketing materials and their checking/examination 
by competent authorities. 

Option 2: Define pre-marketing under the AIFMD  

Option  2  would  define  the  concept  of  pre-marketing  for  AIFs,  relating  to  professional 
investors. Such a negative definition of what does not constitute marketing would complement 
the positive definition of marketing already provided in the AIFMD. 

This  option  would  provide  for  legal  certainty  under  which  circumstances  contacts  with 
potential  investors  are not  treated as  marketing.  It  would harmonise  the  practises  across  the 
EU  on  pre-marketing  of  AIFs,  including  EuVECA  and  EuSEF,  which  would  reduce 
complexity. Pre-marketing is already used by asset managers in some Member States in order 
to  test  the  appetite  of  the  market  (i.e.  potential  investors)  regarding  a  specific  strategy.  A 
harmonised  definition  would  allow  asset  managers  to  develop  products  where  a  demand 
exists,  and  save  costs  for  complying  with  regulatory  requirements  as  long  as  the  decision 
whether to market a product has not yet been taken.  

The concept should be limited to professional investors in order not to endanger retail investor 
protection. It should be made clear that pre-marketing can only be followed by marketing (or 
no offering of the product), i.e. any future subscription on the basis of final documents by the 
potential investor contacted in the framework of a pre-marketing activity will be considered as 
marketing.  

As compared to  Option 1, Option  2 would remove burdensome  requirements as  long  as  the 
decision  whether  to  market  a  product  has  not  yet  been  taken.  Option  2  would  benefit  asset 
managers  as  it  increases  transparency  as  to  situations  covered  by  pre-marketing  and  lowers 
burden  for  asset  managers  in  the  pre-marketing  phase.  This  option  would  not  undermine 
investor protection, especially for retail investors, as the pre-marketing is limited to AIFs and 
to  professional  investors.  In  addition,  pre-marketing  could  be  beneficial  for  the  investors  as 

35 

 
they  would  benefit  from  better  targeted  products  that  might  be  more  appropriate  to  their 
needs.  

Option 3: Define reverse solicitation under the AIFMD 

Option  3  would  introduce  the  concept  of  reverse  solicitation  in  the  AIFMD.  Reverse 
solicitation  covers  situations  where  passive  marketing  takes  place,  in  other  words  where  a 
professional investor contacts the manager regarding a specific product on his own initiative. 
Recital 70 of AIFMD recognizes that professional investors may invest in AIFs on their own 
initiative, but given no further guidance. Accordingly, the current frameworks do not prohibit 
investors to buy or to invest in a product on their own initiative73. 

In  the  absence  of  a  harmonised  definition,  the  practice  differs  from  one  Member  State  to 
another74.A  harmonised  definition  of  reverse  solicitation  would  clarify  this  concept  and 
specify that reverse solicitation falls outside the scope of marketing. 

Contrary to Option 1, Option 3 would potentially allow professional investors access to funds 
which are currently not being marketed to them, if they are in a Member State which does not 
currently recognise the practice. However, there is also risk of a loss of investor protection as 
funds  sold  in  this  way would  be  considered  outside  of  AIFMD,  with  the  non-application  of 
EU marketing rules. This could constitute a way to circumvent the AIFM Directives and this 
might put at risk the efficiency of EU legislation.  

Option  4:  Further  harmonise  requirements  and  supervisory  practices  for  marketing 
materials  

Under this option the process of checking UCITS marketing material and the requirements on 
marketing  materials  would  be  further  harmonised.  As  to  the  requirements  on  marketing 
material,  the  principle  of  a  clear,  fair  and  non-misleading  presentation  would  be  further 
strengthened. 

According  to  Recital  64  to  the  UCITS  Directive,  control  of  compliance  of  marketing 
arrangements with applicable rules of host Member State can be performed after the UCITS 
has  accessed  the  market  of  that  Member  State.  The  Recital  explains  the  host  Member  State 
can  verify  whether  the  marketing  communications  are  fair,  clear  and  not  misleading  before 
the  UCITS  use  them,  provided  such  control  is  non-discriminatory  and  not  preventing  that 
UCITS  from  accessing  the  market:  the  verification  of  marketing  communications  may  not 
constitute  a  precondition  for  the  offer  of  UCITS.  Competent  authorities  which  verify 
marketing communications, prior to them being used, undertake this activity as part of their 
investor protection, and in particular retail investor protection, mission. Investors' associations 
are  also  in  favour  of  such  checks.75  Against  this  background,  option  4  foresee  that  any 
Member State can require automatic notifications of marketing communications by domestic 
UCITS as well as UCITS from other Member States intending to be marketed in their territory 
to the competent authority. Competent authorities that choose to use such option would need 
to  ensure,  in  their  policies  or  internal  rules  and  procedures,  a  transparent  and  non-
discriminatory  treatment  of  all  UCITS  regardless  of  their  origin,  i.e.  in  particular  not 
preventing non-domestic UCITS from accessing the market. This option would also introduce 
a reasonable timeframe for assessing notified marketing communications. This option would 

73 Safeguards have been introduced in the MiFID regarding the reception and transmission of orders of UCITS 
and AIF. Cf. article 25 of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014.   
74 Whereas many Member States provide no formal guidance, some do (e.g. UK, FR, FI). 
75 As a point of clarification, such verifications do not concern AIFs addressed to professional investors 

36 

 
                                                 
apply to UCITS, but also to AIFs marketed to retail investors (if a Member State allows this) 
in order to ensure equal protection of all retail investors. 

the principle, laid down in Article 77 of the UCITS Directive, would be complemented by an 
additional requirement: a balanced presentation of the rewards and risks of the fund. Further 
details  regarding  the  requirements  on  the  marketing  communications  should  be  developed 
through  ESMA  guidelines,  which  should  also  take  into  account  the  specificities  of  digital 
marketing communications in the context of online distribution. Although these principles are 
primarily addressed to UCITS, they shall also apply to AIFs76. 

As compared to  Option 1, Option  4 would improve transparency and reduce complexity, as 
requirements regarding the process of checking marketing material and requirements on these 
materials  would  be  more  harmonised.  This  option  would  ensure  investor  protection,  as  the 
general principles regarding the content of marketing material will be strengthened in order to 
ensure the quality of the marketing materials.   

Feedback from stakeholders 

Many  stakeholders  (in  particular  asset  managers)  asked  for  recognition  of  pre-marketing  and  a 
harmonised  approach  to  pre-marketing,  while  in  comparison  only  some  stakeholders  asked  for  the 
introduction of the concept of reverse solicitation. The Member State expert group on free movement 
of capital has explored possible definitions for pre-marketing and reverse solicitation. 

The  requests  regarding  pre-marketing  were  mainly  made  in  the  context  of  AIFMD  but  some 
respondents also requested it for UCITS. Arguments presented by asset managers were that they need 
to be able to determine investor appetite prior to refining and marketing their products  – and cannot 
justify  registering  in  all  jurisdictions  with  the  associated  regulatory  and  administrative  costs  without 
knowing  if  there  is  demand  from  investors.  Pre-marketing  is  common  practice  in  certain  asset 
management segments that target professional investors or high net worth individuals, such as private 
equity or venture capital. Unlike UCITS, which are offered on a continuous basis to retail investors, 
many  AIFs  which  are  closed-ended  or  which  only  offer  periodic  opportunities  to  invest  may  need 
significant prelaunch commitments from professional investors. It was argued  by many stakeholders 
that Member States which do not permit pre-marketing are denying their investors the opportunity to 
participate (and benefit from) initial capital rounds on advantageous terms, meaning they could only 
participate in later rounds or the secondary market. 

Respondents (industry representatives) to the consultation reported that several Member States have an 
ex-ante pre-approval or checking process of marketing materials and  the uncertainty about how long 
this  process  takes  is  often  a  problem.  Investors  associations  highlight  the  importance  of  marketing 
material  in  investment  decision  and  firmly  request  ex-ante  checking  of  marketing  materials  by 
Competent Authorities. NCAs who perform an ex-ante checking argue that the practice is beneficial 
for both investors and asset managers. They consider that ex-ante checks are in line with their mission 
to  ensure  investor  protection  and  highlight  the  benefit  for  asset  managers  to  receive  specific 
information on the rules and practices in the target market, which allows them to be more confident on 
the use of their marketing materials.  

5.2.2.  Comparison of options 

Options 2, 3 and 4 are complementary options. Options 2 to 4 are envisaging new elements, 
which  would  be  added  to  existing  legislation  without  replacing  any  existing  provisions  and 
they  are  against  this  background  coherent  with  existing  legal  frameworks  for  investment 

76 These principles would be added in AIFMD. 

37 

 
                                                 
funds:  the  UCITS  and  AIFM  Directives  as  well  as  the  ELTIF,  EuVECA  and  EuSEF 
Regulations77. 

Option  2  would  provide  less  flexibility  for  Member  States  to  interpret  the  definition  of 
marketing. The introduction of a definition of pre-marketing would benefit both professional 
investors  and  asset  managers,  allowing  the  latter  to  explore  investors'  appetite  prior  to 
establishing  and  marketing  a  fund,  whereas  Option  3  could  have  a  negative  impact  on 
investor  protection  and  lead  to  circumvention  of  EU  rules,  as  it  concerns  existing  funds. 
Option  4  would  introduce  more  convergence  among  the  Member  States  regarding 
requirements  and  supervisory  practices  for  marketing  materials.  Investors'  associations 
underline  that  marketing  material  needs  to  be  supervised  in  order  to  guarantee  that  it  is 
complete, correct, objective and balanced. The strengthening of the principles applicable for 
marketing material and the development of a level 2 measure/ guidelines by ESMA is in this 
context  –  in  addition  to  option  2  –    the  most  reasonable  option  as  it  will  improve  the 
protection of investors all over the EU. 

Preferred  options  are  Options  2  and  4.  They  constitute  necessary  elements  to  achieve  the 
policy  objectives  satisfactorily  and,  as  such,  are  proportionate  measures.  Options  2  and  4 
together  will  have  a  beneficial  impact  on  compliance  costs,  as  less  legal  advice  will  be 
required  thanks  to  some  harmonisation  and  transparency.  As  outlined  in  detail  in  annex  10, 
legal  counsel  costs  range  on  average  from  €  1,146  to  6,983  (ongoing  costs  per  annum)  per 
fund and host jurisdiction. They could decrease by 25 to 50% if all preferred policy options 
are pursued, while it seems unrealistic that they decrease more, as  legal advice will still be 
required  for  other  aspects,  e.g.  national  taxation  rules,  national  distribution  structures78. 
Enforcement costs for competent authorities will be low. 

Option 

Option 1 
Option 2 
Option 3 
Option 4 

Effectiveness 
S 1 

+ 
+ 
+ 
≈ 

S 2 

0 
++ 
++ 
++ 

S3 

0 
0 
- 
+ 

Efficiency 

Cost-effectiveness 
0 
+ 
- 
+ 

5.3. Options addressing lack of transparency over national requirements 

5.3.1.  Description and assessment of the options  

The following options were considered: 

77  General  principles  have  been  introduced  in  the  EuVECA/EuSEF  Regulations  on  the  regulatory  fees  and  a 
central  notification  database  has  also  been  introduced.  In  ELTIF,  it  is  already  foreseen  that  administrative 
requirements can be performed on-line or by phone. 
78 The initiative does not cover out of scope drivers, most importantly taxation. The public consultation showed 
that stakeholders consider that about 40% of the barriers are linked to out of scope drivers. With respect to each 
addressed barrier, the improvement will be significant, but not materialize in a 100% reduction, e.g. the barrier 
national marketing requirements sometimes lack transparency is addressed by creating transparency, while asset 
managers  will  still  need  to  need  legal  advice  to  analyse  the  provided  information.  Moreover,  the  implications 
will differ from Member State to Member State, e.g. addressing the barrier national marketing requirements lack 
transparency  will  have  little  effect  in  France  where  information  is  already  available  while  the  impact  in  other 
Member States will be high, because these Member States do not (sufficiently) provide relevant information. As 
a consequence, an estimate with a positive impact of 25-50% cost reduction has been calculated.  

38 

 
 
 
 
                                                 
 
Policy option 
1. No policy action 
2.  Publish  and  translate  requirements  on 
national websites  

3. ESMA website as single information portal 
on marketing requirements 
4.  ESMA  interactive  database  on  regulatory 
fees 

Description  
Baseline scenario applies.  
Require  Member  States  and  national  competent  authorities  to 
publish  their  legislation/guidelines  in  one  place  on  national 
websites and to translate it in the language used in the financial 
sector.  Require  national  competent  authorities  to  publish 
regulatory fees on their national websites. 
Introduce a single point on ESMA website containing full up to 
date marketing requirements applicable in each Member State.  
Require  ESMA  to  maintain  a  central  database  with  the 
regulatory framework of each NCA 

Options 2, 3 and 4 can exist on their own, but can also be combined. 

Option 1: No policy action  

In  the  absence  of  any  policy  action,  the  baseline  scenario  applies.  Managers  wishing  to 
distribute  cross-border  would  be  required  to  seek  out  relevant  national  legislation  and 
guidelines concerning marketing requirements on individual websites where possible, and in 
some cases also translate them into their working language.  

Under  option  1  asset  managers  would  still  have  some  difficulties  to  know  in  advance  how 
much it will cost them to market a fund in another MS. They would need the services of local 
law  firms  and/or  consultancy  firms  in  order  to  obtain  all  the  information,  which  can  be 
expensive (based on anecdotal evidence provided in response to the consultations). 

Option 2: Publish and translate requirements on national websites 

This  option  requires  Member  States  and  National  Competent  Authorities  to  place  all  their 
laws,  rules  and  guidance  relating  to  marketing  requirements  for  funds  making  using  of  the 
marketing passport in one place on a website. This includes, where applicable, the  (national) 
definition of marketing as well as the methodology and an indication of the level of regulatory 
fees  charged.  If  specific  requirements  apply  for  online  distribution,  these  shall  also  be 
disclosed.  It  would  also  involve  requiring  them  to  translate  their  requirements  into  a 
language commonly used in financial services. 

This option recognises that managers find it difficult to determine the range of requirements 
for marketing into a Member State and the level of regulatory fees to be paid, and it can be 
costly and take time for them to do so. When this information is published and translated on 
national websites, asset managers can easily obtain the information for each country in which 
they  market  or  intend  to  do  so,  which  would  reduce  the  search  costs  and  complexity  of 
national requirements and improve legal certainty. 

As compared to option 1, option 2 would improve transparency which is likely to reduce the 
time and costs for managers in determining how to market into a Member State, reducing the 
disincentive  to  do  so.  This  is  particularly  relevant  for  small  asset  managers,  given that  they 
cannot spread costs across many funds, or where a manager is considering marketing into an 
additional Member State.  

This  option  would  have  no  impacts  on  investors.  It  would  cause  minor  costs  for  competent 
authorities to consolidate their information and ensure all appropriate rules are captured and, 
if needed, updated. If competent authorities are also required to translate requirements into a 
language  commonly  used  in  financial  services,  this  would  add  further  costs,  which  will 
ultimately be borne by whoever funds the competent authorities, in many cases the financial 
services firms themselves. 

Option 3: ESMA website as single information portal on marketing requirements 

39 

 
This option requires ESMA to introduce a single point on its website on which all of Member 
States’  marketing  requirements  for  cross-border  marketing79  are  put  in  one  place,  and 
translated into a language commonly used in financial services and are made available in the 
form of a summary table providing a concise, accurate and up-to date overview. 

This  overview  could  be  used  by  asset  managers  to  quickly  understand  the  various  national 
requirements,  although  the  asset  manager  would  not  be  able  to  exclusively  rely  on  the 
information included in the overview table (for legal reasons).  

In  comparison  to  option  1,  option  3  would  have  the  advantage  of  ensuring  a  high  level  of 
transparency, i.e. managers have only one place to look to determine marketing requirements, 
reducing costs further – and also allowing Member States’ requirements to be more directly 
comparable.  

This  option  would  introduce  additional  costs  for  NCAs  and  for  ESMA  since  they  need  to 
compile  the  information  and  make  it  accessible.  However,  when  option  3  is  combined  with 
option 2, additional costs for NCAs should be minimal as it would be a matter of copying the 
information provided on their own websites. Moreover, it would be necessary to ensure that 
information on the ESMA site remains reliable and up-to-date, which will require efforts from 
ESMA and competent authorities. 

Option 4: ESMA interactive database on regulatory fees 

Option 4 would require ESMA to create a database with information on the regulatory fees 
charged  by  competent  authorities  in  the  EU,  which  would  be  accessible  through  the  ESMA 
website.  This  database  would  contain  an  interactive  tool  that  would  allow  stakeholders  to 
calculate the amount of regulatory fees for each Member State. Competent Authorities should 
be required to update the information every time the regulatory fees framework is changed. 

Option  4  would  improve  significantly  the  situation  as  compared  to  option  1,  as  the 
information would be transparent and accessible in a common format on ESMA website. The 
costs would be borne by ESMA and NCAs. The latter would have to submit the information 
to ESMA. In turn, ESMA would have to create a database in order to facilitate the comparison 
across  Member  States.  Option  4  has  no  direct  impact  on  the  Commission's  proposal  on  the 
ESA's  review, since specific technical issues,  like this one, are not  addressed in  the review. 
However,  this  option  is  in  line  with  the  enhanced  role  ESMA  is  given  in  the  proposal 
concerning the ESA's review.  

Option  4  would  further  allow  stakeholders  to  use  an  interactive  function  of  the  database  in 
order to  compare  easily the amount  of fees charged in  the various Member States. It would 
facilitate  managers'  decisions  on  where  to  market  their  funds.  Nevertheless,  the  amount  of 
fees  indicated  could  not  be  considered  legally  binding  information  and  a  disclaimer  would 
explain the impact of the fund structure on the amount due. Asset managers would still have 
to take into account the specificities of their funds (single funds, umbrella funds, number of 
compartments/share  classes,  open  to  retail  investors,  etc.)  in  order  to  know  exactly  the  fees 
charged by the competent authorities.  

In comparison to option 1, option 4 would improve transparency and decrease the search cost 
for  asset  managers  in  relation  to  regulatory  fees,  which  is  linked  to  the  complexity  and  the 
divergence of national rules. The interactive database would reduce asset  managers' need to 
use external services to understand the framework for regulatory fees. However, setting up an 
interactive database would incur some development and maintenance costs for ESMA. 

79 This should include the definition of marketing. 

40 

 
                                                 
Feedback from stakeholders 

A number of asset  managers reported  that Member State  marketing requirements are often not clear 
and not translated into English or into another language. Requirements are often difficult to be found 
and have to be translated by the asset managers or their advisors. In consequence, asset managers and 
distributors  face  a  risk  of  having  an  inaccurate  translation  and  incur  extra  costs  for  hiring  external 
counsel. Recurring changes to marketing requirements introduce additional costs. 

Moreover, feedback to the public consultation pointed to the lack of transparency regarding regulatory 
fees charged by competent authorities as an issue. Asset managers indicated having difficulties with 
finding  and  understanding  the  regulatory  fees;  necessitating  them  to  use  the  services  of  a  law  or 
consultancy  firm.  Respondents  indicated  that  if  disclosure  of  the  regulatory  fees  framework  is 
improved, this could significantly reduce the costs for industry. In order to compare regulatory fees, 
consultation respondents were asked to set out costs for two examples: (1) A UCITS fund with 5 sub-
funds marketed on cross-border basis to retail investors; and (2) an AIF with 5 sub funds marketed to 
professional investors on cross border basis. Responses received to this question varied considerably 
for  the  same  scenario;  highlighting  that  it  is  challenging  for  asset  managers  -  and  especially  small 
managers - to determine correctly the level of regulatory fees charged by (host) competent authorities. 

5.3.2.  Comparison of options 

Options 2, 3 and 4 are envisaging new elements, which would be added to existing legislation 
without replacing any existing provisions and they are against this background coherent with 
existing legal frameworks for investment funds: the UCITS and AIFM Directives as well as 
the ELTIF, EuVECA and EuSEF regulations80. 

Option 2 would reduce costs and complexity for managers by making requirements for each 
Member  State  easier  to  find,  encouraging  greater  distribution  of  funds  and  thereby  benefit 
investors. Managers would also not have to incur the expense of translating into a language 
commonly used in financial services. Depending on the requirements, it is still possible that 
external legal advice will be used but to a lesser extent, but in any case legal certainty will be 
improved.  Investor  protection  would  be  maintained  as  rules  would  not  be  changed  –  if 
anything greater transparency over marketing requirements may lead to greater compliance. 

Option 3 can be seen as complementary to option 2, as information on national websites can 
be  used  for  creating  the  single  information  point  on  the  ESMA  website.  This  option  would 
further  reduce  costs  and  complexity  for  asset  managers  by  ensuring  that  all  relevant 
requirements  can  be  found  on  the  same  website.  There  would  be  minor  costs81  involved  in 
developing  a  single  website  to  hold  all  the  marketing  requirements,  and  putting  in  place 
processes  to  ensure  these  remain  up-to-date.  Option  3  has  no  direct  impact  on  the 
Commission's proposal on the ESA's review, since specific technical issues, like this one, are 
not addressed in the review. However, this option is in line with the enhanced role ESMA is 
given in the proposal concerning the ESA's review. 

In line with Option 2, Option 4 would require competent authorities to provide ESMA with 
the information on their calculation methodology and the level of the regulatory fees. Option 
4 would reduce costs for asset managers, as the information would be accessible in a single 
point.  Asset  managers  would  no  longer  have  to  navigate  28  different  websites  of  the 
competent  authorities  in  order  to  have  a  full  picture  of  the  regulatory  fees  that  are  charged. 
This option would also address some of the complexity regarding regulatory fees, without the 

80  General  principles  have  been  introduced  in  the  EuVECA/EuSEF  Regulations  on  the  regulatory  fees  and  a 
central  notification  database  has  also  been  introduced.  In  ELTIF,  it  is  already  foreseen  that  administrative 
requirements can be performed on-line or by phone. 
81 ESMA has indicates in its estimation of enforcement costs that there will be no to minor cost implications. 

41 

 
                                                 
need to change the methodology and framework for regulatory fees  in each Member State. 
Asset Managers would be able to receive tailored information on the amount of fees that are 
charged for marketing their funds, by using in the interactive database.  

Preferred  Options  are  Options  2,  3  and  Option  4  combined  together,  as  they  would 
provide  the  highest  level  of  transparency  and  the  best  access  to  information.  These 
options would allow for a decrease in costs linked to legal advice of potentially 25 to 50%82 if 
all  preferred  policy  options  are  pursued.  Enforcement  costs  for  ESMA  and  competent 
authorities will be low with respect to option 3 and medium to high with respect to option 4, 
in particular due to the setting-up of the fee calculator which ESMA estimates with € 500,000 
for  one-off  costs,  €  100.000  p.a.  and  2  FTE  staff  to  maintain  the  interactive  database. 
However, as ESMA has increasingly gained experience with data management over the last 
years, synergies can be expected and this should lower the costs by approximately 50%, both 
for staff expenditure and external  infrastructure expenditure. Moreover, it is  considered that 
enforcement  costs  are  commensurate  with  the  objectives  to  be  achieved.  Potential  cost 
reductions for industry as well as enforcement costs for ESMA are presented in more detail in 
annex  10.  Options  2,  3  and  4  together  constitute  necessary  elements  to  achieve  the  policy 
objectives satisfactorily and, as such, are proportionate measures. 

Option 

Option 1 

Option 2 
Option 3 
Option 4 

Effectiveness  
S 1 
0 

≈ 
≈ 
≈ 

S2 
0 

+ 
++ 
++ 

S3 
0 

0 
0 
0 

Efficiency 
Cost-effectiveness 
0 

+ 
+ 
- 

5.4. Options regarding differences and complexity of how regulatory fees are set and 

their collection 

5.4.1.  Description and assessment of options 

The following policy options were considered: 

Policy option 
1. No policy action 
2. Define common principles for regulatory 
fees  

3. Cap regulatory fees 

Description  
Baseline scenario applies. 
Establish  high-level  principles  for  the  payment  of  regulatory 
fees. Clarify that fees are linked to performance of supervisory 
tasks. 
Harmonise  the  amount  of  regulatory  fee  due,  as  well  as  the 
calculation methodology. Alternatively, limit regulatory fees. 

Options 2 and 3 are mutually exclusive. 

Option 1: No policy action  

Under option 1 the situation would remain unchanged; managers wishing to distribute cross-
border would still need to seek out relevant national rules on how regulatory fees are set and, 
consequently, how much they need to pay. 

Asset managers would still face difficulties in understanding the complexity of some domestic 
rules  and  processes  regarding  regulatory  fees.  In  some  Member  States  it  would  remain 

82 Legal advice will still be required for other aspects, e.g. national taxation rules, national distribution structures. 

42 

 
 
 
 
 
                                                 
challenging for them to find out the exact amount of regulatory fees to be paid as well as the 
timing and the means of the payment. 

Option 2: Define common principle for regulatory fees  

Option  2  would  introduce  common  principles  for  regulatory  fees  for  all  investment  funds. 
These principles would require that fees should not be charged when no supervisory task is 
performed by competent authorities. Moreover the principles would stipulate that competent 
authorities should send an invoice to asset managers, which should clearly indicate how and 
when the payment should be made. Asset managers should be able to pay the regulatory fees 
directly to competent authorities (see section on administrative arrangements).  

In  comparison  to  option  1,  option  2  would  achieve  more  convergence  amongst  practices  of 
competent  authorities  and  thereby  remove  unnecessary  complexity.  It  would  avoid  the 
situation where the regulatory fees are disproportionate to the supervisory tasks performed by 
the  competent  authorities.  As  a  result,  some  competent  authorities  might  lower  their 
regulatory fees. In addition, asset managers would be able to pay the regulatory fees directly 
to  competent  authorities,  eliminating  the  cost  of  appointing  a  third  party  (see  section  on 
administrative arrangements requirements). Furthermore, this option would ease the payment 
of regulatory fees by asset managers, as they would be able rely on the transparency provided 
through the invoice sent by the competent authority83.  

Option 3: Cap regulatory fees 

Option  3  would  set  a  cap,  i.e.  fix  a  maximum  amount  that  regulatory  fees  should  not  to 
exceed.  

A more ambitious approach that was also considered in this context was to specify the exact 
amount of regulatory fees that should be charged, the basis for their calculation (stand-alone 
fund,  umbrella  fund  or  sub-fund)  as  well  as  the  point  in  time  when  the  payment  is  due. 
However, as this was not considered politically feasible, this approach was discarded. 

In comparison to option 1, option 3 would remove or at least improve complexity regarding 
how regulatory fees are set. However, this option could have a negative impact on competent 
authorities, as regulatory fees are the main, or at least an important source of funding for some 
competent authorities. Limiting their funding possibilities could hamper the supervisory tasks 
performed  by  authorities.  Consequently,  while  this  option  would  seemingly  benefit  asset 
managers, it could ultimately have a negative impact on investor protection.   

Feedback from stakeholders 

Responses from industry to the public consultation differ on whether the level of the regulatory fees 
has  an  impact  on  their  business  decision  to  access  a  market  or  not.  Managers,  including  those 
providing quantitative data, generally point to the costs of determining the level of fees as being more 
problematic than the level of the fees itself. However, it is suggested that for some smaller managers, 
or those in particular niches such as private equity and venture capital, the level of fees charged can 
have more of an impact. For example, one association representing the private equity sector noted that 
more than half of its members avoid some countries because of the fees charged. 

Responses from Competent Authorities generally highlighted that the level of the fees is quite low in 
comparison with other charges, and focus more on the need for transparency. 

83 This option increases transparency and is coherent with the next set of policy options. 

43 

 
 
                                                 
5.4.2.  Comparison of options 

Options 2 and 3 are envisaging new elements, which would be added to existing legislation 
without replacing any existing provisions and, against this background, they are coherent with 
existing legal frameworks for investment funds: the UCITS and AIFM Directives as well as 
the ELTIF, EuVECA and EuSEF regulations84. 

Option  2  would  improve  the  effectiveness  and  efficiency  of  the  EU  framework  without 
requiring  a  single  framework  for  regulatory  fees  across  the  EU.  Contrary  to  Option  3,  this 
option would provide flexibility to Competent Authorities to charge the amount of regulatory 
fees needed in order to perform their supervisory tasks properly. In addition, under option 2, 
asset managers would benefit from improvements of the administrative process. This would 
reduce their time to market and their costs, as they would know how much they will have to 
pay and when the payment is due.  

Option  3  would  not  sufficiently  address  the  regulatory  barrier  and  not  solve  the  significant 
issue regarding the need to appoint a law firm or a consultant by asset managers. Moreover, 
Option 3 might be difficult to introduce as the regulatory fees in several Member States are a 
tax decided by national parliament and, this option might therefore interfere with subsidiarity 
and proportionality. 

Option 

Option 1 

Option 2 
Option 3 

Effectiveness  
S 1 
0 

+ 
≈ 

S2 
0 

++ 
≈ 

S3 
0 

0 
- 

Efficiency 
Cost-effectiveness 
0 

+ 
- 

The preferred Option is Option 2, as it would ensure more convergence across EU legislation, 
while not endangering supervision of funds. It constitutes a necessary element to achieve the 
policy  objectives  satisfactorily  and,  as  such,  is  a  proportionate  measure.  Option  2  would 
contribute to the lowering of the need for legal advice. The decrease in legal counsel costs is 
estimated at 25 to 50% if all preferred policy options are pursued, while it seems unrealistic 
that they decrease more, as  legal advice will still be required for other aspects, e.g. national 
taxation rules, national distribution structures (for further details please see annex 10).  

5.5. Options  regarding  administrative  requirements  (local  facilities)  under  the 

UCITS Directive 

5.5.1.  Description of the policy options 

The following policy options were considered:  

Policy option 
1. No policy action 

2.  Allow  fund  managers  under  certain  conditions 
to provide the facilities physically, by telephone or 
electronically in an investor's local language  

Description  
Keep  flexibility  for  Member  States  to  decide  on  the  detailed 
requirements and thus maintain national requirements regarding 
local facilities. 
Provide flexibility  to asset  managers by revising art. 92 of the 
UCITS  Directive  to  allow  managers  to  either  appoint  a  local 
facility or to make use of IT services, under the condition that 
these services are provided in the investor's language. 
In parallel, ensure efficient supervision of the asset manager by 

84  General  principles  have  been  introduced  in  the  EuVECA/EuSEF  Regulations  on  the  regulatory  fees  and  a 
central  notification  database  has  also  been  introduced.  In  ELTIF,  it  is  already  foreseen  that  administrative 
requirements can be performed on-line or by phone. 

44 

 
 
 
 
 
                                                 
improving  cooperation  between  host  and  home  Member  State 
Competent Authorities through reinforced cooperation between 
host and home Member State Competent Authorities. 

Options 2 and 3 can exist on their own, but can also be combined. 

Option 1: No policy action 

Under  option  1  Member  States  could  still  require  the  appointment  of  local  facilities.  This 
would potentially mean that seventeen Member States continue to apply this requirement. The 
exact roles of these local facilities would also continue to differ between Member States.  

Costs  for  complying  with  the  administrative  requirements  would  remain  significant, 
depending on the markets asset managers wish to distribute their funds to.  

Option 2: Choice of how facilities are provided 

Option 2 would provide the choice to the asset manager to either appoint a local facility or to 
make use of distance communication. This choice implies that Member States can no longer 
require  asset  managers  to  appoint  a  local  facility.  This  would  cover  different  existing 
functions of the local facilities: paying/facilities agent, information agent/ complaint handler, 
legal representative and local distributor. 

If asset managers choose to make use of distance communication and terminate their contract 
with a local facility, investors and (host) competent authorities lose a local point of contact. 
Therefore the choice to make use of distance communication is bundled with two safeguards. 
The first safeguard is addressed to investors and replaces the information agent function of the 
local facility: information should be accessible on the asset manager's website, and includes a 
description  of  ways  how  to  get  in  touch  with  the  asset  manager  and  how  to  submit  a 
complaint. Furthermore, the information would have to be provided in the investor's language. 
The  second  safeguard  ensures  the  capacity  of  competent  authorities  to  efficiently  supervise 
the asset manager and, if applicable, also replaces the legal representative function previously 
fulfilled  by  the  local  facility.  Should  the  host  competent  authority,  in  absence  of  a  local 
facility of the fund, encounter any difficulties to obtain information from the asset manager or 
to receive the payment of regulatory fees, the home competent authority should assist the host 
authority in obtaining the information or payment of regulatory fees. 

In  comparison  to  option  1,  option  2  would  greatly  reduce  unnecessary  complexity  and 
burdensome  requirements  (and  associated  costs)  for  asset  managers  as  they  would  be  no 
longer required to  appoint  an external service  provider to  provide local facilities in the host 
Member  State.  Furthermore,  asset  managers  would  have  less  need  to  obtain  legal  advice  to 
understand  national  requirements  in  this  area.  Removing  the  requirement  to  appoint  a  local 
facility would allow asset managers to centralise the provision of information to investors and 
handle investor request and complaints on their own. Moreover this option would guarantee 
investor  protection  by  requiring  the  asset  manager  to  provide  information  in  the  investor's 
language  and  allow  investors  to  file  a  complaint  in  their  language.  This  option  would  also 
ensure that host competent authorities can continue to efficiently fulfil their mission to protect 
local  investors,  because  they  would  receive  the  requested  information  directly  from  asset 
managers and would be able to collect fees allowing them to perform their supervisory tasks.   

Feedback from stakeholders 

Responses to the consultations provided by asset managers suggest that the costs to comply with the 
requirement  to  have  local  facilities  present  in  each  Member  State  are  significant,  while  in  practice 

45 

 
facilities nowadays mostly play a passive role and are rarely used by the investors. These respondents 
request that the requirement to appoint a local facility is abolished.  

Several competent authorities highlighted that local facilities serve as a local contact point and ease the 
exchange with asset managers and the collection of fees. 

National and European retail investor associations indicated in their responses to the open consultation 
that  local  facilities  have  no  added  value  for  investors.  However,  they  also  emphasised  that  the 
availability of information in the investor's national language is a key requirement.  

Targeted  (follow-up)  consultation  of  a  European  investor  association  confirmed  that  allowing  asset 
managers  to  provide  the  facilities  through  other  means  than  a  local  facility  –  while  retaining  the 
obligation  to  provide  information  in  the  investor's  local  language  –  would  not  lower  investor 
protection. 

5.5.2.  Comparison of options 

Option 2 envisages new elements, which would replace existing provisions. It is coherent with 
the  recently  adopted  delegated  act  for  the  ELTIF  Regulation,  as  this  provides  ELTIF 
managers with the possibility to provide facilities through distance communication.  

Apart from option 2, no other viable option was identified. Therefore option 2 is retained as 
the  preferred  option.  More  farreaching  options  were  initially  considered,  but  discarded  as 
they were not considerd realistic or proportionate. One of these options was setting a cap on 
the fees that entities fulfilling the role of local facilities can charge asset managers. However, 
this  option  –  which  would  constitute  price  regulation  –  would  intervene  in  private  contract 
law and was therefore not considered proportionate and feasible.  

As  to  the  direct  costs  linked  to  the  appointment  of  a  local  facility,  costs  savings  thanks  to 
option 2 should be around 90% of on average €4,437 annually per fund per host jurisdiction 
(see also annex 10). Around 10%85 of these costs are expected to be reallocated to improve to 
the asset manager's website and customer services, which will become solely responsible for 
contacts  with  investors.  Enforcement  costs  for  competent  authorities  (i.e.  costs  linked  to 
reinforcing debt collection activities) are considered as medium; based on input received by 
Competent Authorities the estimated impact is € 400 per fund and host jurisdiction86. 

Option 2 is the preferred option as it provides more benefits compared to option 1.  

Option 

Option 1 
Option 2 

Effectiveness 
S 1 
0 
+++ 

S2 
0 
≈ 

S3 
0 
+ 

Efficiency 
Cost-effectiveness 
0 
+ 

5.6. Options regarding notification requirements 

5.6.1.  Description and assessment of the policy options 

The following policy options were considered:  

Policy option 
1. No policy action 
2. Publish de-notification rules on national 

Description  
Baseline scenario applies. 
Require  competent  authorities  to  publish  the  rules  relating  to 

85 Commission estimation 
86 Input from some Competent Authorities concerns salaries of persons involved in the debt collection activities 
and number of hours required to reinforce debt collection per fund. 

46 

 
 
                                                 
 
websites   

3. Harmonised framework for (de-) 
notifications under UCITS and AIFMD 

4.  Centralised  platform 
operated by ESMA 

for  notifications 

de-notification  of  UCITS  and  AIFs  on  their  websites  and 
transmit them to ESMA. 
Change  the  host-home  responsibilities  for  notifying  changes 
under  UCITS..  Harmonise  the  rules  relating  to  de-notification 
of UCITS and AIFs across the EU  
Introduce  a  single  platform  operated  by  ESMA,  where  asset 
managers  can  directly  submit  notifications  for  use  of  the 
marketing  passports,  changes  to  the  notification  and  de-
notification.   

Options  2  and  3  are  mutually  exclusive,  while  both  can  be  combined  with  options  4  and  5. 
Likewise, options 4 and 5 are mutually exclusive, while they can be combined with options 2 
and 3.  

Option 1: No policy action  

In  the  absence  of  any  policy  action,  the  baseline  scenario  applies.  Asset  managers  would 
continue to be subject to diverging requirements regarding updates of notifications, both on 
national  level  and  on  EU-level,  depending  whether  the  concerned  fund  is  an  AIF  or  an 
UCITS. In addition, diverging national practises regarding de-notification would continue to 
exist. 

Asset managers would continue to face burdensome procedures, unnecessary complexity and 
legal uncertainty under the notification frameworks for the marketing passports contained in 
the  UCITS  Directive  and  AIFMD.  Asset  managers  would  also  be  subject  to  unclear  rules 
regarding  de-notification  or  even  be  deprived  from  the  possibility  to  exit  a  specific  market, 
when they wish to terminate their marketing activity in a certain Member State.  

Option 2: Publish de-notification rules on national websites and on ESMA's website 

Under option 2 competent authorities would need to disclose the national rules regarding de-
notification on their websites and transmit them to ESMA for publication on ESMA's website. 
The national rules can be comprised of conditions for de-notification (e.g. a minimum number 
of local investors), the process to be applied and the fees to be paid. If no specific procedure 
on de-notification exists, the authority would need to disclose this and outline how a fund de-
notification is handled (e.g. as a material change). 

In  comparison  to  option  1,  option  2  would  improve  transparency.  It  would  improve  in 
particlar the situation in those Member States where there is currently little information on the 
de-notification process, but it would not ensure that de-notification procedures exist in every 
Member State or that these procedures are aligned, and consequently it might remain difficult 
in  some  Member  States  to  de-notify  funds.  This  option  would  have  no  impact  on  investor 
protection on EU level, as national rules would continue to apply.  

Option 3: Harmonised framework for (de-)notifications under UCITS and AIFMD 

This option would consist of three main elements: 

First,  a  shift  of  the  home-host  responsibilities  for  competent  authorities  with  regard  to 
changes to the initial notification under Article 93(8) of the UCITS Directive. Like under the 
AIFMD notification framework, asset managers would give written notice of changes to the 
information contained in the initial notification letter to the competent authority of the home 
Member State, instead of the host Member State. In addition, a timeframe that would apply to 
national  competent  authorities  to  approve  or  object  to  the  changes  notified  by  the  asset 
manager would be introduced in both Directives. 

47 

 
Second,  competent  authorities  of  the  home  Member  State  would  be  required  to  transmit 
notifications  of  new  funds  and  updates  of  existing  funds  regarding  the  use  of  the  EU 
marketing  passports  for  UCITS  and  AIFs  as  well  as  de-notifications  not  only  to  competent 
authorities of the host Member State, but also to ESMA. Using this data, ESMA would create 
a publicly available database for cross-border marketing activity under the UCITS and AIFM 
Directives87. 

Third,  this  option  would  foresee  full  harmonisation  of  the  rules  for  de-notification  for  all 
investment funds, in other words rules for the discontinuation of marketing of units or shares 
of EU AIFs in a or several host Member States. This harmonisation would cover the detailed 
conditions for de-notification, and the process to be applied, in particular the information and 
documents to be submitted to the home competent authority, to the public and the investors. 
Harmonised  rules  for  de-notification  would  complement  existing  rules  for  the  initial 
notification and consequent updates.  

In comparison to option 1, option 3 would remove unnecessary complexity and thus reduce 
costs  and  time  for  asset  managers,  as  they  would  benefit  from  harmonised  rules  and 
procedures for notifying changes to the initial notification relating to the use of the marketing 
passports.  In  particular  managers  of  UCITS  funds  would  benefit  from  a  reduced 
administrative  burden  as  they  would  no  longer  have  to  transmit  the  information  to  all  the 
competent authorities of the host Member States where the UCITS is marketed. This option 
would  increase  the  workload  for  home  authorities  as  they  will  have  to  transmit  the  notified 
changes to all relevant host authorities. Furthermore, although host authorities might prefer to 
be  directly  in  contact  with  the  asset  manager,  they  would  receive  information  via  the  home 
authority.  

Moreover, in  comparison  to  option 1, this option would greatly enhance transparency  about 
the  use  of  the  marketing  passports  in  the  EU  and  could  assist  competent  authorities  (in 
particular host authorities) in their supervision of these activities. 

Finally,  this  option  would  also  eliminate  complexity  of  diverging  national  rules  and  create 
legal  certainty  how  to  de-notify  a  fund  in  a  host  Member  State.  In  comparison  to  option  1, 
option 3 would improve the situation for investors and asset managers. De-notification would 
be possible under certain conditions and according to a specific procedure, both defined at EU 
level, which would remove unnecessary complexity . Under this option, asset managers would 
have  more  incentives  to  market  in  a  Member  State  as  there  would  be  more  clarity  on  the 
possibility  to  exit  a  market.  This  would  potentially  also  benefit  investors  through  a  larger 
offer.  Moreover,  investor  protection  would  be  maintained  or  even  improved  since  the  same 
safeguards  would  apply  across  the  EU.  One  of  these  safeguards  is  that  investors  are  not 
obliged to redeem their units as some of them might benefit from tax advantages for holding 
certain funds. In case of early redemption they might lose their tax advantage. In case of de-
notification,  asset  managers  should  not  bear  any  costs  other  than  the  cost  to  provide 
information to the remaining investors. 

Option 4: Centralised platform for notifications operated by ESMA 

This option would introduce a single platform operated by ESMA for all notifications relating 
to  the  use  of  the  marketing  passports  under  the  UCITS  and  AIFM  Directives.  The  platform 
would  create  a  single  EU  notification  for  cross-border  distribution,  as  the  asset  manager 
would  submit  its  notification  directly  to  ESMA,  which  would  in  turn  either  transmit  this 
information  to  the  relevant  competent  authorities  or  make  this  information  available  on 

87 This database would complement existing public registers/lists compiled by ESMA. 

48 

 
                                                 
demand.  Besides  the  initial  notifications,  the  platform  would  also  process  changes  to  the 
information contained in the initial notification and even de-notification of funds, if the policy 
option to harmonise these rules is retained (see section 5.6.2). 

In comparison to option 1, option 4 would remove complexity, as asset managers would have 
a single portal to submit their notifications, subsequent updates and de-notifications relating to 
the  use  of  the  marketing  passports  under  the  UCITS  and  AIFM  Directives.  However,  this 
option  would  also  require  significant  resources  from  ESMA.  Furthermore,  the  ability  of 
competent authorities to effectiently supervise asset managers operating under the marketing 
passports  is  affected,  as  they  will  have  to  rely  on  ESMA  to  transmit  or  make  available  the 
revelant information, which might lead to delays in the notifications. Option 4 has no direct 
impact on the Commission's proposal on the ESA's review since specific technical issues, like 
this one, are not  addressed in  the review. However, this option  is  in  line with  the enhanced 
role ESMA is given in the proposal concerning the ESA's review. 

Feedback from stakeholders  

National competent authorities have expressed diverging opinions on whether it would be beneficial to 
notify changes to the initial notification to the home authority instead of the host authority under the 
UCITS Directive, as proposed under option 2. Several competent authorities considered this approach 
– which is already in place under the AIFMD – to be the most efficient arrangement and some noted 
that this better ensures the quality of the information received. Other competent authorities preferred 
receiving changes to the notifications directly from the asset managers in their role as host authority, 
as  they  are  able  to  provide  the  latest  up-to-date  information  and  documentation  available.  One 
competent authority also considered that making the home authority the single point of contact would 
not provide any advantage, as in most cases when the host competent authority has further questions, 
those questions are triggered by requirements pursuant to the national law of the host Member State 
and not by the home Member State.     

Several  asset  managers  and  trade  bodies  that  responded  to  the  open  consultation  on  cross-border 
distribution  of  investment  funds,  expressed  support  for  a  centralised  platform  for  notifications,  as 
included under option 4.  

Respondents to the public consultation noted that in many Member States no clear procedure exists for 
de-notifying a fund. Additionally, several respondents note that some Member States only permit de-
notification of a fund once the number of investors drops below a minimum specified amount or after 
certain  publication  requirements  are  fulfilled.    According  to  these  respondents,  difficulties  with  de-
notification considerably influence the decision of a fund manager to access a market in the first place. 
To be precise, a lack of an exit strategy has a negative impact in this decision process.   

5.6.2.  Comparison of options 

Option 2 would envisage new elements, which would be added to existing legislation without 
replacing  or  amending  existing  provisions  and,  against  this  background,  is  coherent  with 
existing legal frameworks for investment funds. Option 3 would amend the current rules for 
UCITS, but is coherent with the approach under AIFMD since the home authority is already 
the  first  point  of  contact  for  AIFMs  with  regards  to  changes  to  the  notification.  Option  3 
would further introduce new elements on de-notification, which would be  added  to  existing 
legislation.  Option  4  envisages  a  new  approach  to  the  current  notification  procedures  and 
would replace existing rules. This option – which would significantly simplify the notification 
process  and  hence  make  it  easier  to  use  the  marketing  passport  –  is  coherent  with  the 
objectives of the existing legal frameworks for investment funds.  

Option  2  would  provide  for  clear  and  transparent  rules  on  de-notification.  This  would 
beneficial  for  asset  managers,  as  they  would  obtain  legal  certainty  and  would  be  able  to 

49 

 
establish an exit strategy for each market. It can be assumed that this would motivate them to 
access more EU markets. However, as compared to option 3, this option is less effective, as it 
would neither allow asset managers to develop a single de-notification approach nor remove 
unnecessary burden caused by diverging national rules. 

Option  3  would  signficantly  reduce  compliance  costs,  remove  unnecessary  complexity  and 
legal  uncertainty  with  regard  to  the  notification  process  and  ensure  investor  protection,  in 
particular in case of de-notification88. Option 4 would be even more effective in reaching the 
objective,  as  there  would  be  only  one  procedure  and  a  single  point  of  contact  for  the  asset 
manager  for  all  notifications,  changes  and  de-notifications  in  the  EU.  However,  although 
Option  4  would  be  the  most  effective  option  to  reduce  complexity  by  harmonising  and 
simplifying  the  notification  framework,  it  is  likely  not  the  most  efficient  option  as  long  as 
national competent authorities retain supervisory responsibility for the notifications regarding 
use  of  the  marketing  passport.  As  competent  authorities  would  have  to  rely  on  ESMA  to 
transmit  or  make  available  the  relevant  information  provided  by  the  asset  manager  and 
subsequently  submit  its  response  to  ESMA  -  which  in  turn  would  transmit  this  to  the  asset 
manager,  the  timeframe  for  the  procedure  would  be  much  longer  than  under  Option  3. 
Against  this  background  Option  4  does  not  seem  efficient.  Furthermore,  Option  3  is  also 
more cost-efficient  as compared to Option 4 as ESMA is currently not equipped to operate 
such a platform. 

Option 

Option 1 
Option 2 
Option 3 
Option 4 

Effectiveness 
S 1 
0 
0 
+ 
++ 

S2 
0 
+ 
+ 
+ 

S3 
0 
≈ 
+ 
≈ 

Efficiency 
Cost-effectiveness 
0 
+ 
+ 
- 

Considering the above, the preferred option is Option 3. It constitutes a necessary element to 
achieve the policy objectives satisfactorily and, as such, is a proportionate measure. 
Minor costs linked to the safeguards introduced in case of de-notification89, mainly linked to 
the  obligation  to  publish  a  blanket  offer,  would  have  to  be  borne  by  asset  managers. 
Stakeholders  would  benefit  from  the  database  foreseen  under  this  option,  as  it  would  allow 
them to  evaluate the evolution of the single market for investment funds. There would be a 
financial impact on ESMA and competent authorities to put in place the information exchange 
and database. As outlined in annex 10, ESMA estimates costs at min. €250,000 one-off costs, 
€50,000  ongoing  costs  and  3  FTE.  However,  as  ESMA  has  increasingly  gained  experience 
with data management over the last years, synergies can be expected and this should lower the 
costs  by  approximately  50%,  both  for  staff  expenditure  and  external  infrastructure 
expenditure  .  Moreover,  it  is  considered  that  enforcement  costs  are  commensurate  with  the 
objectives to be achieved. 

6.  OVERALL IMPACT OF THE PROPOSED OPTIONS 

The intervention logic is as follows.  

88  Investors  would  receive  an  offer  of  repurchase.  The  continuation  of  the  flow  of  information  for  investors 
choosing to remain in the fund would be guaranteed.  
89 These costs are linked to providing the blanket offer to investors, either individually or by a publication. Costs 

for publications are minor, e.g. in the range €25. 

50 

 
 
 
                                                 
  The overall aim is to increase the cross border distribution of funds by reducing regulatory 
barriers that introduce unnecessary complexity and legal uncertainty for asset managers.  

  Evidence  that  these  problems  are  present  and  binding  was  provided  by  the  stakeholder 
consultations  and  performed  analysis.90  In  addition,  stakeholders  also  provided 
corroborating  evidence  for  the  underlying  problem  drivers  (D1)  as  summarized  in  the 
problem tree.  

  All relevant options were assessed based on their effectiveness to meet the three objectives 
related  to  the  reduction  of  complexity  and  burdensome  requirements  (S1);  improving 
transparency  (S2);  and  safeguarding  investor  protection  (S3);  and  their  efficiency. 
Coherence and proportionality are considered as well. 

  For each of the (in-scope) problem drivers, the preferred option(s) was identified based on 
its  ability  to  meet  the  criteria  above  and  because  of  a  positive  effect  on  cross  border 
distribution of funds can be expected based on the discussion of impacts.91 

  The preferred options are as follows: 

Problem tackled 
National marketing requirements 
and practices differ and are 
sometimes unnecessarily 
burdensome 

Description of preferred option(s) 
Introduce the concept of pre-marketing in the AIFMD. 
Introduce  more  convergence  on  the  requirements  on  marketing  materials 
and  on  the  process  for  checking  or  approving  marketing  materials  by 
competent authorities. 

Lack of transparency over 
national requirements 

Regulatory fees differ, can be 
complex and do not necessarily 
reflect supervisory tasks 
performed 
National requirement to have 
local facilities are costly, but 
have limited added value given 
use of digital technology 
Requirements for updating 
notifications either not 
standardised or applied 
differently across EU and types 
of funds, no harmonised de-
notification process for cross-
border funds  

Require Member States and national competent authorities to publish their 
legislation/guidelines  regarding  marketing  requirements  and  regulatory 
fees  in  one  place  on  national  websites  and  to  translate  it  in  the  language 
commonly used in the financial sector. 
Introduce  a  single  point on  the  ESMA  website  containing full  up  to  date 
marketing  requirements  and  information  on  regulatory  fees  applicable  in 
each Member State.  
Require ESMA to develop an interactive database on regulatory fees.  

Define common principles for regulatory fees. 

Choice of how facilities are provided. 

Harmonise  rules  and  procedures  for  notifying  changes  under  UCITS  and 
AIFMD. 
ESMA database for notifications  
Full harmonisation of the de-notification process. 

90 For instance, This is confirmed by the results of the randomized survey in which 77% of the respondents agree 
that a positive change with regard to regulatory barriers would increase their level of cross-border activity, even 
without any change in the other barriers. 
91  Robust  quantification  is not possible given that the  decision  to go  cross-border  is a  strategic  decision  taken 
based on the marginal cost of going cross-border, structural feature of national markets and expected demand. A 
qualitative  analysis of  the  impact  can  however be  inferred from  the  elements  put forward  in  the discussion of 
each option. 

51 

 
 
 
 
 
                                                 
The  preferred  options  remove  unnecessary  complexity.  They  provide  together  for  a  higher 
level  of  harmonisation  and  an  improved  level  of  transparency  regarding  marketing 
requirements  and  regulatory  fees.  Moreover,  they  reduce  the  (compliance)  burden  for  asset 
managers, while ensuring investor protection.  

The  preferred  options  together  significantly  reduce  regulatory  barriers.  Indeed,  combined 
together they are expected to deliver the strongest positive effect. The preferred options raise 
the potential to have more funds marketed cross-border, improve competition, lower market 
fragmentation and increase investor's choice in the EU. Corroborating evidence is provided in 
the  randomized  survey.  Respondents  indicated  that  increased  action  at  the  EU  level  (either 
increased  transparency  or  harmonization)  would  increase  competition  and  consumer  choice. 
Strongest results on increased competition were reported with respect to regulatory fees and 
notification  (92%),  with  a  minimum  score  of  85%  over  all  barriers.  Strongest  results  for 
increased  consumer  choice  were  reported  for  measures  related  to  the  notification  process 
(92%) and local agents (91%).  The currently lost potential, described in the evaluation annex 
(annex 5), could be better exploited.  

However, it should be acknowledged that there are inherent limitations to the impact of this 
initiative.  Factors  related  to  vertical  distribution  channels,  cultural  preferences  for  domestic 
products  and  national  tax  rules  are  out  of  the  scope  of  this  initiative,  while  they  provide 
significant disincentives to cross-border distribution of investment funds.  

A detailed overview of impact on stakeholders is provided below: 

Description 

Introduce  the  concept  of 
pre-marketing 
the 
AIFMD. 

in 

Types of impacted 
stakeholders 
AIF Managers and 
professional investors 

Investors, UCITS/AIF 
Managers, Competent 
Authorities 

Estimated impact 

their 

certainty 

It can be expected that AIF managers will be able to 
pre-market  with  more 
funds 
domestically  but  also  cross-border,  as  the  definition 
and the practice will no longer diverge among the EU 
Member States. 
A  higher 
investor  protection  and  an 
improvement  of  the  quality  of  marketing  materials 
can  be  expected.  A  time  limit  for  ex-ante  checks 
could  be  established 
the 
efficiency  of  the  process.  In  consequence,  this  can 
reduce 
to  market  for  most  of  asset 
management companies. 

in  order 

level  of 

improve 

time 

the 

to 

Investors, 
UCITS / AIF Managers, 
Competent authorities 

This  option  would  reduce  costs  for  asset  managers. 
The costs for competent authorities should be limited.  

Investors, 
UCITS/AIF Managers, 
Competent authorities 
and ESMA 

This option would reduce costs for asset managers.  

The costs for ESMA should be negligible, as they can 
use information provided on national websites. 

UCITS/ AIF Managers, 
Competent Authorities 
and ESMA 

This option would reduce costs for asset managers.  
ESMA would need the resources in order to develop 
the database. 

52 

on 

the 

process 

Introduce 
more 
convergence 
the 
on 
requirements 
marketing  materials  and 
on 
for 
checking  or  approving 
marketing  materials  by 
Competent Authorities. 
Require  Member  States 
and  national  competent 
authorities to publish their 
legislation/guidelines  on 
marketing 
requirements 
and regulatory fees in one 
place on national websites 
and  to  translate  it  in  the 
language  used 
the 
financial sector. 
Introduce  a  single  point 
the  ESMA  website 
on 
containing  full  up  to  date 
information  on  marketing 
requirements 
applicable 
in each Member State.  
to 
Require 
develop  an 
interactive 
database  for  regulatory 

ESMA 

in 

 
 
 
 
fees. 

Define  common  principle 
for regulatory fees 

UCITS/ AIF Managers 
and NCAs 

Allow  fund  managers  to 
provide 
facilities 
the 
physically,  by  telephone 
or  electronically 
in  an 
investor's local language. 
Require  home  and  host 
competent  authorities  to 
cooperate. 
and 
Harmonise 
procedures  for  notifying 
changes  under  UCITS 
and AIFMD 
ESMA 
notifications  

database 

rules 

for 

UCITS Managers, 
investors and competent 
authorities 

UCITS/AIF Managers 
and Competent 
Authorities 

Competent authorities 
and ESMA 

Full  harmonisation  of  the 
de-notification process 

UCITS/AIF Managers,  
Investors,  
Competent authorities 

Regulatory  convergence  would  increase  across  the 
EU  without 
tasks 
performed by NCAs.  

supervisory 

impacting 

the 

This  option  would  reduce  the  burden  of  requiring  a 
third party to pay the regulatory fees on behalf of the 
asset managers 
Asset managers would be able to reduce costs. 
All EU investors would be able to obtain information 
in  their  language  and  file  a  complaint  in  their 
language. 
Competent  authorities  would  be  able  to  fulfil  their 
mission of investor protection and obtain information 
from asset managers and collect regulatory fees. 

rules  would 

reduce 
Harmonised 
compliance  costs  for  asset  managers.  They  would 
remove unnecessary complexity.  

significantly 

The  database  would  show  cross-border  marketing 
activity  under  the  UCITS  and  AIFM  Directives, 
which  would  enhance  transparency  about  the  use  of 
the EU marketing passport and facilitate supervision. 
Asset  managers  would  be  better  able  to  define  exit 
strategies  and  could  apply  the  same  processes  in  all 
Member States. 
All  EU  investors  would  benefit  from  a  guaranteed 
choice  between  repurchasing  or  maintaining  the 
investment. In the latter case they would continue to 
be informed by the asset manager. 

The  preferred  options  are  coherent  with  existing  legal  frameworks  for  investment  funds 
including  ELTIF,  EuVECA  and  EuSEF  regulations92.  All  EU  fund  frameworks  are  covered 
by  the  initiative.  Improvements  of  the  single  market  will  thus  benefit  all  investment  funds. 
The  proposals  based  on  the  preferred  options  respect  the  distinction  between  these 
frameworks, as they target different kinds of investors (i.e. UCITS are primarily addressed to 
retail investors, whereas most of AIFs to professional investors).  

The preferred options are expected to provide together costs savings of at least € 306 million 
per year for all funds currently marketed on a cross-border basis in the EU (recurrent costs). A 
detailed explanation of the estimated cost reduction and the methodology is provided below 
and in Annex 12. 

Methodology for cost and cost reduction estimations 

As a first step, costs linked to cross-border distribution have been calculated based on data provided 
through public sources and input by stakeholders. On the basis of input from (industry) stakeholders 
average costs and ranges of costs were calculated. Costs are calculated on a per fund basis and on a 
total industry basis. The total industry figure is calculated using the total number of cross-border funds 

92  The  EuVECA/EuSEF  Regulations  contain  general  principles  on  regulatory  fees  and  a  central  notification 
database. Under the ELTIF Regulation, administrative facilities to investors can already be provided online or by 
telephone.  

53 

 
 
 
 
                                                 
domiciled  in  the  EU  per  end  2016  (11.380  funds)  and  the  average  number  of  EU  host  jurisdictions 
these funds are marketed to (5.4 Member States)93.  

As  a  second  step,  cost  reductions  have  been  estimated.  For  each  of  the  different  cost  categories  the 
impact of the retained policy options has been evaluated and calculated. The reductions and reasoning 
are indicated in the tables below and in the annex. The figures show only expected cost reductions for 
existing funds, while the initiative aims at raising the number of cross-border funds. In this context, it 
is  highlighted  that  the  number  of  cross-border  funds  has  increased  over  the  last  5  years  with  an 
average of 6.8% per year and growth is expected to accelerate thanks to this initiative. Therefore the 
figures below show conservative estimates of cost reductions.  

In parallel ESMA and Competent Authorities have provided input on enforcement costs linked to the 
retained policy options. 

It is noted that compliance costs are the most important cost category. They appear in relation 
to all regulatory barriers, and they can be quantified based on anecdotal evidence. Regulatory 
fees (or charges) are considered less important. Beyond these categories, certain costs are of 
qualitative  nature  and  cannot  be  quantified,  e.g.  costs  linked  to  legal  uncertainty  regarding 
what does qualify as marketing (no pre-marketing) and lost opportunities due to the lack of an 
exit strategy (de-notification). 

Different scenarios have been developed to identify potential cost reductions to be achieved 
through  this  initiative.  Scenario  A  shows  the  estimated  total  cost  reduction  for  an  asset 
management company  which uses in-house legal advice  and undertakes  fund administration 
itself. Scenario B describes estimated total cost reduction for an asset management company 
which fully outsources legal advice and fund administration. Total cost reductions have been 
calculated  for  both  scenarios,  based  each  time  on  the  assumption  that  100%  of  the  market 
applied the same model (in reality the actual cost reduction would be a weighted average of 
the two scenarios). They are as follows: 

Change compared to current situation per fund 
and host jurisdiction 

Cost  reductions 
in scenario A 

On average down by €6,148 annually per fund and 
jurisdiction in the first year when entering into the 
jurisdiction. 

Estimated average change 
compared to current situation for 
all funds marketed cross-border 94 
Down by € 378 million 
one-off 

On average down by € 4,976 annually per fund and 
host jurisdiction. 

Down by € 306 million 
Ongoing 

Cost  reductions 
in scenario B 

On average down by at € 7,584 annually per fund 
and jurisdiction in the first year when entering into 
the jurisdiction.  

Down by € 467 million 
one- off 

On average down by € 7,165 annually per fund and 
host jurisdiction  

Down by €440 million 
ongoing 

93 Source: PwC, Benchmark your Global Fund Distribution, March 2017. 

54 

 
                                                 
 
 
 
 
 
 
 
 
 
 
A further breakdown of the cost reductions can be provided, as the total costs are composed of 
different categories. When looking at ongoing costs, the cost reductions at a per fund and host 
jurisdiction level are as follows: 

Type of cost 

Description of action 

Change compared to 
current situation for one 
fund (in %) 

Substantive 
compliance costs: 
direct labour costs 

Scenario A  

in-house compliance/ counsel,  
linked to analysis of marketing 
requirements, administrative 
requirements, notification, 
regulatory fees and out of 
scope drivers 

- 25-50%95: advice linked to 
taxation and market 
structure remains, evaluation 
of other elements and 
administration is simplified 
but not eliminated 

Change compared to 
current situation for 
one fund (in monetary 
terms) 
- €286.5 to €573 

Legal counsel costs, linked to 
analysis of marketing 
requirements, administrative 
requirements, notification, 
regulatory fees and out of 
scope drivers and to 
undertaking administration 
Administrative requirements/ 
local facilities 

- €1,745.75 - €3,491.5 

- 25-50%: advice linked to 
taxation and market 
structure remains, evaluation 
of other elements and 
administration is simplified 
but not eliminated 

- 90 %96 

- €4,437 annually 

Substantive 
compliance costs: 
costs of external 
services 

Scenario B   

Substantive 
compliance costs: 
costs of external 
services  

Scenario A and B 

Regulatory 
charges 

Regulatory fees on national 
level in host Member States 

- 5%97 

- €109.70 ongoing 

Scenario A and B 

7.  OTHER SPECIFIC IMPACTS OF THE RETAINED POLICY OPTIONS 

As  demonstrated  in  the  section  above,  the  package  of  preferred  options  should  lead  to 
significant  cost  reductions  for  asset  managers  that  distribute  their  investment  funds  cross-
border  or  intend  to  do  so  in  the  near  future.  These  cost  reductions  will  in  particular  have  a 
positive effect for small fund managers. The costs associated with regulatory barriers have a 
bigger impact on these managers, as  they manage a smaller number of  funds or  have fewer 
assets  under  management  and  consequently  have  a  smaller  base  over  which  to  spread  the 

95 The estimated change is based on the following elements: The initiative does not cover out of scope drivers, 
most  importantly  taxation.  The  public  consultation  showed  that  stakeholders  consider  that  about  40%  of  the 
barriers  are  linked  to  out  of  scope  drivers.  With  respect  to  each  addressed  barrier,  the  improvement  will  be 
significant, but not materialize in a 100% reduction, e.g. the barrier national marketing requirements sometimes 
lack transparency is addressed by creating transparency, while asset managers will still need to need legal advice 
to analyse the provided information. Moreover, the implications will differ from Member State to Member State. 
As a consequence, an estimate with a positive impact of 25-50% cost reduction has been calculated.  
96  Costs  for  local  facilities  will  fall,  but  some  costs  will  be  linked  to  providing  information  in  the  investor's 
language. 
97 The level of regulatory fees is not directly affected by the retained policy options, but increased transparency 
can have a slight indirect positive impact. 

55 

 
 
 
 
 
 
 
 
 
 
 
 
                                                 
costs.  The  costs  associated  with  regulatory  barriers  can  even  prevent  them  from  marketing 
their funds cross-border altogether. 

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

As to the social and environmental impact of the proposed policy options, again the benefits 
are indirect as investment opportunities in investment funds pursuing social or environmental 
goals  should  increase  due  to  increased  cross-border  distribution,  which  in  return  could 
accelerate growth in these areas.  

8.  MONITORING AND EVALUATION 

Providing  for  a  robust  monitoring  and  evaluation  mechanism  is  crucial  to  ensure  that  the 
rights  and  obligations  envisaged  in  the  above  mentioned  Directives  and  Regulations  are 
complied with.  

When establishing the detailed programme for monitoring the following elements should be 
taken into account: 

The timely and correct transposition of the new requirements into national law will be a key 
indicator for their success. The obligation of the Member States to "bring into force the laws, 
regulations and administrative provisions necessary to comply with this Directive" should be 
included  in  the  Directives.  The  final  transposition  by  the  Member  States  of  the  new 
requirements  needs  to  be  accomplished  by  the  prescribed  transposition  deadline.  The  time 
limit for transposition of the changes to the UCITS and AIFM Directive will be twenty-four 
months after publication in the Official Journal of the European Union. Twenty-four months 
appear to  be an adequate period  for transposition of the changes into national  law. Member 
States  should  report  on  the  effective  implementation,  i.e.,  they  should  notify  the  text  of  the 
main provisions of national law which they adopted in the fields governed by the Directive.  

Wherever necessary, the Commission will follow the procedure set out in Article 258 of the 
Treaty in case any Member State fails to respect its duties concerning the implementation and 
application of EU law. 

For further monitoring and preparing an evaluation of the impact of the legislative initiative, 
the  following  non-exhaustive  list  of  sources  could  provide  for  a  basis  for  information 
gathering: 

a)  Websites  of  competent  authorities  regarding  national  marketing  requirements  and 

regulatory fees and charges,  

b)  ESMA database regarding national marketing requirements, 
c)  ESMA database regarding regulatory fees and charges, 
d)  ESMA interactive tool for regulatory fees and charges, 
e)  ESMA  database  for  notifications  (notifications,  updates,  de-notification  regarding 

cross-border distribution of funds).  

Whereas source e) would help the Commission to verify whether the general policy objective 
has been met, sources a) to d) could help to analyse in how far the specific policy objectives 
have been met.  

56 

 
The  indicators  for  monitoring  and  evaluation  linked  to  these  sources  would  include  the 
following output:  

  creation/update  of  websites/databases  by  competent  authorities  and  ESMA  (use  of 

sources a to c), checks whether information is available on these websites; 

  creation of an interactive tool for regulatory fees and charges by ESMA (use of source 

d), check whether the tool is up and running.  

The  timing  of  the  monitoring  needs  to  take  into  account  the  transposition  deadline  of  18 
months of the Directives forming part of this initiative.  

As to the evaluation of the results and impacts, the analysis should take into account source 
e). This source permits to identify the number of notifications in total and per Member States, 
as  well  as  the  growth  rate  in  total  and  per  Member  State.  The  analysis  should  take  into 
account the benchmark of the current increase of cross-border fund distribution: the average 
growth of the number of cross-border funds over the last five years was 6.8% per year98. All 
other things equal, growth should further accelerate thanks to this initiative99.  

No  sooner  than  five  years  after  the  date  of  transposition  of  the  Directives  forming  part  this 
legislative  initiative  (UCITS  and  AIFM  Directives)100  the  Commission  shall  carry  out  an 
evaluation  of  this  initiative,  unless  underlying  legislation  provides  for  an  earlier  evaluation 
deadline. The Commission will take the sources and indicators mentioned above into account 
and 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.  

98 PwC, Benchmark your Global Fund Distribution, March 2017. 
99  Annex  10  contains  calculations  how  the  situation  should  further  improve  per  each  additional  percent  of 
growth. 
100  The  Regulations  forming  part  of  this  initiative  are  directly  applicable.  However,  as  the  evaluation  should 
cover the initiative globally, the timing is defined in function of the concerned Directives. 

57 

 
 
 
 
                                                 
ANNEX 1: Procedural information  

Lead Directorate General  

Directorate-General for Financial Stability, Financial Services and Capital Markets Union. 

Reference Agenda Planning / Work Programme 

The initiative is included in the Commission Work Programme 2018.  

Inter Service Steering Group  

Work  on  the  Impact  Assessment  started in  June  2017  with  the  first  meeting  of  the Steering 
group  held  on  26  July  2017,  followed  by  two  further  meetings  on  21  September  and  18 
October 2017.  

The Inter Service Steering Group was formed by representatives of the Directorates General 
Competition  (COMP),  Economic  and  Financial  Affairs  (ECFIN),  Internal  market  Industry 
Entrepreneurship  and  SMEs  (GROW),  Justice  (JUST),  Communications  Networks  Content 
and  Technology  (CONNECT),  Taxation  and  Customs  Union  (TAXUD),  the  Legal  Service 
(LS) and the Secretariat General (SG).  

The  draft  report  was  sent  to  the  Regulatory  Scrutiny  Board  on  27  October  2017.  The 
Regulatory  Scrutiny  Board  delivered  a  positive  opinion  with  recommendations  to  further 
improve  the  draft  Impact  Assessment  report  on  1  December  2017.  The  draft  report  has 
subsequently  been  modified  to  take  into  account  comments  from  the  Board.101  The  main 
changes related to factors that affect cross-border not covered by the initiative, description in 
the baseline of recent initiatives that have an (indirect) impact on cross-border distribution of 
funds,  the  structure,  presentation,  assessment  and  comparison  of  the  options  and  the 
presentation, documentation and qualification of the quantitative methods and their results. 

Evidence used in the impact assessment 

This  impact  assessment  is  based  primarily  on  stakeholder  consultations  and  additional  desk 
research of the Commission services. More specifically, sources include:  

  replies by stakeholder to the following three open consultations:  

i. 

ii. 

iii. 

a  public  consultation  on  the  Green  Paper  on  the  Capital  Markets  Union,  18 
February to 13 May 2015102;  
a  public  consultation  in  the  framework  of  the  Call  for  Evidence  on  the  EU 
regulatory  framework  for  financial  services  inviting  feedback  and  empirical 
evidence  on  the  benefits,  unintended  effects,  consistency  and  coherence  of  the 
financial legislation, 30 September 2015 to 31 January 2016103;  
a  public  consultation  on  cross-border  distribution  of  investment  fund,  2  June  to  9 
October 2016104); 

  feedback  from  stakeholders  through  28  targeted  interviews  of  stakeholders  who 

responded to the consultations (out of 64);  

101 The opinion of the Regulatory Scrutiny Board is available at: […] 
102 http://ec.europa.eu/finance/consultations/2015/capital-markets-union/index_en.htm 
103 http://ec.europa.eu/finance/consultations/2015/financial-regulatory-framework-review/index_en.htm 
104 http://ec.europa.eu/finance/consultations/2016/cross-borders-investment-funds/index_en.htm 

58 

 
                                                 
  feedback  from  stakeholders  through  15  bilateral  meetings  between  the  Commission 

services and stakeholders who did not respond to the consultations; 

  a targeted survey based on a randomized  stratified sampling procedure105; 
  a regression analysis106; 
  statistics and data from various sources, including Morningstar, ESMA, European Fund 
and Asset Management Association (EFAMA)107 and the Investment Company Institute 
(ICI)108. 

  market  reports  and  dedicated  studies  by  consultancy  firms  (Price  Waterhouse  Coopers, 

Deloitte, etc.); and 

  academic (economic) literature.  

In addition to these sources, the Commission services also took into account the exchange of 
views  between  Member  States  on  barriers  to  cross-border  distribution  of  investment  funds 
that took place in the context of the Expert Group on barriers to free movement of capital.109  

For a detailed description of the methodological approach, analytical methods, and limitations 
of the evidence underpinning this impact assessment, see annex 4. 

105 See annex 4 for details regarding the methodology. 
106 The regression analysis is presented in detail in annex 6. 
107 http://www.efama.org/statistics/SitePages/Statistics.aspx 
108 http://www.icifactbook.org/ 
109 http://ec.europa.eu/transparency/regexpert/index.cfm?do=groupDetail.groupDetail&groupID=3388 

59 

 
 
 
 
 
                                                 
ANNEX 2: Stakeholder consultation 

On  18  February  2015  the  Commission  launched  a  Green  Paper  consulting  on  its  overall 
approach  to  building  a  CMU.  This  included  asking  how  to  improve  investment  fund 
distribution across the EU. 
On  30  September  2015,  the  Commission  services  launched  a  Call  for  evidence110  inviting 
feedback  and  empirical  evidence  on  the  benefits,  unintended  effects,  consistency  and 
coherence of the financial legislation adopted in response to the financial crisis.  

Responses to both the CMU consultation and the Call for evidence suggested that regulatory 
barriers  to  the  cross-border  distribution  of  funds  prevented  the  full  benefits  of  the  single 
market being realised.   

Meetings/conference calls were organised with ESMA, asset managers and investor/consumer 
associations in order to address the most relevant issue in the public consultation.  

Additional information on national practices was sought from national competent authorities. 
In  2016,  ESMA  conducted,  in  consultation  with  Commission  Services,  a  survey  among 
supervisors,  requesting  details  on  current  national  practices  in  several  areas,  including 
regulatory fees and marketing requirements.  

Based  on  the  input  received  from  the  CMU  Green  Paper  and  the  Call  for  evidence  and  the 
mapping exercise realised by ESMA, the Commission services launched, on 2 June 2016111, a 
public  consultation112  on  the  cross  border  distribution  of  investment  funds.  Given  the 
feedback already received, the public consultation was particularly detailed, seeking specific 
examples of the problems faced and evidence of their impact.  

In  order  to  foster  stakeholder  engagement  with  the  consultation  and to  seek  early feedback, 
the Commission also organised a number of roadshows with asset management associations 
in the Member States acting as the main hubs for fund management and domiciliation.113 The 
roadshows were held with (national) industry associations and their members.  

In  order  provide  sufficient  differentiation  of  stakeholder  opinions,  several  meetings  and 
conferences  calls  were  held  with  European  and  national  investors  associations  in  order  to 
incentive  them  to  response  to  the  consultation  and  to  take  on  board  their  concerns  about 
investor's  protection.  In  addition,  the  consultation  was  presented  to  the  Financial  Services 
User  Group  (FSUG)114  on  15  September  2016.  Despite  these  efforts  investor  associations 
provided only limited feedback mainly due to their limited resources whereas at the same time 
the  number  of  consultation  increases.  In  consequence,  consumers  and  investors  associations 
have  to  allocate  their  'limited'  resources  to  their  main  priorities.  Another  explanation  is  the 
fact that European and national investor/consumer associations are outnumbered compared to 
the  number  of  European  and  national  industry  associations.  This  explains  also  why  so  few 
investor associations have responded.  

64  responses  were  received  to  the  public  consultation:  52  from  private  organisations  or 
companies;  8  from  public  authorities  or  international  organisations  and  4  from  private 

110 http://ec.europa.eu/finance/consultations/2015/financial-regulatory-framework-review/index_en.htm  
111 The consultation closed officially in October 2016 
112 https://ec.europa.eu/info/publications/consultation-cross-border-distribution-investment-funds_en  
113 Luxembourg, Paris, Dublin, London, Frankfurt and Brussels 
114 The FSUG was set up by the European Commission in order to involve users of financial services in policy-
making. 

60 

 
                                                 
 
individuals  (the  summary  of  responses  received  is  included  in  annex  3).  Most  of  the  asset 
managers  have  contributed  to  the  consultation  through  their  national  associations  who  have 
contributed then to the response of their European associations. In consequence the responses 
received  from  national  and  European  associations  represent  a  significant  part  of  the  asset 
manager sector. For example, EFAMA represents through its 28 member associations and 62 
corporate members close to € 23 trillion in assets under management of which €14.1 trillion 
managed by 58.400 investment funds at end 2016.  

At  the  request  of  the  Commission  and  based  on  the  evidence  received,  ESMA  conducted  a 
follow-up  survey  in  2017,  seeking  further  information  on  specific  marketing  practices  and 
notification requirements in each Member States. 

Commission Services also sought further information through meetings with the fund industry 
and European investor associations. In addition, a questionnaire was sent to eight trade bodies 
on the various areas covered by this initiative. A particular focus was placed on attempting to 
quantify the costs of the regulatory barriers to cross-border distribution and potential benefits 
of  removing  these  barriers  for  asset  managers  and  investors.  Moreover,  a  targeted  survey 
based on a randomized stratified sampling procedure was conducted115. The responses to this 
targeted survey are included in figure 1 below.  

In addition, an Inception Impact Assessment was published for consultation. Five responses 
have  been  received  mainly  from  investment  funds  managers,  their  associations  and  also 
distributors/financial advisors' associations. They were all supportive of the action initiated by 
the Commission on reducing the barrier to the cross-border distribution of funds.   

Commission Services has used publically and privately available information to supplement 
responses received  to  the  consultations  mentioned  above.  This  includes  data  from  EFAMA, 
Morningstar and from private companies. Additionally, we have reviewed academic literature 
for evidence of the economic impact of cross-border distribution on competition and expected 
consumer behaviour. 

Table 1 – Responses to targeted survey based on a randomized  stratified sampling procedure 

SECTION 1 

1. For each of the items below, indicate to what extent 
you feel that -in your experience- they are a barrier to 
the cross-border distribution of your fund(s) in the EU.:   Av. S* 
Regulatory barriers 
Local demand 
Taxation 
Local distribution network / market structure 

% Agree/ 
Strongly 
agree  

Av. L * 

3.67 
2.83 
4.00 
3.17 

3.67 
3.86 
4.14 
3.43 

75% 
54% 
85% 
54% 

115 A questionnaire was sent to a sample of 60 funds with various sizes (equally divided over small, medium and 
big). 

61 

 
 
 
  
  
  
  
  
 
  
  
  
 
  
                                                 
2. For each of the regulatory barriers, indicate to what 
extent you feel that -in your experience- they are a 
barrier to the cross-border distribution of your fund(s) 
in the EU.:  
National marketing rules 
Regulatory fees 
Notification process 
 Local agent 

3. Would a positive change in the items below result in an 
increase of your cross-border activity, provided that 
there is no change with respect to the other barriers 
listed below.: 
Regulatory barriers 
Local demand 
Taxation 
Local distribution network / market structure 

SECTION 2 

3.33 
3.33 
3.33 
3.33 

3.83 
3.50 
4.33 
4.17 

4.00 
3.00 
3.00 
3.71 

3.71 
4.14 
3.71 
3.14 

62% 
46% 
38% 
62% 

77% 
69% 
77% 
69% 

4. Regarding regulatory barriers, please indicate which 
approach you feel is most appropriate to increase your 
cross-border distribution of funds.:  
National marketing rules 
Regulatory fees 
Notification process 
Local agent 

% EU 
harmonisation**  
77% 
83% 
100% 
85% 

5. For each of the specific regulatory barriers, indicate to 
what extent you feel that a reduction would increase 
competition: 
National marketing rules 
Regulatory fees 
Notification process 
 Local agent 

6. For each of the specific regulatory barriers, indicate to 
what extent you feel that a reduction would investor's 
choice more investment opportunities, lower fees, etc.): 
National marketing rules 
Regulatory fees 
Notification process 

Local agent 

69% 
75% 
92% 
77% 

55% 
67% 
67% 

64% 

% EU 
transparency
** 

% National 
transparency
**  

15% 
17% 
0% 
8% 

15% 
17% 
0% 
8% 

27% 
8% 
25% 

27% 

8% 
0% 
0% 
8% 

15% 
8% 
8% 
15% 

18% 
25% 
8% 

9% 

62 

 
  
 
  
  
  
 
  
  
 
  
  
  
 
  
  
  
  
  
  
 
  
  
  
 
  
  
  
 
  
  
 
  
  
  
 
  
  
 
  
* Respondents were ask to rank each item on a scale of 1-5 [strongly disagree - 
strongly agree] 
** Whereby 'EU harmonisation' refers to harmonising requirements at European level, 
 'EU transparency' to increasing transparency at the European level and 'National transparency' at to increasing 
transparency national level  

63 

 
 
 
 
 
 
 
 
 
ANNEX 3: Who is affected by the initiative and how? 

Fund  managers  should  face  reduced  costs  in  distributing  funds  across  borders  –  through 
harmonisation  of,  and  easier  access  to,  national  requirements,  which  should  act  as  an 
incentive to test new markets and test their funds more broadly. This is particularly the case 
for the smaller managers and smaller funds where the funds are disproportionately larger. 

Investors  across  the  EU  should  be  offered  a  greater  range  of  attractive  investment 
opportunities  as  a  result  of  the  initiative.  As  a  result,  they  will  be  more  likely  to  choose  to 
invest  in  funds  in  comparison  with  other  types  of  investment,  and  more  likely  to  invest  in 
cross-border funds. 

Given that investment options for retail investors are more restricted, they should particularly 
benefit.  However,  professional  investors  should  also  benefit  from  a  greater  range  of 
investment  funds.  The  initiative  will  lower  barriers  and  encourage  greater  choice.  This  is 
particularly the case for some niche sectors. For example in the Member States where there is 
currently  lack  of  clarity  over  pre-marketing,  the  initiative  should  mean  that  professional 
investors gain access to early Venture Capital / Private Equity funding rounds.  

ESMA will face with additional and ongoing work linked to the setup of the central database 
covering in particular the domestic rules on marketing and regulatory fees in each NCAs but 
also covering the notification. 

National  Competent  Authorities  will  face  some  initial  additional  and  ongoing  work  in 
implementing  the  changes  envisioned,  such  as  translating  requirements  into  a  language 
commonly used in financial services, and introducing rules for 'de-notification'.  

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

64 

 
 
 
 
ANNEX 4: Methodological approach, analytical methods, and limitations  

Overview 

The analysis underlying the impact assessment is based on 3 methodological approaches: 

1. 
2. 
3. 

desk research;  
qualitative analysis and;  
quantitative analysis. 

The  data  used  stems  from  several  different  data  sources.  Input  from  the  stakeholder 
consultation,  the  follow-up  survey  and  targeted  interviews  are  used  for  the  qualitative 
analysis.  In  addition  data  from  existing  databases  such  as  Morningstar,  EFAMA  and  ICI 
Global  were  used.  Morningstar  data  was  used  for  the  quantitative  analysis.  This  was 
supplemented with market reports and dedicated studies (Price Waterhouse Coopers, Deloitte, 
etc.) 

1.  Desk research 
A  literature  review  was  performed  regarding  the  determinants  of  cross  border  fund 
distribution  and  resulting  impact  on  competition  and  consumer  choice.  The  relevant 
(academic) literature was also consulted to gain an insight into fund market developments. 

2.  Qualitative analysis 
Qualitative  analysis  is  based  on  the  information  collected  via  the  stakeholder  consultation.  
We  followed  the  following  3-fold  methodological  approach  to  the  consultation  of 
stakeholders:  

(i) 
(ii) 
(iii) 

public stakeholder consultation;  
stratified randomized sampling-based consultation;  
anecdotal evidence gathering based on targeted interviews. 

(i)  The  public  stakeholder  consultation  was  conducted  prior  to  the  impact  assessment.  The 
consultation  was  open  so  the  design  would  ensure  sufficient  representation  of  different 
stakeholders, maximize the number of respondents, and allow for sufficient spread in opinion 
(in case opinions would differ). The public consultation thus provided insight on the average 
opinion  for  each  stakeholder  group  concerned  and  the  level  of  consensus  within  each 
stakeholder group.  

Details on the public consultation can be retrieved in Annex 2. 

(ii)  A  stratified  randomized  sampling-based  consultation  was  issued  in  order  to  supplement 
the public consultation.  

This  second  survey  allowed  for  differentiated  opinions  along  these  two  dimensions  (large 
versus  small  funds  and  active  versus  non-active  funds).  The  randomized  stratified  sampling 
approach  ensured  maximum  representativeness  for  a  given  level  of  confidence.  In  addition, 
specific questions were introduced to obtain more information on topics for which the public 
consultation yielded no sufficient input 

The  result  allowed  to  further  insight  into  the  differences  between  large  and  small  UCITS 
funds:  the  effect  of  costs  and  other  factors  on  the  decision  to  go  cross  border  may  differ 
between large and small funds. These factors as well as any improvement in these factors as a 
result of proposed measures might also differ along funds depending on which are currently 
already distributing funds cross border and other funds. 

65 

 
 
The randomized stratified sampling proceeded as follows. 

- Population considered:   

  As a starting point, 25,313 UCITS funds, being all the UCITS funds domiciled in EEA 

based on the consultation of the Morningstar database on 6 October 2017. 

  Only the funds with size larger than 1 million EUR have been withheld, resulting in 
24,193 funds. Funds smaller than that threshold would not be significant in the contest 
of this analysis, they are not likely to be distributed cross border anyway. 

- Total sample size:  

  The  size  was  determined  in  order  for  the  responses  to  be  representative  for  the 
population  with  a  90%-confidence  level.  Based  on  conventional  statistics,  a  sample 
size of 268 observations is recommended. 

  The final sample takes into consideration a non-response rate of 10%. 

- Stratification of sample: 

  Fund size and whether fund manager are currently distributing the fund cross-border116 

are used as the 2 dimensions for stratification. 

  With respect to size, we construct size deciles and only consider the two most extreme 
deciles (decile 1 and decile 10) given that we are interested in possible differentiation 
of opinion along the dimensions.  

  To  further  assure  maximum  representativeness  within  the  smallest  and  largest  size 
decile, both the largest and smallest size decile are subsequent split into 3 equal parts. 
  With respect to cross-border activity, we use a binary dummy variable to assign funds 
being  distributed  cross-border  or  not.117  We  ensured  that  the  sample  mirrors  the 
number  of  cross-border  funds  in  our  population  to  assure  representativeness.  The 
observed percentage of cross-border funds to total population is 34%, i.e. overall we 
observed 34% of UCITS are marketed cross border (i.e. they are notified for sale in at 
least two countries). 

  As  a  result,  we  end  up  with  a  6×2  classification  matrix  along  size  and  cross-border 
activity  where  each  time  3  size  classes  are  taken  from  the  largest  and  smallest  size 
decile.  

- Randomization: 

  To  select  random  funds  for  each  of  the  6×2  groups,  funds  were  classified  in  these 

groups based on the rules explained above. 

  Funds  were  assigned  a  unique  number  and  random  funds  per  group  were  selected 

based on a random number generator. 

  We proceeded in 2 rounds: 

o  In  round  1  random  funds  were  selected  and  the  survey  was  submitted  to  the 

manager of the fund 

o  In case of insufficient replies per group to achieve the pre-set level of confidence, 
the survey was resent to another random fund of that group. This fund was again 
selected based on the random number generator. 

116 Binary dummy variable (yes: funds currently distributed cross-border; otherwise value set to no. 
117 Hence, the original 10×2 classification matrix is shrunk to a 2×2 matrix. 

66 

 
 
                                                 
  The number of funds are as follows: 

o  We  divided  the  sample  size  to  have  the  number  of  observations  for  the  two 

deciles, reaching a total of 54 observations (i.e. 2 x (268 x 10%) = 54). 

o  Considering  response  rate  of  90%  we  round  the  sample  size  at  60  observations, 

i.e. 10 observations for each of the 6 sub-groups according to size. 

o  Of these 10 funds, we select each team 3 cross-border funds and 7 funds that are 
marketed  only  domestically  to  match  the  cross-border  distribution  rate  in  our 
sample  as  explained  above.  Final  number  of  funds  in  the  stratified  sample  is 
summarized in the table below. 

Table: Number of UCITS funds selected for survey 

Funds with cross-border distribution(*) 

 Others 

Decile 1: 10% largest funds 

LARGE – Top (1/3) 
LARGE – Medium (1/3) 
LARGE – Bottom (1/3) 

Deciles 2-9 
Decile 1: 10% smallest funds 

SMALL – Top (1/3) 
SMALL – Medium (1/3) 
SMALL – Bottom (1/3) 

3 
3 
3 
[Not considered] 

3 
3 
3 

7 
7 
7 

7 
7 
7 

(*) 34% of funds are distributed cross-border in our population based on Morningstar. Figures are rounded to determine the number of funds. 

3.  Quantitative analysis 

A quantitative analysis was performed in order to examine if factors beyond structural factors 
(local  distribution  channel  etc.)  and  (expected)  demand  are  related  to  the  cross-border 
distribution of funds. More particularly, we aimed at testing the impact of costs. The results 
provide  an  indication  regarding  the  extent  to  which  regulatory  measures  that  would  reduce 
these  costs  could  impact  the  level  of  cross-border  distribution.  Regulatory  fees  related  to 
cross-border activity are used as a measure for costs.118 

Details of the analysis are presented in Annex 6. 

In essence, we estimate a robust regression relating the cross-border distribution of funds to 
different  measures  of  regulatory  fees.  Fees  are  considered  separately  for  professional  and 
retail investors and are split up between one-off fees and ongoing fees.  

In addition, a market entry variable is used as an instrument to proxy for the attractiveness of 
the local market.119  

The full model from which different specifications are drawn can be summarized as follows: 

118 Importantly, the costs of going cross-border will not only consists of regulatory fees but will also consist of 
additional compliance cost and other costs as indicated in Annex 10. 
119 The attractiveness of the local fund market will be influenced by a number of factors such as local distribution 
channels,  (expected)  demand,  and  taxation.  These  factors  will  not  only  affect  the  cross-border  distribution  of 
funds but will also affect the entry decision of other funds in a similar fashion which provides the basis to use the 
market entry variable as an instrument. In the sensitivity analysis we included fund flows as a more direct proxy 
for local demand 

67 

 
 
 
 
 
 
 
 
 
                                                 
With the regulatory fee proxy equal to one-off fees and ongoing fees for profession investors 
or retail investors. 

Limitations 

a.  Existing limitations 

All reasonable efforts have been undertaken to collect and analyse available evidence. There 
are  nevertheless  still  some  remaining  limitations  to  the  current  approach  which  should  be 
taken into consideration when interpreting the evidence. 

Public stakeholder consultation: although the consultation was open the number of responses 
is with 64 responses limited. More responses could have yielded more information regarding 
the extent that there was consensus among individual stakeholders on certain subject. 

Stratified  randomized  sampling-based  consultation:  sample  selection  was  set  up  to  be 
representative  with  a  90%-level  of  confidence.  12  responses  were  received  after  the  first 
round. 

Regression  analysis:  Ideally,  we  would  have  liked  to  analyse  the  total  effect  of  costs 
(regulatory fees, compliance costs, search costs) on the decision to go cross-border but data is 
only available for regulatory fees. 

Fund databases (Morningstar) and other data sources: funds are not obliged to report data. 
As a result none of these databases or data sources has complete coverage. As a case in point, 
the reporting on Morningstar database is based on a voluntary reporting from asset managers.  

The  number  of  UCITS  funds  included  in  the  Morningstar  database  is  estimated  to  be  about 
80%  of  the  number  of  UCITS  reported  by  EFAMA.  Morningstar  data  for  AIFs  is  far  less 
representative. Hence, AIF data from Morningstar is only indicative and should be interpreted 
with caution. As data provision is not compulsory, there are also some discrepancies between 
the data reported by various data sources. 

Granular  cost  data  and  itemization:  As  indicated  above,  detailed  information  on  all  costs 
influencing  the  cross-border  distribution  funds  (regulatory  fees,  compliance  costs,  search 
costs) is not available at a granular level per Member State. Regulatory fees are available at 
this level of detail, but they only constitute a small part of total costs. Compliance costs for 
cross-border activity (e.g. legal advice) are often considered together with compliance cost of 
other  out-of-scope  drivers  or  other  business  activities,  making  it  difficult  to  have  a  very 
clearly defined itemization. 

Quantitative forecast on dynamic baseline scenario and effect of policy action.  

Historical data on cross-border distribution and its driver is limited.  
As a result, the expected growth rate based on a multivariate forecast cannot be estimated. 

As  argued  in  Annex  11,  a  fund  manager's  decision  to  distribute  a  fund  cross-border  will  be 
influenced by discretionary strategic considerations on the one hand and the attractiveness of 
the local  market  on the other  hand. The latter  include the (i)  marginal  costs of going  cross-
border  to  a  specific  national  market;  (ii)  structural  factors  of  the  local  market;  and  (iii) 
expected demand. In addition, we identified a number of important out-of-scope drivers (e.g. 
taxation) as summarized by the problem tree.  

68 

 
 
As  a  result,  it  is  not  feasibility  to  have  point  estimates  on  cost  reduction  induced  by  option 
policies  in  view  of  the  lack  of  historical  data  on  these  drivers  that  shape  the  cross-border 
decision process. 

b.  Interpretation of results and strategy to mitigate effect of limitations 

Public stakeholder consultation:  

-  It is important to note that in spite of the small number of responses, the coverage for the 
fund management industry is good nonetheless: most of the asset managers have contributed 
to  the  consultation  via  their  national  associations,  which  in  turn  have  contributed  to  the 
viewpoint of their European associations. Given that the majority of funds are members of a 
fund  association,  the  responses  from  national  and  European  associations  represent  a 
significant  part  of  the  asset  manager  sector.  For  example,  EFAMA  represents  though  its  28 
member  associations  and  62  corporate  members  close  to  € 23  trillion  in  assets  under 
management of which € 14.1 trillion managed by 58,400 investment funds at end 2016.  

-  To  overcome  concerns  about  limited  differentiation  of  opinion  within  stakeholder  groups, 
we  set-up  the  stratified  randomized  sampling-based  survey  where  groups  were  selected  to 
allow for maximum differentiation between large and small funds and active and non-active 
funds  (cross-border  distribution),  while  remaining  representative  for  the  population.  In 
addition, new questions were introduced to address limited responses to specific issues. 

- Further differentiation of stakeholder opinions was established by: 

o  consulting ESMA in order to get their feedback on the policy options considered and 

their costs;  

o  by checking the policy options with an investor association (Better Finance) to ensure 

that the retail investor's protection is not reduced;  

o  by organising several ad-hoc conference calls and meeting with asset managers 

associations and asset management companies in order to evaluate the impact of the 
options considered. 

- As a result, the variation in responses in the industry stakeholder group is increased, while 
the extra questions completed the picture on cross-border related issues. 

Stratified randomized sampling-based consultation:  

-  Although  the  sample  selection  was  set  up  to  be  representative  with  a  90%-level  of 
confidence, only 12 responses were received after the first round.  

-  Hence,  we  initiated  a  second  round  were  additional  funds  were  randomly  selected,  which 
yielded 1 additional answer. 

- Importantly, we obtained an equal split between small funds (46%) and large funds (54%), 
indicating that the results will provide insight into different opinions of small and large funds.  

- In effect, the results are still very informative in terms of possible different opinions of small 
and large funds (as both type of funds answered to the survey) and help to address open issues 
for which the consultation did not provide sufficient feedback. The representativeness of the 
answers is however lower than anticipated. 

69 

 
 
 
Regression analysis:  

- Ideally, we would have liked to analyse the total effect of costs (regulatory fees, compliance 
costs, search costs) on the decision to go cross-border but data is only available for regulatory 
fees. 

- We accommodated this by collecting estimates on the total costs, as presented in Annex 12, 
but data is not available on a per Member State basis.  

-  As  a  result,  the  regression  results  –  that  rely  only  on  regulatory  fees-  provide  no  direct 
evidence  on  the  relation  between  total  costs  and  cross-border  activity,  but  provide  an 
indication  on  the  importance  of  non-structural  factors  on  the  decision  to  distribute  cross-
border.  They  also  give  an  indication  regarding  the  effect  of  total  costs  under  the  realistic 
assumption that total costs are positively related to regulatory costs. 

Fund databases (Morningstar) and other data sources: funds are not obliged to report data. 
As a result none of these databases or data sources has complete coverage. As a case in point, 
the reporting on Morningstar database is based on a voluntary reporting from asset managers.  

The  number  of  UCITS  funds  included  in  the  Morningstar  database  is  estimated  to  be  about 
80%  of  the  number  of  UCITS  reported  by  EFAMA.  Morningstar  data  for  AIFs  is  far  less 
representative. Hence, AIF data from Morningstar is only indicative and should be interpreted 
with caution. As data provision is not compulsory, there are also some discrepancies between 
the data reported by various data sources. 

Granular cost data and itemization:  

- Estimates on the total costs were collected from feedback from stakeholders (cf. Annex 12). 
A general cost mapping based on a broad sample of responses was not possible.  

- We accommodate this by trying to achieve as much granular information through targeted 
consultations. In addition, we also indicate the source of information on which we relied. 

-  As  a  result,  costs  for  individual  fund  might  deviate  from  the  estimates  due  to  the  small 
sample  that  responded.  Costs  are  likely  to  be  higher  in  case  they  deviate  because  smaller 
funds are less inclined to answer and face higher costs on a relative basis. Hence, our figures 
could be considered to be conservative estimates. 

Quantitative forecast on dynamic baseline scenario and effect of policy action:  

Historical data on cross-border distribution and its driver is limited. As a result, the expected 
growth rate based on a multivariate forecast cannot be estimated. 

As  argued  in  Annex  11,  a  fund  manager's  decision  to  distribute  a  fund  cross-border  will  be 
influenced by discretionary strategic considerations on the one hand and the attractiveness of 
the local  market  on the other  hand. The latter  include the (i)  marginal  costs of going  cross-
border  to  a  specific  national  market;  (ii)  structural  factors  of  the  local  market;  and  (iii) 
expected demand. In addition, we identified a number of important out-of-scope drivers (e.g. 
taxation) as summarized by the problem tree.  

As  a  result,  it  is  not  feasible  to  have  point  estimates  on  cost  reduction  induced  by  policy 
options  in  view  of  the  lack  of  historical  data  on  these  drivers  that  shape  the  cross-border 
decision  process.  Results  will  however  still  reveal  the  direction  of  the  impact.  We 
accommodated  this  by  introducing  dedicated  survey  questions  to  assess  the  extent  to  which 
barriers are binding to evaluate the expected effect of policy actions. 

70 

 
 
Overall,  significant  efforts  have  been  undertaking  to  support  the  analysis  of  cross-border 
distribution  of  funds  in  the  EU  and  the  evaluation  of  policy  options  based  on  3 
methodological  approaches.  Each  of  them  has  its  merits  but  also  its  limitations  and  we 
discussed our approach to mitigate the effect and its effect on the analysis.  

As  the  combined  evidence  stemming  from  the  various  methodological  approaches  provide 
corroborating  evidence,  it  can  be  considered  to  be  a  sound  basis  for  the  impact  assessment 
despite the inherent limitations of each of the individual approaches. 

71 

 
 
 
 
 
 
 
 
 
 
 
ANNEX 5: Evaluation of relevant provisions in AIFM and UCITS Directives 

Section 1 Introduction 

Purpose of the evaluation  

Collective  investment  funds  in  the  EU  are  regulated  under  the  Undertakings  for  Collective 
Investment in Transferable Securities (UCITS)120 and Alternative Investment Fund Managers 
(AIFM)121 Directives. One of the main objectives of these Directives was to establish a single 
market for investment funds, in particular through the creation of a marketing passport, which 
allows funds to be marketed across the EU without additional authorisation in each Member 
State.   

While  the  marketing  passports  in  the  Directives  have  had  some  success  in  supporting  the 
distribution of investment funds across the EU, available data  suggests that to date much of 
the  market  remains  structured  along  national  lines.  This  indicates  that  the  single  market  for 
investment  funds  has  not  exploited  its  full  potential.  Responses  to  various  Commission 
consultations  and  additional  desk  research  of  the  Commission  services  identified  several 
factors  that  limit  the  cross-border  distribution  of  funds.  One  important  factor  is  regulatory 
barriers,  which  follow  from  diverging  and  difficult  to  determine  national  requirements  and 
(supervisory)  practices  regarding  the  use  of  the  EU  marketing  passport  under  the  two 
Directives.      

In this context, the purpose of the evaluation is to assess to what extent the existing EU rules 
on  cross-border  distribution  of  investment  funds  have  met  their  principle  objectives  and  in 
particular  whether  they  have  been  efficient,  effective,  coherent,  and  relevant  and  have 
provided EU added-value. This retrospective evaluation has been conducted in parallel with 
the work on the impact assessment (IA) and is presented as a standalone annex to the impact 
assessment. The results of the evaluation have been incorporated in the problem definition of 
the impact assessment. 

Scope of the evaluation  

This evaluation does not constitute a full review of the two Directives; it only focuses on the 
rules on the use of the marketing passport for investment funds contained therein. As such, the 
evaluation provides an assessment of the Directives focusing on the potential factors that may 
have prevented the wider distribution of investment funds as compared to initial expectations. 
To the extent possible, the evaluation assesses the rules in the context of the five evaluation 
criteria, as required by the Better Regulation guidelines.  

Both the UCITS and AIFM Directive will be subject to broader reviews in the near future. An 
overall review of the AIFM Directive started recently with a tender for an external study on 
the  functioning  of  the  Directive.  The  tender  was  awarded  in  September  2017  and  the 
contractor will have a year to carry out its tasks. An overall review of the UCITS, including a 
review of the application of criminal and administrative sanctions, was initially expected by 
no  later  than  September  2017.  However,  this  review  has  been  delayed  as  not  enough 
experience  has  been  gained  with  the  practical  application  of  elements  introduced  with  the 
most recent amendments to the Directive through UCITS V.  

120 http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32014L0091 
121 http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=celex%3A32011L0061 

72 

 
                                                 
For both (overall) reviews it will take at least until the end of 2018 to gather enough evidence 
to  be  able  to  decide  whether  any  legislative  changes  should  be  initiated.  This  is  the  reason 
why the initiative on cross-border distribution of funds is being pursued now on a stand-alone 
basis. The potential to make significant progress in reducing barriers and bolstering the single 
market  for  investment  funds  –  thus  providing  a  tangible  contribution  to  CMU  on  the  short 
term – justifies taking action now instead of waiting for the broader reviews.  

The  evaluation  takes  a  holistic  approach  to  the  rules  on  cross-border  distribution,  meaning 
that it covers UCITS and AIFs and consequently also EuVECA, EuSEF and ELTIF funds (as 
these are AIFs). However, this evaluation does not cover the rules included in the EuVECA, 
EuSEF  and  ELTIF  Regulations,  nor  any  of  the elements  which  were  amended  in  the  recent 
EuVECA and EuSEF review but which are not yet implemented. The reason for this is that 
the rules on the cross-border distribution for these funds either follow directly or are copied 
from the AIFMD.   

Section 2 Background to the initiative 

Description of the initiative and its objectives 

The EU legislative framework for investment funds and its managers has at its heart the aim 
of achieving a single market through a set of rules under which managers (and funds) have the 
opportunity  to  compete  across  the  EU  to  the  benefit  of  investors  and  investee  firms.  An 
important element to achieve this aim is the marketing passport as foreseen in the UCITS and 
AIFM Directives, which is designed to allow investment funds to be marketed across the EU 
without requiring  separate authorisation  for each Member State.  In  other words, the  general 
objective of the UCITS and AIFM Directives was to provide for a single market for UCITS 
and AIFs which allows investment funds to be distributed across borders, within a harmonised 
regulatory framework for the activities of their managers and funds122. 

In line with the internal market strategy, another important objective of the two Directives is 
to  ensure  that  investor  protection  is  not  undermined  by  the  greater  freedoms  of  the  internal 
market.  Other  objectives  of  the  EU  rules  for  investment  funds  and  their  managers  include 
improving  monitoring  of  macro-prudential  risks,  and  proper  management  and  limitation  of 
micro-prudential  risks.  However,  these  objectives  are  not  in  the  scope  .  Instead,  this 
evaluation  focuses  only  on  the  objective  that  is  central  to  cross-border  distribution  of 
investment funds, namely achieving a single market for investment funds.  

A more detailed description of the UCITS and AIFM Directives and their specific objectives 
is provided below.  

a.  UCITS 

The UCITS Directive provides a harmonised regulatory framework for retail investment funds 
at the EU level, and has laid the basis for a single market for investment funds. The UCITS 
framework  has  been  considered  largely  successful  in  delivering  an  effectively  functioning 
single  market  for  investment  funds  in  the  EU,  including  ensuring  that  investment  funds  are 
suuitable for retail investors.  

122 While the UCITS Directive provides a harmonised regulatory framework for managers and their funds, the 
AIFMD provides only a harmonised framework for the activities of managers.  

73 

 
                                                 
The UCITS Directive lays down common requirements for the organisation, management and 
oversight  of  UCITS  funds.  The  Directive  defines  a  list  of  eligible  assets  in  which a  UCITS 
fund can invest. It also imposes rules relating to the diversification and liquidity of the fund's 
portfolio.  The  first  UCITS  Directive  adopted  in  1985  has  provided  the  regulatory 
underpinning  for  the  development  of  a  strong  and  quickly  expanding  European  investment 
fund market. This legislation was introduced when the European mutual fund industry was in 
its infancy. By providing a common harmonised template, before Member States' legislation 
was  fully  developed,  UCITS  permitted  market  participants  and  authorities  across  the  EU  to 
align on a common standard. 

Overview of milestone amendments to the UCITS Directive 

Adoption date 

Reference 

UCITS Directive 

20 December 1985 

  Directive 85/611/EC 

UCITS III 

UCITS IV 

UCITS V 

Objectives 

21 January 2002 

Directive 2001/107/EC and Directive 2001/108/EC 

13 July 2009 

Directive 2009/65/EC (recast) 

28 August 2014 

Directive 2014/91/EU 

The  UCITS  Directive  introduced  the  first  financial  services  passport  in  the  EU.  Once  a 
UCITS  fund  had  been  authorised  by  the  competent  authorities  of  its  country  of  domicile,  it 
could be marketed all over the EU. It simply needed to notify this intention to the competent 
authorities of the host Member State. 

The objective was to ensure that all players, asset managers, intermediaries and investors, can 
exercise their respective single market rights. Market players should be in the position to fully 
benefit from the single market freedoms and investor protection safeguards established by the 
UCITS  Directive,  as  well  as  from  the  efficiency  gains  that  an  up-to-date  legislative 
framework should facilitate. These single market opportunities not only concern the freedom 
of the industry to do business but also the freedom and right of investors to participate in the 
market in a fair and transparent way.  

Background 

As  recalled  in  the  UCITS  IV  impact  assessment123,  in  the  1980s,  the  European  industry  for 
investment  funds  had  just  started  to  develop.  However,  the  existence  of  a  patchwork  of 
national  legislation  had  created  an  increasingly  fragmented  market.  The  first  UCITS 
Directive, which dates back to 1985, was adopted in order to overcome this situation. It aimed 
to  offer  greater  business  and  investment  opportunities  for  both  industry  and  investors  in  an 
enlarged market. The UCITS Directive regulated the product. It set a series of requirements 
with which investment funds needed to comply.  

The  UCITS  IV  impact  assessment  identified  some  barriers  to  marketing  funds  in  other 
Member  States'  (MS)  markets.  In  particular,  the  notification  procedure  (vis-à-vis  the 
competent  authority  of  the  host  MS)  introduced  by  the  1985  Directive  was  long  and 
cumbersome.  The  host  regulator's  role  often  exceeded  the  role  defined  in  the  Directive  (i.e. 
verification  of  the  UCITS  marketing  arrangements  in  the  host  market)  and  the  two-month 
limit was not always respected. The procedure has been compared to a second authorisation of 

123 http://ec.europa.eu/smart-regulation/impact/ia_carried_out/docs/ia_2008/sec_2008_2263_en.pdf 

74 

 
 
 
                                                 
the fund by the host regulator instead of a simple communication of the UCITS intention to 
market its units in the host market (as provided for in the Directive). 

As further detailed in the 2006 "White Paper on enhancing the single market framework for 
investment funds"124, before marketing a fund in another Member State, the UCITS Directive 
required  the  fund  manager  to  file  extensive  documentation  with  the  relevant  local  authority 
and wait for two months while the latter verified compliance with local advertising rules. The 
deadline  of  two  months  was  not  always  respected.  Extensive  efforts  to  remove  the  most 
important  sources  of  administrative  friction  were  undertaken,  culminating  in  CESR125 
guidelines  in  June  2006.  However,  these  improvements  were  not  able  to  overcome  the 
administrative and procedural obstacles that have their origin on outmoded provisions of the 
Directive. 

Therefore,  in  2009  UCITS  IV  introduced  a  full  (management)  passport  for  UCITS 
management companies and a new notification procedure. This improved the time to market 
by  facilitating  immediate  access  of  UCITS  to  host  markets.  The  backbone  of  this  new 
procedure  was  swift  communication  between  home  and  host  authorities  (regulator-to-
regulator  notification),  in  particular  with  the  use  of  electronic  means  to  speed  up  processes 
and increase their reliability. From an investor protection angle UCITS IV introduced the Key 
Investor  Information  Document  (KIID).  Finally,  from  an  industry  efficiency  point  of  view, 
UCITS  IV  facilitated  cross-border  mergers  and  master-feeder  structures,  allowing  funds  to 
grow more easily. 

In July 2012, the European Commission presented a proposal to amend the UCITS Directive 
(UCITS  V).  This  proposal  was a  direct  consequence  of  the  financial  crisis  and  in  particular 
the Madoff events that had put in the spotlight the duties and the liability of the investment 
funds  depositaries.  The  UCITS  V  Directive  mirrors,  to  a  large  extent,  the  provisions  on 
depositaries  that  were  introduced  in  the  AIFMD,  which  were  further  implemented  through 
Delegated  Regulation  231/2013.  Although  most  of  the  provisions  were  similar  to  those 
foreseen  in  the  AIFMD,  the  UCITS  V  has  stricter  depositaries’  duties,  delegation 
arrangements,  and  a  liability  regime  for  custodial  in  order  to  ensure  the  protection  of  retail 
investors. 

The UCITS V Directive addresses also other issues, such as the lack of harmonised sanctions 
and administrative requirements across the EU and the lack of strict rules on asset managers' 
remuneration.  Following  the  adoption  in  co-decision,  UCITS  V  Directive  was  published  in 
the  Official  Journal  of  the  European  Union  on  28  August  2014  and  came  into  force  on  17 
September 2014. 

b.  AIFMD 

In  2013,  the  AIFMD  introduced  for  the  first  time  a  harmonised  framework  for  the 
authorisation,  supervision  and  oversight  of  managers  of  non-UCITS  funds  (so  called 
'Alternative Investment Funds - AIFs126).The AIFMD regulates the management of AIFs and 
the marketing of these funds to professional investors in the EU. Member States may impose 
additional requirements for the marketing of AIFs to retail investors.  

124 http://ec.europa.eu/internal_market/securities/docs/ucits/whitepaper/whitepaper_en.pdf 
125 The Committee of European Securities Regulators 
126  Alternative  Investment  Funds  (AIF)  covered  all  the  investment  funds  that  are  not  UCITS  such  as  private 
equity funds, hedge funds, venture capital funds but also more traditional funds. 

75 

 
                                                 
AIFMs have to be authorised, and to obtain this authorisation they have to comply with the 
requirements  laid  down  in  the  Directive.  These  requirements  cover,  amongst  other  areas, 
capital,  risk  and  liquidity  management,  the  appointment  of  a  depositary,  rules  regarding 
disclosures to investors, and reporting to competent authorities. 

AIFMD does not regulate the fund itself (i.e. AIFs) but instead only targets the managers. The 
AIFM  Directive  covers  managers  of  all  funds  that  are  not  captured  by  the  existing  UCITS 
regulatory  framework.  Like  UCITS,  the  AIFM  Directive  aims  to  create  a  single  market  for 
alternative  investment  funds,  but  for  the  benefit  of  professional  and  sophisticated  investors, 
rather than for retail investors like in UCITS. 

Objectives 

The AIFMD aims to provide for a single market for AIFMs and AIFs through a harmonised 
and stringent regulatory and supervisory framework for the activities of all AIFMs within the 
EU. AIFMD also lays down the conditions subject to which EU AIFMs may market the units 
or shares of EU AIFs to professional investors in the Union. Such marketing by EU AIFMs 
should be allowed only in so far as the AIFM complies with the Directive and the marketing 
occurs with the marketing passport. 

Background 

The  AIFMD  impact  assessment127  recalled  that  following  the  financial  crisis  that  started  in 
2008,  many  Member  States  had  introduced  legislation  for  AIFMs;  however,  the  scope  and 
content of national measures varied significantly, for example with regard to the requirements 
for  the  registration  and  authorisation  of  AIFMs,  their  prudential  regulation,  regulatory 
reporting requirements, etc. 

It is important to recall that the risks posed by AIFMs domiciled in one Member State are not 
only of concern to the financial markets and market participants in that Member State. They 
also  have  an  important  cross-border  dimension.  Indeed,  the  investor  base  of  many  AIFMs 
business  models  is  highly  international,  as  investors  seek  to  optimise  and  diversify  their 
uently 
major players in financial markets outside their domicile and can have a substantial influence 
on  price  formation  and  liquidity  in  these  markets;  and  AIFMs  investing  in  companies 
frequently acquire portfolio companies located in other Member States. 

The  evidence  in  the  AIFMD  impact  assessment  highlighted  the  discrepancies  under  which 
AIFMs  could  distribute  AIFs  on  a  cross-border  basis,  resulting  in  legal  and  regulatory 
obstacles to the cross-border distribution of AIFs and manifesting themselves in the following 
areas: 

  Requirements to produce local disclosure documents to accompany the offer; 
  Restrictions on marketing, promotion, etc.; 
  Restrictions on placing entities approaching prospective investors; 
  Different approaches to defining the population of eligible investors; 
  Requirements regarding prior approval or registration of instruments; 
  Limits  on  the  eligible  offerors  or  intermediaries  who  are  permitted  to  approach 

prospective investors. 

The AIFMD aimed at overcoming nationally fragmented regimes which might act as a barrier 
to  market  integration  by  raising  regulatory  compliance  costs  for  foreign  competitors.  The 

127 http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52009SC0576&from=EN 

76 

 
                                                 
burdens associated with compliance with multiple regulatory regimes constrain cross-border 
business,  with  a  consequent  impact  on  the  efficiency  of  AIF  markets.  AIFMs  are  therefore 
unable to take full advantage of the available economies of scale (e.g. through increased fund 
size and cost reduction). Investors do not have access to the complete universe of AIF in the 
EU  and  therefore  might  not  be  able  to  diversify  their  portfolio  optimally  and  to  choose  the 
funds  with  the  best  risk-return  features  for  their  investor  profile.  These  problems  are 
compounded by differences in national provisions on investor protection and disclosures. 

The removal of barriers to the efficient cross-border distribution of AIF should have allowed 
for  an  internal  market  in  AIFs  in  the  EU  to  develop  which  is  grounded  in  a  robust  and 
consistent regulatory supervisory framework. 

Intervention logic  

The  intervention  logic  below  provides  a  description  -  in  a  summarised  diagram  format  -  of 
how  the  UCITS  and  AIFM  Directives  were  expected  to  work.  It  is  also  used  in  this 
assessment to identify particular evaluation questions. 

UCITS 

AIFMD 

Need: 
Create a EU level regulatory framework for retail 
investment funds. 

Need: 
Harmonise requirements for entities engaged in 
the management and administration of alternative 
investment funds (AIFs) i.e. non-UCITS funds 

Objectives: * 
Lay the basis for a single market for retail funds 
and the conditions subject to which investment 
funds could be sold to investors across borders. 

Objectives:* 
Provide for an internal market for AIF managers (AIFMs) 
and the conditions subject to which AIFMs may market 
AIFs to professional investors in the EU. 

Input: 

DIRECTIVE 2009/65/EC in the specific areas: 

- marketing requirements 

- regulatory fees 
- administrative requirements 

- notification requirements 

Input: 
DIRECTIVE 2011/61/EU in the specific areas: 
- marketing requirements 
- regulatory fees 
- notification requirements. 

Output: 
Common requirements for the organisation, 
management and marketing of UCITS. 

Output: 
Common requirements for the management and 
marketing of AIFs. 

Results: 
Better functioning of the marketing passports to 
allow UCITS to be marketed more easily across 
the EU . 

Results: 
Better functioning of the marketing passports to 
allow AIFs to be marketed more easily across the 
EU. 

Impact:  
Increase (i) the number and (ii) the assets under 
management held by UCITS marketed cross-
border.  

Impact: 
Increase (i) the number and (ii) the assets under 
management held by AIFs marketed cross-
border.  

* Other objectives are not part of this evaluation 

77 

 
 
State of play 

The relevant rules in both UCITS and AIFMD have been implemented in all Member States. 
However, national implementation of the Directives has resulted in differing interpretations of 
the rules applicable to the use of  the marketing passports under these two Directives128. For 
example at least 17 Member States require that local facilities are present in their territory in 
case of cross-border distribution of UCITS funds, whereas the remaining Member States do 
not require a physical presence.  Moreover there is a lack of transparency regarding national 
rules, e.g. regarding national marketing requirements or regulatory fees to be paid. For a more 
detailed  description  of  diverging  and  difficult  to  determine  national  requirements  and 
practices, see the answer on evaluation question 1 in section 5.  

Section 3 Methodology 

This evaluation is based primarily on stakeholder consultations and additional desk research 
of the Commission services129. More specifically, sources include:  

  28 bilateral meetings between the Commission services and stakeholders who 

responded to the consultations (out of 64);  

  15 bilateral meetings between the Commission services and stakeholders who did not 

 

respond to the consultations; 
three public (online) consultations: (i) the consultation on the Green Paper on the 
Capital Markets Union (18 February 2015130); (ii) the Call for evidence (30 
September 2015131), and (iii) the public consultation on cross-border distribution of 
investment funds (2 June 2016 132); 

  a targeted survey based on a randomized stratified sampling approach133; 
  a regression analysis134; 
  statistics and data from various sources, including Morningstar, ESMA and the 

European Fund and Asset Management Association (EFAMA). 

In addition to these sources, the Commission services also took into account the exchange of 
views  between  Member  States  on  barriers  to  cross-border  distribution  of  investment  funds 
that took place in the context of the Expert Group on barriers to free movement of capital.135  

Where  possible  the  conclusions  of  the  evaluation  are  based  on  triangulation  of  information 
from different sources. 

128 Further examples are provided in section 5. 
129 The Directorate General for Financial Stability, Financial Services and Capital Markets Union was in charge 
of this review. It was supported by the Directorates General and services which participated in the steering group 
for  the  impact  assessment,  in  particular  the  Secretariat  General  and  Directorate  General  for  Internal  Market, 
Industry, Entrepreneurship and SMEs, Directorate General for  Competition, Directorate General for Economic 
and Financial Affairs, Directorate General for Justice, and the Legal Service. 
130 http://ec.europa.eu/finance/consultations/2015/capital-markets-union/index_en.htm 
131 http://ec.europa.eu/finance/consultations/2015/financial-regulatory-framework-review/index_en.htm 
132 http://ec.europa.eu/finance/consultations/2016/cross-borders-investment-funds/index_en.htm 
133 The methodology and its limitations is further described in annex 4. 
134 The regression analysis is presented in detail in annex 6. 
135 http://ec.europa.eu/transparency/regexpert/index.cfm?do=groupDetail.groupDetail&groupID=3388 

78 

 
 
 
 
 
                                                 
Limitations  

While both the UCITS and AIFM Directive contain requirements for asset managers to report 
information  on  the  funds  they  manage  to  the  national  competent  authorities,  the  reported 
information does not provide insights into the extent funds are distributed on a cross-border 
basis. Moreover, ESMA reported that the AIFMD reporting system is not yet fully operational 
and that the data is not immediately comparable. In this context, the Commission services had 
to rely on public sources and professional databases for quantitative data.   

However, data coverage from the Morningstar database and EFAMA is not complete. Funds 
are not obliged to report data to Morningstar and not all managers are members of (national) 
trade  bodies  that  provide  data  to  EFAMA.  The  number  of  UCITS  funds  included  in  the 
Morningstar  database  is  estimated  to  be  about  80%  of  the  number  of  UCITS  reported  by 
EFAMA.  Morningstar  data  for  AIFs  is  far  less  representative.  Hence,  AIF  data  from 
Morningstar is only indicative and should be interpreted with caution. As data provision is not 
compulsory,  there  are  also  some  discrepancies  between  the  data  reported  by  various  data 
sources. 

For all the above reasons granular data was very difficult to obtain. In particular, data on the 
detailed  costs  and  administrative  requirements  for  marketing  cross-border,  as  well  as 
differences  between  UCITS  and  AIFs,  were  not  directly  available.    Consequently,  it  was 
necessary  to  rely  on  bilateral  meetings  with  asset  managers  and  industry  associations  for 
collecting  selected  information.  It  should  be  noted  that  anecdotal  evidence  was  mainly  – 
although  not  exclusively  –  provided  by  large  asset  managers,  as  they  have  the  most 
experience  with  cross-border  distribution.  As  such,  the  overall  analysis  could  be  seen  as 
relatively biased towards the point of view of large asset managers. 

Therefore,  for  the  purpose  of  quantifying  impacts  this  evaluation  makes  cautious  use  of 
available data, which should be understood as 'anecdotal evidence' rather than conclusive. 

Section 4 Evaluation questions 

Question 1: How effective has the EU intervention been?  

To  what  extent  have  the  objectives of  the  UCITS  and  AIFM  Directives  to  establish a  single 
market  for  investment  funds  been  achieved  and  what  factors  influenced  the  achievements 
observed?  

Question 2: How efficient has the EU intervention been?  

To  what  extent  have  the  rules  regarding  cross-border  distribution  in  the  UCITS  and  AIFM 
Directives been cost-effective? Are there significant differences in costs (or benefits) between 
Member States and what is causing them?  

Question 3: How relevant is the EU intervention?  

To  what  extent  are  the  rules  still  relevant  and  how  well  do  the  original  objectives  of  the 
Directives correspond to the current needs within the EU? 

Question 4: How coherent is the EU intervention?  

To  what  extent  are  rules  on  cross-border  distribution  in  the  UCITS  and  AIFM  Directives 
coherent with other pieces of EU legislation?  

 Question 5: What is the EU-added value of the EU intervention?  

79 

 
 
To what extent have the relevant rules increased cross-border distribution and to what extent 
does this matter continue to require action at EU level? 

Section 5 Answers to the evaluation questions 

Question 1: How effective has the EU intervention been?  

To  what  extent  have  the  objectives of  the  UCITS  and  AIFM  Directives  to  establish a  single 
market  for  investment  funds  been  achieved  and  what  factors  influenced  the  achievements 
observed?  

Baseline 

Before  the  introduction  of  the  UCITS  Directive in  1985,  there  was  no  possibility  for  cross-
border  marketing  of  funds  in  the  EU.  No  impact  assessment  accompanied  the  UCITS  I 
Directive  (Directive  1985/611/CEE)  and  no  projection  or  benchmark  was  identified  for 
growth regarding UCITS funds. Likewise, no projection or benchmark was identified in the 
impact assessment for the AIFMD, which came into force in 2013.  

Analysis of the achievement of objectives 

For  the  purpose  of  this  evaluation,  only  investment  funds  that  are  marketed  in  two  or  more 
Member  States  other  than  the  fund  domicile  are  considered  cross-border  funds.  This  is  to 
exclude  so-called  'round-trip  funds',  where  a  manager  domiciles  a  fund  in  another  Member 
State and then distributes it only back into the market where it is based. Although round-trip 
funds are legitimate arrangements from which managers and investors can both benefit, they 
do not represent a true deepening of the single market.  

In  a  fully  functioning  single  market,  it  could  be  expected  that  a  large  majority  of  managers 
would distribute their funds across the EU. In July 2008, the Commission noted in its impact 
assessment on UCITS IV that only 20% of European funds were notified for sale in at least 
two countries other than their fund domicile.136 By June 2017, this number reached 34% (see 
figure 1). The proportion of AIFs that are registered for sale in two or more Member States 
other than the fund domicile was only 3% by June 2017.  

Figure 1 – Number  of UCITS and AIFs registered for sale across the EU 

Country registered 
for sale 
Domestic only 
2 countries only 
3 to 5 countries 
more than 5 countries 
TOTAL 

Number of UCITS 
registered  for sale 
11,650 
4,326 
3,440 
5,897 
25,313 

% of 
total 

Number of AIF 
registered for sale 

% of 
total 

46 
17 
14 
23 
100 

9,455 
586 
246 
112 
10,399 

91 
6 
2 
1 
100 

Source: Morningstar database (June 2017) 

In addition to the number of cross-border funds, the Assets under Management (AuM) held by 
cross-border funds also provides an indication of the extent to which the objective to establish 
a  single  market  for  funds  has  been  achieved.  Data  shows  that,  although  cross  border 
distribution  of  EU  investment  funds  has  grown  gradually  over  the  last  10  years,  the  EU 

136 http://ec.europa.eu/smart-regulation/impact/ia_carried_out/docs/ia_2008/sec_2008_2263_en.pdf 

80 

 
 
                                                 
investment fund market is still predominantly organised along national lines. Figure 2 (below) 
shows that 70% of the total AuM held by investment funds resides in funds registered for sale 
only in its domestic market – this includes so-called 'round-trip' funds. 

Figure 2 – Assets under management of cross-border investment funds  

The  distribution  of  cross-border  funds  across  individual  Member  States  can  also  be 
considered  as  an  indication  that  the  single  market  is  not  functioning  optimally,  with  some 
Member States receiving relatively few cross-border funds. Figure 3, which collates data from 
two different sources, illustrates that while in several Member States a high number of cross-
border fund are registered for sale, in most Member States that number is (relatively) low.   

Figure 3– Number of cross-border registrations (per Member State, incoming) 

9.000

8.000

7.000

6.000

5.000

4.000

3.000

2.000

1.000

0

 Source: PwC, Benchmark your Global Fund Distribution – March 2017, Morningstar database – July 2017 

Data PwC (Dec 2016)

Data Morningstar (July 2017)

The open consultation also provides an indication of the extent of cross-border distribution – 
albeit  anecdotal  given  the  sample  size  –  showing  that  managers  choose  not  to  market  their 
funds  in  all  Member  States,  with  only  3  managers  (15%  of  those  responding)  choosing  to 
market  in  27  or  28  Member  States,  and  with  the  majority  of  managers  marketing  in  half  or 
fewer Member States (see figure 12).  

81 

 
 
 
Figure 4– Feedback from stakeholders 

In how many Member States do you market your funds on a cross border basis? 

s
t
n
e
d
n
o
p
s
e
r

f
o

r
e
b
m
u
N

4

3

2

1

0

1

2

3

4

5

6

7

8

9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Number of Member States 

Source: Open consultation, European Commission, 2016 

The data provided above on cross-border distribution of funds across the EU indicates that the 
single market for investment funds is not functioning as effectively as it could. 

In order to estimate the lost potential for the single market, a scenario analysis was conducted. 
This analysis (see figure 5) shows that even small increases in the growth rate of cross-border 
funds would have a significant effect on the total number of funds marketed over the course 
of several years. This will increase the choice for investors and will have positive effects on 
the  level  of  competition,  which  will  in  turn  put  pressure  on  the  fees  charged  by  investment 
funds.   

Figure 5 – Different scenarios of increased cross-border growth rates 

Source: Morningstar data (October 2017), Commission services calculations 

The different scenarios depicted in figure 5, are based on the current average growth rate of 
cross-border funds for each individual Member State respectively, based on Morningstar data. 
This forms the baseline. The distribution of the different growth rates across Member States is 

82 

 
 
 
 
 
 
indicated  by  the  superimposed  box-plots.  These  box  plots  only  account  for  the  distribution 
under the baseline but would take a similar form for each respective scenario. The divergence 
would grow in line for each scenario depending on the assumed increase in the growth rate. 
The  trendline  for  scenario  demonstrates  the  percentage  growth  potential  lost  in  terms  of  the 
total number of cross-border marketed funds.    

Factors influencing the achievements 

The  various  stakeholder  consultations  that  informed  this  evaluation  identified  a  range  of 
factors  influencing  the  cross-border  distribution  of  investment  funds.  One  other  important 
factor is regulatory barriers that follow from diverging implementation and interpretation of 
the rules regarding the marketing passport contained in the UCITS and AIFM Directives, as 
well as additional requirements imposed by (host) Member States. Analysis of the responses 
to the consultations and desk research by the Commission services identified four areas where 
disincentives to cross-border distribution are apparent:   

  Marketing requirements; 
  Regulatory fees; 
  Administrative requirements; 
  Notification requirements.  

A detailed analysis of these areas is provided below.  

Besides  regulatory  barriers,  other  factors  also  provide  disincentives  to  cross-border 
distribution  of  investment  funds.  These  include  the  impact  of  vertical  distribution  channels, 
cultural preferences for domestic products (home and familiarity bias), and national tax rules. 
However, these factors are out of scope of this evaluation as these are outside the remit of the 
AIFMD and UCITS Directives. For a more detailed description of these factors, see section 
2.1.5 of the impact assessment.    

1)  Marketing requirements 

The burden of host Member State’s marketing requirements were cited as a barrier by 30% of 
respondents to the public consultation on cross-border distribution. Regarding the actual costs, 
anecdotal  evidence  from  one  manager  showed  that  he  spends  €10.000  per  year  for  the 
maintenance  of  existing  market  registrations.  A  similar  amount  is  spent  on  new  market 
registrations. These costs consist of legal counsel and in-house costs for all of the 365 funds 
managed    and  are  calculated  in  a  year  in  which  he  decided  to  market  his  funds  to  5  new 
jurisdictions  within  the  EU  (in  addition  to  the  10  EU  Member  States  where  the  fund  was 
already marketed). 

Diverging interpretations of activities considered to be marketing 

Activities  which  may  or  may  not  be  considered  to  be  marketing  depending  on  the  Member 
State practices include, for example, pre-marketing and reverse solicitation137. A considerable 
majority of the industry responses to the public consultation considered this to have a material 
impact  upon  the  cross-border  distribution  of  investment  funds.  Moreover  two  competent 
authorities  agreed  that  there  is  a  need  for  more  harmonisation  of  the  negative  definition  of 
marketing  and  expressed  their  commitment  to  further  engage  in  convergence  work  in  this 
matter. 

137 Reverse solicitation is where an investor contacts a management company on their own initiative, seeking to 
purchase units of shares of a fund without having been first marketed to by that company. 

83 

 
                                                 
Different interpretations of pre-marketing can cause particular challenges for managers. Pre-
marketing  reflects  normal  market  practice  in  certain  asset  management  segments  targeting 
professional investors or high net worth individuals, such as private equity or venture capital.  
that  Member  States  which  did  not  permit  pre-marketing  are  depriving  asset  managers  from 
"testing"  investors'  appetite  for  upcoming  investment  opportunities  or  strategies  and  are 
denying  investors  the  opportunity  to  be  aware  early  of  future  initial  capital  rounds  on 
advantageous  terms,  meaning  they  could  only  participate  in  later  rounds  or  the  secondary 
market. 

Ex-ante checks of marketing material 

Asset managers can start marketing funds without any marketing material and just rely on the 
documents  which  meet  their  legal  obligations  concerning  information  to  be  provided  to 
investors138. However, in practice asset managers generally also use marketing material, such 
as  flyers,  website,  e-mails,  radio/TV  spots.  In  six  Member  States  national  competent 
authorities  check  marketing  material  to  retail  investors  for  some  or  all  funds  on  an  ex-ante 
basis,  i.e.  when  receiving  the  notification.  Most  competent  authorities  pursue  a  risk-based 
approach  and  do  thus  not  check  all  marketing  material.  However,  in  one  Member  State  the 
marketing material is not only checked, but even approved on an ex-ante basis. The ex-ante 
checks/  approval  can,  according  to  some  industry  players,  be  significantly  more  time-
consuming in some Member States than others and can take up to four months, rendering the 
material outdated when informing clients on evolving market conditions.  
Competent  authorities  which  check  marketing  material  on  an  ex-ante  basis139  consider  this 
process to be important in ensuring investor protection, and in some markets made the link to 
a substantial lowering of complaints regarding the investments. Competent authorities which 
do not check marketing material on an ex-ante basis, check marketing material exclusively on 
an ex-post basis in the framework of ongoing supervision and, if necessary, take enforcement 
actions when the funds are already marketed140. According to a survey by European Investors, 
held  among  its  retail  members141,  89%  of  the  respondents  consider  that  marketing  material 
needs  to  be  supervised  in  order  to  guarantee  that  it  is  complete,  correct,  objective  and 
balanced.  

However,  the  possibility  that  a  competent  authority  can  request  changes  to  the  marketing 
material  means  a  lack  of  certainty  over  documentation  and,  in  case  of  formal  pre-approval, 
also a lack of certainty about the exact timing when marketing  with  marketing material can 
begin on safe grounds. More broadly, small differences in approach to marketing documents 
can  cumulatively  add  to  cost  and  complexity,  for  example  different  methods  for  complying 
with marketing requirements such as operational filing processes and how updates to KIIDs 
have  to  be  submitted.  When  filing,  aspects  such  as  feedback,  deadlines  and  language 
requirements are sometime not clear according to industry stakeholders. . 

Lack of transparency over national marketing requirements  

According  to  industry  feedback,  it  is  often  not  clear  at  first  glance  which  (local)  marketing 
requirements apply exactly unless a manager or distributor has very detailed knowledge of the 

138 E.g. for UCITS this covers the prospectus, periodic reports and key information. 
139  According  to  feedback  from  competent  authorities,  pre-checks  or  pre-approval  of  marketing  material  can 
exceptionally take up to 15 days, but usually only requires a few days. 
140 National competent authorities who check/approve marketing material on an ex-ante basis, in addition also 
make take measures in the framework of ongoing supervision. 
141  The  survey  was  conducted  amongst  a  sample  of  4,000  retail  investors  based  in  the  Benelux  from  4  to  23 
September 2016. 

84 

 
 
                                                 
applicable local law. Local regulators often give additional guidance on how to interpret local 
law which is not always in a single rule book. There are also Member States that refer to non-
financial legislation (such as regulation on advertising and marketing practices). In practice, 
this means that external counsel needs to be engaged to determine how to comply with local 
rules.  Regular  changes  to  marketing  requirements  introduce  additional  costs,  meaning  such 
costs  are  incurred  on  a  regular  basis.  According  to  examples  provided  by  fund  managers, 
costs linked to legal counsel can amount up to €15,000 per fund and per jurisdiction for one-
off legal advice upon market entry and €10,000 per annum for ongoing legal advice in order 
to  keep  up  with  national  requirements.  Fund  managers  also  indicated  that  sometimes  these 
costs can be shared between several funds. Furthermore, economies of scale can be achieved 
by larger managers, as costs do not rise proportionally with the number of funds managed142. 

2)  Regulatory fees 

When  managers  make  use  of  the  marketing  passport,  a  large  majority  of  Member  States 
require paying regulatory fees to competent authorities of the host Member State when funds 
are marketing to retail investors in their jurisdiction (see Annex 11 of the IA). Respondents to 
the Call for Evidence and the CMU Green Paper have referred to the range of regulatory fees 
charged by host Member States as hindering the development of the cross-border marketing 
of funds across  the EU. A preliminary  assessment  by the Commission  services showed that 
the level of fees levied by host Member State on asset managers varies considerably, both in 
absolute  amount  and  how  they  are  calculated.  For  example,  ongoing  regulatory  fees  for  a 
UCITS fund with five sub-funds marketed to retail investors vary from €0 to 10,275 and for a 
AIF with the same structure marketed to professional investors vary from €0 to 15,000.  

Lack of transparency on regulatory fees 

When  consultation  respondents  were  asked  to  report  fees  for  two  set  examples  marketed  to 
professional  investors  on  a  cross  border  basis,  responses  varied  considerably.  This  lack  of 
consistency  in  responses  to  a  simple  scenario  supports  managers’  contention  that  it  is 
challenging  for  asset  managers  -  and  especially  small  ones  -  to  determine  the  level  of 
regulatory fees charged by host competent authorities.  

Level  of  regulatory  fees  charged,  lack  of  harmonisation  in  the  calculation  and 
differences in terms of payment of fees 

Currently,  21  Member  States  levy  fees  for  the  marketing  of  AIFs  and  UCITS  in  their  host 
jurisdiction to retail investors. According to a majority of the host competent authorities those 
regulatory  fees  constitute  a  large  part  of  the  annual  budget  of  competent  authorities. 
Depending on the jurisdiction, the regulatory fees take the form of a tax levy set by national 
parliament  or  fees  determined  by  the  market  authority  of  the  host  country  or  ministry  of 
finance.  These  fees  may  in  turn  be  broken  down  into  several  different  categories,  including 
the cost of applying to enter the country, the cost of the passport itself, publication and public 
offering fees, plus potential annual or monthly supervision fees. Several host Member States 
also  draw  a  distinction  based  on  the  number  of  single  funds,  umbrella  funds  and  sub-funds 
while others do not. These fees may further increase depending on the number of sub-funds or 
the  type  of  funds  (AIFs  versus  UCITS)  or  whether  the  fund  is  marketed  to  retail  investors. 
This  implies  that  the  process  to  determine  the  level  of  fees  that  have  to  be  paid  can  be 
complex.  It  is  noted  that  the  regulatory  fees  here  presented  are  linked  to  cross-border 

142 The differences in costs indicated might be also linked to varying levels of national requirements (i.e. in some 
Member States less man hours for legal advice are necessary than in others). 

85 

 
                                                 
distribution  (for  incoming  funds),  and  are  distinct  from  regulatory  fees  paid  to  the  home 
competent authority when launching the fund in the home Member State. 

Absence of invoice received  

Some asset managers indicated in response to the public consultation that they did not receive 
invoices for regulatory fees. This can create accounting difficulties – and they may be obliged 
to wait for reminder notices in order to pay the regulatory fees. Sometimes, this can delay the 
passporting process as proof of payment is required by some host competent authorities to be 
sent  to  them  before  marketing  commences  according  to  these  asset  managers.  Moreover, 
delays  can  accordingly  also  be  caused  by  a  requirement  for  a  country  specific  annex  to  be 
appended  to  the  fund  Prospectus.  Overall,  this  variation  in  practices  is  costly,  as  it  is  time 
consuming to keep track of the fees that are due and can limit the benefits of the marketing 
passport. 

3)  .Administrative requirements 

UCITS  provides  for  minimum  harmonisation  of  the  requirements  to  manage  and  market 
investment funds to retail investors. As a result, where UCITS are marketed across borders to 
retail investors, at least 17 Member States require – as part of the transposition of Article 92 
of the UCITS Directive – that facilities are present in their territory for making payments to 
unit-holders,  repurchasing  or  redeeming  units  and  making  available  the  information  which 
funds  are  required  to  provide.143  A  few  Member  States  also  require  these  local  facilities  to 
perform additional tasks, like handling complaints or serving as local distributor or being the 
legal representative (including vis-à-vis the national competent authority). 

Responses to the consultations suggest that the costs to comply with the requirement to have 
local  facilities  present  in  each  Member  State  are  significant.  Industry  associations  indicated 
that  the  fees  of  these  facilities  can  be  in  the  region  of  at  least  €5,500  per  fund  and  per 
jurisdiction  (in  at  least  7  Member  States  the  fees  are  €5,500  or  more)  and  can  go  up  to 
€20,000 per annum where funds are marketed to retail investors (the latter is the case in Italy). 
Feedback  from  industry  also  suggests  that  the  appointment  of  local  facilities  is  time-
consuming and can lead to significant delays in marketing funds, as negotiating the agreement 
involves the management company's legal and business teams as well as the fund's depository 
and operational oversight teams.   

While  the  costs  of  local  facilities  are  significant,  asset  managers  indicate  that  in  practice 
facilities  nowadays  mostly  play  a  passive  role  and  are  rarely  used  by  the  investor,  as  the 
preferred method of contact has shifted to direct contacts with the manager and payments and 
redemptions are done through other channels, either online or by telephone. In the past, there 
was a stronger need for a local presence due to the lack of modern technologies for handling 
the different functions (i.e. payments to unit-holders, repurchasing or redeeming units, making 
information  available  for  investors).  Besides  questioning  the  need  to  have  local  facilities 
nowadays,  many  industry  respondents  also  considered  the  diverging  requirements  between 
Member States regarding the appointment and role of local facilities as a barrier.  

143  Article  92  of  the  UCITS  Directive  requires  UCITS  to,  in  accordance  with  the  laws,  regulations  and 
administrative  provisions  in  force  in  the  Member  State  where  their  units  are  marketed,  take  the  measures 
necessary  to  ensure  that  facilities  are  available  in  that  Member  State  for  making  payments  to  unit-holders, 
repurchasing or redeeming units and making available the information which UCITS are required to provide. 

86 

 
 
 
                                                 
4)   Notification requirements 

Before  a  fund  manager  can  use  the  marketing  passport  under  the  UCITS  and  AIFM 
Directives,  it is  required to  notify the competent authority of the home  Member State of its 
intention  to  market  the  fund(s)  cross-border  into  another  Member  State.  However,  the 
Directives  leave  it  to  the  Member  States  to  define  the  process  of  such  notifications,  which 
leads to inconsistencies and/or lack of clarity across Member States. 

Whereas  feedback  from  industry  on  the  initial  notification  process  is  rather  positive, 
respondents  found  the  process  for  updating/  modifying  documentation  burdensome. 
According to industry associations, costs in the context of notifications are concretely linked 
to  the  administration  associated  with  all  new  fund  launches,  changes  and  registrations  per 
jurisdiction  as  well  as  the  dissemination  of  regulatory  documents  to  all  host  competent 
authorities. One asset manager, which manages 56 funds and markets his funds to 10 Member 
States, reported that costs associated with notification amounted to €383,000 per year.  

The lack of a harmonised de-notification process in the host Member State, i.e. enabling an 
asset  manager  to  stop  marketing  a  fund,  was  also  found  to  be  a  barrier.  The  lack  of  such  a 
harmonised  process  means  that  there  is  no  exit  strategy,  which  in  return  creates  uncertainty 
and a disincentive to enter a market.   

Updating notifications 

A majority of the responses received from industry associations and asset managers indicated 
they have difficulties with the UCITS process for updating notifications (e.g. regarding fund 
rules,  the  prospectus,  periodic  reports  and  key  investor  information).144  This  process  is 
managed by the host Member State and is not harmonised or standardised. Under the UCITS 
Directive, the initial notification is sent to the competent authority of the home Member State, 
who  subsequently  transmits  the  notification  and  all  accompanying  documentation  to  the 
competent authority of the host Member State. However, as opposed to the procedure under 
AIFMD,  under  the  UCITS  Directive  changes  to  the  information  contained  in  the  initial 
notification have to be sent directly to the competent authority of the host Member State. In 
this  context,  respondents  also  reported  that  one  or  two  host  Member  States  impose 
burdensome  requirements  like  ongoing  information  on  approved  distributors,  sales  and  risk 
classification of the funds marketed in their jurisdiction. As for AIFs, some respondents note 
that the requirement under AIMFD to update notifications (e.g. regarding to the programme of 
operations,  fund  rules,  target  market,  etc.)  when  there  are  material  changes145  can  create 
difficulties  as  it  is  unclear:  a)  which  timeframe  is  applicable  to  the  notification  of  material 
changes; b) what constitutes a material change; and c) whether marketing activities continue 
to be allowed during that period.      

De-notification  

Another issue highlighted by industry stakeholders (mainly associations representing the asset 
management  industry  on  national  and  European  level)  is  the  absence  of  a  de-notification 
process  in  some  Member  States  as  well  as  differences  between  the  national  de-notification 
procedures.  More  precisely,  when  a  fund  wishes  to  stop  its  marketing  activity  in  one  or 
several Member States146, different procedures can apply across Member States depending on 
whether  there  are  still  local  investors  in  the  fund  and  on  whether  the  number  of  investors 

144 Article 93(8) UCITS Directive  
145 Article 32(7) and Annex IV AIFMD 
146 The fund continues to exist and pursues its marketing activities in one or several other Member States. 

87 

 
                                                 
drops  below  a  specific  threshold.  For  example,  one  Member  State  has  a  threshold  of  3 
investors,  while  another  Member  State  has  set  this  limit  on  150  investors.  In  addition,  five 
Member States allow de-notification only after certain publication requirements are fulfilled. 
According to responses from industry, difficulties with  de-notification result in  a  lack of an 
exit strategy, which considerably influences the decision of a fund manager to access a market 
in the first place. According to feedback from competent authorities, two Member States also 
charge  fees  for  de-notification;  although  it  should  be  noted  that  these  are  negligible  (e.g. 
€430).  If  de-notification  is  delayed  or  even  rendered  impossible,  the  asset  manager  or  fund 
will have to continue paying regulatory fees and providing administrative arrangements, even 
if the fund is no longer marketed in that Member State. 

Conclusion 

The UCITS and AIFM Directives have laid the foundation for a single market for investment 
funds and have helped in increasing cross-border distribution of investment funds within the 
EU.  However,  as  data  on  cross-border  distribution  shows,  the  single  market  has  not  yet 
realised  its  full  potential  and  as  such,  the  objectives  of  the  Directives  have  not  been 
completely  achieved.  The  analysis  in  this  evaluation  suggests  that  –  among  other  factors  - 
regulatory barriers, i.e. diverging, sometimes difficult to determine national requirements and 
practices, are a binding factor that limits the distribution of investment funds cross-border.    

These  regulatory  barriers  are  largely  due  to  different  implementation  and  interpretations  by 
Member States of the EU rules on the use of the marketing passport for funds. These barriers 
include  diverging  marketing  requirements  and  practices,  the  requirement  to  have  a  local 
presence,  cumbersome  procedures  for  updating  notifications,  and  more  broadly  difficulties 
with finding out what the national requirements are – including regulatory fees. 

Question 2: How efficient has the EU intervention been?  

To  what  extent  have  the  rules  regarding  cross-border  distribution  in  the  UCITS  and  AIFM 
Directives been cost-effective? Are there significant differences in costs (or benefits) between 
Member States and what is causing them?  

If an asset manager limits the distribution of its funds to its home Member State, it operates in 
an environment which is well known. Hence, costs for setting up and starting distribution of a 
fund in this market are typically low. However, responses to the consultations suggest that in 
case a manager distributes its funds across borders, significant (additional) costs are incurred.  
Feedback  by  industry  indicates  that  asset  managers  need  to  seek  legal  advice  to  understand 
and  comply  with  different  national  regulatory  frameworks,  including  regulatory  fees.  Costs 
for legal advice are incurred on a one-off basis when first accessing the market, but also on an 
ongoing  basis  to  keep  up  to  speed  with  changing  requirements.  Furthermore,  requirements 
like  the  mandatory  appointment  of  local  facilities  can  be  burdensome  according  to  industry 
respondents, given the direct fees that have to be paid to these facilities and the time needed to 
negotiate appropriate arrangements.  

This indicates that the current arrangements foreseen in the UCITS and AIFM Directives for 
cross-border  distribution  are  not  sufficiently  cost-effective.  In  a  fully  functioning  single 
market, costs for cross-distribution are expected to be low, if not as low as for distributing in 
the  domestic  market.  Against  this  background,  the  consultations  sought  evidence  from 
competent  authorities  and  industry  on  costs  associated  with  regulatory  barriers.  Given  the 
limitations  on  available  evidence  on  costs  provided  through  the  open  consultations,  a 
particular  focus  was  later  placed  on  attempting  to  quantify  the  costs  by  obtaining  anecdotal 
evidence from asset managers and industry associations.  

88 

 
Input from industry suggests that direct costs from regulation are the most important category 
of costs and that within this cost category substantive compliance costs are most burdensome. 
They  appear  in  relation  to  all  regulatory  barriers,  and  they  can  be  quantified  based  on 
anecdotal evidence. Regulatory fees (or charges) are considered less important. Beyond these 
categories, certain costs are of qualitative nature and cannot be quantified, e.g. costs linked to 
legal  uncertainty  regarding  what  does  qualify  as  marketing  (no  pre-marketing)  and  lost 
opportunities due to the lack of an exit strategy (de-notification). 

On  the  basis  of  industry  input  average  costs  and  ranges  of  costs  were  calculated.  Figure  6 
(below)  shows  the  average  costs  for  two  types  of  asset  managers:  Scenario  A  describes  an 
asset mangement company relying on in-house legal advice and in-house fund adminsitration, 
whereas Scenario B shows an asset management company outsourcing legal advice and fund 
administration to third parties. Costs are calculated on a per fund basis and on a total industry 
basis.  The  total  industry  figure  is  calculated  using  the  total  number  of  cross-border  funds 
domiciled  in  the  EU  per  end  2016  and  the  average  number  of  EU  host  jurisdictions  these 
funds are marketed to147.  

More details on the costs and sources used for calculating them can be found in Annex 12.   

Type of cost 

Compliance costs: external (legal) 
services for determining:  
  marketing requirements 
  administrative requirements 
  notification requirements  
  regulatory fees 

Compliance costs: external services 
for local facilities 
Charges: regulatory fees 
TOTAL per fund 

Figure 6  

One-off 
(per fund and host jurisdiction) 
Scenario A : €4,297 
Scenario B: €8,150 

Ongoing 
(per fund and host jurisdiction) 
Scenario A: €1,146 
Scenario B: €6,983  

€4,930 

€4,930 

€1819 
Scenario A: €11,046 
Scenario B: €14,899 

€2194 
Scenario A: €8,270 
Scenario B: €14,107 

TOTAL for all cross-border funds 

Scenario A: €679 million 
Scenario B: €916 million 

Scenario A: €508 million 
Scenario B: €867 million 

According to estimates provided by a number of industry associations in response to the open 
consultation, the different regulatory barriers sum up to total costs between 1 and 4% of the 
overall  fund  expenses  (this  figure  applies  to  funds  using  the  expense  model).148  Anecdotal 
evidence provided in response to the open consultation, also indicated that for a single asset 

147  Source:  PwC,  Benchmark  your  Global  Fund  Distribution,  March  2017.  The  total  costs  for  all  cross-border 
funds  is  calculated  by  using  the  total  number  of  cross-border  funds  registered  in  at  least  two  Member  States 
besides its fund domicile (11,380) and the average number of EU host jurisdictions (5.4) a cross-border fund is 
registered for sale. 
148 In expense models there is a direct impact of costs on the Total Expense Ratio (TER) of the fund. However, it 
should be noted that barriers also negatively affect all-in fee models. 

89 

 
 
 
 
 
 
                                                 
manager total costs linked to national requirements can correspond to 2 basis points (0.02%) 
of its reported AuM149. 

A recent study by Morningstar of the fees charged by investment funds found that the average 
asset-weighted  expense  ratio  for  the  full  European  fund  universe  was  1%  (of  AuM)  in 
2016.150 Applying these industry estimations to the €4.19 trillion AuM held by cross-border 
investment  funds151  implies  fund  expenses  of  circa  €41.9  billion,  with  regulatory  barriers 
costing  somewhere  between  €419  million  to  €1.67  billion.  This  corresponds  with  the  range 
estimated in the cost calculations in figure 6.  

Based  on  the  anecdotal  evidence  provided  by  industry,  it  is  not  possible  to  conclusively 
answer the question whether there are significant differences in costs between Member States. 
However, data on regulatory fees (see annex 11) – which is available for almost all Member 
States  – indicates that there  are indeed  large differences in  the regulatory  fees that  Member 
Sates  charge.  Furthermore,  feedback  collected  from  national  competent  authorities  also 
indicated that the requirement to appoint a local facility is not present in every Member State. 
As this requirement is linked to significant costs (see figure 6) and requirements of individual 
Member  States  also  diverge  in  other  areas,  it  is  plausible  that  significant  differences  exist 
between Member States regarding the costs to distribute in that market. Feedback provided by 
industry  that  some  jurisdiction  are  (significantly)  more  expensive  to  market  to  than  others, 
also points to this conclusion.         

Conclusion 

Feedback from industry indicates that those asset managers which market their funds cross-
border in the EU, are faced with significant (additional) costs. This indicates that the current 
rules  in  the  AIFMD  and  UCITS  Directive  are  not  sufficiently  cost-effective.  Furthermore, 
available  evidence  suggests  that  these  costs  can  vary  between  Member  States,  as  national 
requirements and practices diverge widely.  

Question 3: How relevant is the EU intervention?  

To  what  extent  are  the  rules  still  relevant  and  how  well  do  the  original  objectives  of  the 
Directives correspond to the current needs within the EU? 

The  objectives  of  the  UCITS  and  AIFMD  Directives  to  establish  a  single  market  for 
investment funds, for the benefit of funds and their managers, investors and investee firms are 
still relevant in light of the objectives of the CMU. The CMU has three main objectives:  

  The CMU  will broaden the sources of financing in  Europe towards non-bank  financing 
by  giving  a  stronger  role  to  capital  markets.  It  will  offer  to  borrowers  and  investors  a 
broader set of financial instruments to meet their respective needs.  

  The CMU will help deepen the single market for financial services. Capital markets will 
benefit  from  the  size  effects  of  the  single  market  and  become  deeper,  more  liquid  and 
more competitive, for the benefit of both borrowers and investors.  

  The  CMU  will  help  promote  growth  and  financial  stability.  By  facilitating  companies' 
access to finance, in particular SMEs, the CMU will support growth and jobs' creation. At 
the  same  time,  by  promoting  more  diversified  funding  channels  to  the  economy,  it  will 

149 This figure was calculated by a big European asset manager with over €1,000 billion AuM.  
150 Morningstar Research Paper, "European Fund Expenses Are Decreasing in Percentage", August 2016. 
151 Source: EFAMA Fact Book 2017.  

90 

 
 
                                                 
help  address  possible  risks  stemming  from  the  over-reliance  on  bank  lending  and 
intermediation in the financial system. By diversifying the risks, it will make the whole 
system  more  stable  and  help  financial  intermediaries  granting  more  funding  to  the 
economy.  

Non-bank  financing  does  not  merely  substitute  investment  that  was  previously  funded  by 
banks,  but  it  also  enables  additional  investment  that  banks  would  not  be  ready  to  fund. 
Investment  funds  are  an  important  instrument  to  foster  retail  investment  and  increase  the 
funding  possibilities  for  firms.  Investment  funds  are  essentially  investment  products  created 
with the sole purpose of pooling investors' capital in a portfolio of financial instruments such 
as stocks, bonds and other securities. Market financing is usually regarded as being better at 
dealing  with  uncertain  environments  and  therefore  better  suited  to  fund  riskier  investment 
projects (with a higher required rate of return). The UCITS Directive and AIFMD both aim to 
create  a  single  market  for  investment  funds  and  consequently  contribute  to  increasing  the 
growth  of  investment  funds,  including  across  national  borders  and  fostering  non-bank 
financing.  

Deep,  liquid  and  efficient  capital  markets  bring  advantages  to  borrowers  and  investors. 
Investment funds are an important financial product category forming part of capital markets.  
Capital markets have three main advantages for companies seeking finance: (i) improve their 
access to  funds; (ii)  reduce  their capital  costs by creating competition among investors; and 
(iii)  reduce  the  risk  of  disruption  in  financing  by  diversifying  their  funding  sources.  On  the 
investors'  side,  by  increasing  the  investment  opportunities,  efficient  capital  markets  offer 
investors  a  broader  set  of  financial  products  to  (i)  meet  their  investment  objectives,  (ii) 
diversify and manage their risks, and (iii) optimise their risk-return profile, while respecting 
their  investment  constraints  –  whether  in  terms  of  risk,  duration,  or  other  assets' 
characteristics.  Overall,  capital  markets  (especially  equity  markets)  facilitate  entrepreneurial 
and other risk-taking activities, which have a positive effect on economic growth.  

Large and well-integrated capital markets can contribute to jobs and growth through a number 
of  channels.  They  can  contribute  to  allocative  efficiency  by  opening  up  investment  and 
diversification opportunities for investors across Europe, improving access to risk capital for 
borrowers,  and  allowing  greater  competition  (unleashing  corresponding  benefits  such  as 
productivity  gains,  lower  costs,  greater  choice,  financial  innovation,  etc.).  Unobstructed 
capital  flows  within  the  single  market  should  allow  financial  resources  to  reach  the  most 
profitable investments.  

Conclusion 

By  fostering  cross-border  distribution  of  investment  funds  through  the  establishment  of  a 
single  market,  the  rules  subject  to  this  evaluation  contribute  to  allocating  capital  efficiently 
across the EU and to realise deep and more integrated capital markets. As such, the rules in 
the  UCITS  and  AIFM  Directives  remain  relevant  for  the  current  needs  of  EU,  in  particular 
under the CMU. 

Question 4: How coherent is the EU intervention?  

To  what  extent  are  rules  on  cross-border  distribution  in  the  UCITS  and  AIFM  Directives 
coherent with other pieces of EU legislation and EU initiatives?  

The  rules  on  cross-border  distribution  in  the  UCITS  and  AIFM  Directives  and  more 
specifically, the creation of a passport to market and manage investment funds across the EU, 
are part of the well-established single market freedom to provide services across the EU. This 

91 

 
 
freedom  is  entrenched  in  both  the  Treaties  and  secondary  legislation  (Directives  and 
Regulations).  Indeed,  in  the  area  of  financial  services  a  single  passport  for  the  EU  is 
commonplace  and  includes  banking,  investment  services,  insurance,  payment  and  electronic 
money services and financial infrastructure (clearing and settlement of securities). Hence, the 
rules in the UCITS and AIFM Directives are coherent with other EU legislation in the area of 
financial services.   

The  UCITS  and  AIFM  Directives  are  also  coherent  with  the  objectives  of  current  EU 
initiatives like the CMU, which aim to deepen the single market for financial services. More 
details on the coherence with CMU can be found in the answer to question 3 (relevance) of 
this section.    

An assessment of the coherence of the rules with the complete EU legislative framework for 
investment funds, shows that the UCITS and AIFMD Directives are coherent and complement 
each  other  as  both  Directives  regulate  different  funds  and  target  different  investors.  The 
UCITS Directive provides a marketing passport primarily for retail investors, while AIFMD 
only allows marketing to professional investors while using the passport. 

While  UCITS  and  AIFMD  are  the  general  frameworks  for  investment  funds,  they  are 
completed by four additional pieces of legislation (see figure 7). These additional legislative 
frameworks  for  investment  funds  are  designed  to  meet  specific  needs  in  the  European 
economy.  The  European  Venture  Capital  (EuVECA)  and  European  Social  Entrepreneurship 
Fund  (EuSEF)  Regulations  support  the  development  of  the  single  market  in  venture  capital 
and social entrepreneurship funds, while the European Long Term Investment Funds (ELTIF) 
Regulation152 is designed to support investment in companies and projects which need long-
term capital, such as infrastructure projects. The more recently adopted Money Market Funds 
(MMF)  Regulation153  supports  the  short  term  financing  of  corporates,  financial  institutions 
and governments and at the same time limits the systemic risk of those funds.  

Figure  7 – EU Funds Frameworks in 2017154 

These  four  frameworks  complement,  without  contracticting,  the  UCITS  and  AIFMD 
Directives. The passports foreseen in the UCITS and AIFM Directives also apply to these four 

152 Regulation 2015/760 of the European Parliament and of the Council of 29 April 2015. 
153 Regulation 2017/1131 of the European Parliament and of the Council of 14 June 2017. 
154 This chart takes into account the recently adopted review of the EuVECA and EuSEF Regulations. 

92 

 
                                                 
specific  funds,  but  in  order  to  use  the  fund  'labels'  managers  will  have  to  comply  with  the 
rules laid down in these four frameworks.      

Conclusion 

To  conclude,  the  rules  on  cross-border  distribution  in  the  UCITS  and  AIFM  Directives  are 
coherent with other EU legislation and initiatives in the area of financial services and within 
the overall framework for regulating investment funds.   

Question 5: What is the EU-added value of the EU intervention?  

To what extent have the relevant rules increased cross-border distribution and to what extent 
does this matter continue to require action at EU level? 

In terms of EU-added value, the European legislator did not await significant proliferation of 
divergent retail investment schemes before embarking on the UCITS Directives. As early as 
1985, a common approach to investor protection was taken in the UCITSD Directive. Action 
in harmonising the key features of retail investment funds was therefore already taken in the 
run-up to the creation of a single market by the end of 1992. Experts in the field of investment 
management  services  unite  in  agreeing  that  a  common  UCITS  brand  could  not  have  been 
introduced, with any promise of success in take-up, at a later stage, say in 2000.  

This  early  intervention  has  provided  the  basis  on  which  the  succes  of  the    European 
investment fund market has been built. As presented in the answer to Question 1 in section 5, 
this  has  resulted  in  a  strong  and  quicly  expanding  EU  investment  fund  industry,  inluding  a 
steady  growth  of  cross-border  distribution  of  funds  over  the  last  ten  years.  However,  even 
though the market is increasingly organised on a pan-European basis, it has not exploited its 
full potential in terms of cross-border distribution.   

In reaction to the financial crisis a new framework for investment funds was added in 2013: 
the  AIFM  Directive.  It  introduced  a  framework  for  the  authorisation,  supervision  and 
oversight of managers of non-UCITS funds (AIFs). Although only limited to date due to its 
recent  inception,  this  has  contributed  to  further  growth  of  cross-border  distribution  of 
investment funds, which would not have been possible without a common EU framework in 
the absence of comparable authorisation and operation rules as well as of passporting rights. 

Given that single market for EU investment funds is not functioning as efficiently as it could 
– as evidenced by the extent of cross-border distribution – action at EU level is still required.  
Removing  market  fragmentation  and  moving  further  towards  a  single  market  cannot  be 
satisfactorily  achieved by  Member  States  alone,  neither  for  UCITS  nor  for  AIFs,  because  it 
requires  uniformity  in  the  rules  regarding  the  use  of  the  passport.  The  rules  in  question  are 
inherently  transnational  in  nature  and  hence  consistency  is  required  in  the  way  in  the 
requirements  are  placed  on  managers  and  funds.  Furthermore,  previous  efforts  to  converge 
national (supervisory) practices in this area through ESMA have not succeeded to address the 
identified problem, strenghtening the (continued) need for EU intervention.  

Section 6 Conclusions 

With regard to the  effectiveness, both the UCITS and AIFM Directive sought to establish a 
single market in which investment funds could be sold across borders. Despite some success, 
the evaluation indicates that the single market falls short of realising its full potential in terms 
of  cross-border  distribution  and  as  such,  the  objectives  of  the  Directives  have  not  been 

93 

 
 
completely  achieved.  The  analysis  in  this  evaluation  suggests  that  –  among  other  factors  - 
regulatory  barriers,  i.e.  diverging,  sometimes  difficult  to  determine  national  requirements 
and practices, are a binding factor that limits the distribution of investment funds cross-border.   
These  regulatory  barriers  are  largely  due  to  different  implementation  and  interpretations  by 
Member States of the EU rules on the use of the marketing passport for funds. These barriers 
include  diverging  marketing  requirements  and  practices,  the  requirement  to  have  a  local 
presence,  cumbersome  procedures  for  updating  notifications,  and  more  broadly  difficulties 
with finding out what the national requirements are – including regulatory fees. 

In respect of the  efficiency, the evaluation indicates that asset managers which market their 
funds cross-border in the EU are faced with significant (additional) costs. This indicates that 
the  current  rules  in  the  UCITS  and  AIFM  Directives  on  cross-border  distribution  are  not 
sufficiently cost-effective. Furthermore, available evidence suggests that these costs can vary 
between Member States, as national requirements and practices diverge widely.  

By  fostering  cross-border  distribution  of  investment  funds  through  the  establishment  of  a 
single  market,  the  rules  subject  to  this  evaluation  contribute  to  allocating  capital  efficiently 
across the EU and to realise deep and more integrated capital markets. As such, the rules in 
the UCITS and AIFM Directives remain  relevant for the current needs of EU, in  particular 
under the CMU. Therefore, reducing barriers to cross-border distribution of investment funds 
has been recognised as integral to the work on the CMU.155  

In  terms  of  coherence,  the  rules  on  cross-border  distribution  in  the  UCITS  and  AIFM 
Directives are aligned with other EU legislation in the area of financial services, which also 
provide the freedom to provide financial services across the EU under a passport. The UCITS 
Directive  and  AIFMD  are  also  coherent  within  the  overall  framework  for  regulating 
investment funds.   

In  terms  of  the  EU  added  value,  both  the  UCITS  and  AIFM  Directives  have  provided  the 
basis  for  a  single  market  for  all  EU  investment  funds,  which  has  resulted  in  a  strong  and 
quicly  expanding  EU  investment  fund  industry.  However,  even  though  the  market  is 
increasingly organised on a pan-European basis, the analysis in this evaluation indicates that it 
has not exploited its full potential in terms of cross-border distribution. In order to achieve the 
objectives of the UCITS and AIFM Directives, action at EU level is still required as removing 
market  fragmentation  and  moving  further  towards  a  single  market  cannot  be  satisfactorily 
achieved by Member States alone.     

155 http://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1507119301191&uri=CELEX:52017DC0292 

94 

 
 
 
 
 
                                                 
ANNEX 6: Statistical analysis of impact on cross-border distribution 

A  fund  manager's  decision  to  distribute  a  fund  cross-border  will  be  influenced  by 
discretionary  strategic  considerations  on  the  one  hand  and  the  attractiveness  of  the  local 
market on the other hand. The latter include the (i) marginal costs of going cross-border to a 
specific national market; (ii) structural factors of the local market; and (iii) expected demand.  

At the aggregate level, fund managers' decisions on cross border distribution will be reflected 
in  the  number  of  cross-border  funds  in  a  specific  local  market  and  the  percentage  of  cross-
border funds related to the number of total funds in a local market. 

The  goal  of  the  analysis  is  to  examine  if  factors  beyond  structural  factors  are  related  to  the 
cross-border distribution of funds within the EEA156. More particularly, we aim at analysing 
the  possible  impact  of  costs  by  testing  the  effect  of  regulatory  fees  on  the  cross  border 
distribution  of  funds.  Results  will  provide  an  indication  regarding  the  extent  to  which 
regulatory  measures  that  would  reduce  these  costs  could  impact  cross-border  fund 
distribution. 

Importantly, the costs of going cross-border will not only consists of regulatory fees but will 
also consist of additional compliance cost and other costs as indicated in Annex 11. Total cost 
will  thus  exceed  regulatory  costs,  but  the  amount  with  which  it  will  exceed  regulatory  fees 
will vary over countries and cannot be determined in view of data restrictions.  

As the total cost of cross-border distribution in the EU is not available, we can only rely on 
regulatory fees. Hence, estimated coefficients for the fee proxies do no capture the full effect 
of total fees, but can be considered to be lower bounds of the importance of total fees given 
that  total  fees  will  considerably  exceed  the  regulatory  fees.    The  same  reason  applies  with 
regard to the economic significance of the estimated relationships.  

Structural factors like local distribution channels, (expected) demand, and taxation will affect 
the  attractiveness  of  the  local  fund  market  both  for  fund  managers  deciding  on  the  cross 
border  distribution  of  their  fund  in  a  given  country  as  for  other  fund  managers  deciding  on 
launching new funds. Hence, a market entry variable can be used as an instrument to proxy 
for the attractiveness of the local market. In the specifications reported below the  number of 
new UCITS funds in a local market is used.  

The full model can be summarized as follows: 

𝐶𝑟𝑜𝑠𝑠 − 𝑏𝑜𝑟𝑑𝑒𝑟 𝑓𝑢𝑛𝑑 𝑑𝑖𝑠𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 = 𝑓(∑ 𝑅𝑒𝑔𝑢𝑙𝑎𝑡𝑜𝑟𝑦 𝑓𝑒𝑒 𝑝𝑟𝑜𝑥𝑦; 𝑙𝑜𝑐𝑎𝑙 𝑚𝑎𝑟𝑘𝑒𝑡 𝑎𝑡𝑡𝑟𝑎𝑐𝑡𝑖𝑣𝑒𝑛𝑒𝑠𝑠 𝑝𝑟𝑜𝑥𝑦) 

With the regulatory fee proxy equal to one-off fees and ongoing fees for profession investors 
or  retail  investors  expressed  in  EUR  as  documented  in  Annex  11.  Hence,  we  obtain  the 
following  specifications.  Estimation  results  of  these  specification  are  reported  in  the  table 
below.  

for specification (1) and  (4) which examine the effect of fees for retail investors: 
 𝑈𝐶𝐼𝑇𝑆 𝑓𝑢𝑛𝑑𝑠 𝑚𝑎𝑟𝑘𝑒𝑡𝑒𝑑 𝑐𝑟𝑜𝑠𝑠 𝑏𝑜𝑟𝑑𝑒𝑟 𝑖𝑛𝑡𝑜 𝐸𝐸𝐴 𝑐𝑜𝑢𝑛𝑡𝑟𝑦 𝑖 

=   𝛽1𝑂𝑛𝑒 − 𝑜𝑓𝑓 𝑟𝑒𝑔𝑢𝑙𝑎𝑡𝑜𝑟𝑦 𝑓𝑒𝑒𝑠 𝑓𝑜𝑟 𝑟𝑒𝑡𝑎𝑖𝑙 𝑖𝑛𝑣𝑒𝑠𝑡𝑜𝑟𝑠𝑖
+   𝛽2𝑂𝑛𝑔𝑜𝑖𝑛𝑔 𝑟𝑒𝑔𝑢𝑙𝑎𝑡𝑜𝑟𝑦 𝑓𝑒𝑒𝑠 𝑓𝑜𝑟 𝑟𝑒𝑡𝑎𝑖𝑙 𝑖𝑛𝑣𝑒𝑠𝑡𝑜𝑟𝑠𝑖
+ 𝛽3 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑛𝑒𝑤 𝑈𝐶𝐼𝑇𝑆 𝑓𝑢𝑛𝑑𝑠𝑖 + 𝑐𝑜𝑛𝑠𝑡𝑎𝑛𝑡 + 𝜀𝑖 

156 We study funds domiciled in an EAA country and marketed for cross distribution in another EAA country. 

95 

 
 
 
                                                 
and for specification (2) and (3) which examine the effect of fees for professional investors: 
 𝑈𝐶𝐼𝑇𝑆 𝑓𝑢𝑛𝑑𝑠 𝑚𝑎𝑟𝑘𝑒𝑡𝑒𝑑 𝑐𝑟𝑜𝑠𝑠 𝑏𝑜𝑟𝑑𝑒𝑟 𝑖𝑛𝑡𝑜 𝐸𝐸𝐴 𝑐𝑜𝑢𝑛𝑡𝑟𝑦 𝑖  =

𝛽1 𝑂𝑛𝑒 − 𝑜𝑓𝑓 𝑟𝑒𝑔𝑢𝑙𝑎𝑡𝑜𝑟𝑦 𝑓𝑒𝑒𝑠 𝑓𝑜𝑟 𝑝𝑟𝑜𝑓𝑒𝑠𝑠𝑖𝑜𝑛𝑎𝑙 𝑖𝑛𝑣𝑒𝑠𝑡𝑜𝑟𝑠𝑖 +
𝛽2 𝑂𝑛𝑔𝑜𝑖𝑛𝑔 𝑟𝑒𝑔𝑢𝑙𝑎𝑡𝑜𝑟𝑦 𝑓𝑒𝑒𝑠 𝑓𝑜𝑟 𝑝𝑟𝑜𝑓𝑒𝑠𝑠𝑖𝑜𝑛𝑎𝑙 𝑖𝑛𝑣𝑒𝑠𝑡𝑜𝑟𝑠𝑖 +
𝛽3 𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑛𝑒𝑤 𝑈𝐶𝐼𝑇𝑆 𝑓𝑢𝑛𝑑𝑠𝑖 + 𝑐𝑜𝑛𝑠𝑡𝑎𝑛𝑡 ++𝜀𝑖 

The regression specifications are estimated by means of robust regression to arrive at robust 
estimates  and  limit  the  effect  of  outlying  observations.157  Results  of  the  regression  analysis 
are summarized in the table below. 

Table: Effect of regulatory fees on the number of UCITS funds marketed cross border.  

One-off regulatory fees for professional investors 

Ongoing regulatory fees for professional investors 

One-off regulatory fees for retail investors 

Ongoing regulatory fees for retail investors 

Number of new UCITS funds 

Constant 

(1) 

0.00427 
(0.954) 

-0.122* 
(0.0369) 

8.067*** 
(0.000) 

815.0*** 
(0.002) 

(2) 

0.0457 
(0.652) 

-0.131 
(0.184) 

(3) 

0.0304 
(0.763) 

-0.329** 
(0.000) 

(4) 

-0.0880 
(0.718) 

-0.139* 
(0.0880) 

7.642*** 
(0.000) 

760.2*** 
(0.009) 

6.069*** 
(0.000) 

7.354*** 
(0.000) 

2143.0*** 
(0.000) 

1470.0* 
(0.056) 

p-values  reported  in  parentheses,  with    ***  denoting  a  p-value  lower  than  0.01,  **  denoting  a  p-value  lower 
than 0.05, and * denoting a p-value lower than 0.10. P-values indicate the exact level of significance. 

Source: UCITS funds included in the sample are UCITS funds domiciled in an EAA country and marketed for 
cross distribution in another EAA country. Fund data are retrieved from the Morningstar (October 2017). For 
regulatory fees we refer to Annex 11. 

In conclusion, overall results support the conjuncture that a reduction in the regulatory costs 
related  to  going  cross  border  positively  affects  the  number  of  cross  border  funds.  Not 
surprisingly, ongoing cost considerations are more important than one-off costs. The effect for 
regulatory  fees  is  economically  moderate  compared  to  other  factors  related  to  the 
attractiveness  of  the  market.  The  economic  impact  of  total  costs  will  exceed  the  one  of 
regulatory  fees  (see  supra),  but  the  exact  economic  impact  is  not  quantifiable  due  to  data 
restrictions.  

In the sensitivity analysis we included fund flows as more direct proxy for local demand or 
examined  the  cross  border  penetration  rate.  Conclusions  on  the  overall  impact  of  cost 
elements remain qualitatively the same.  

157 Given that we only consider cross-sectional data, the sample size is relatively small.   

96 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
ANNEX 7: Synopsis report open consultation on cross-border distribution of funds  

The Commission open consultation on cross-border barriers to the distribution of investment 
funds across the Union was conducted between June and October 2016.  

With this consultation, that formed part of the Capital Market Union (CMU) action plan, the 
Commission  has  sought  further  details  and  evidence  from  stakeholders  including  fund 
managers, investors and consumer representatives in order to understand where and how the 
cross-border distribution of funds could be improved. In order to build upon earlier responses 
to  the  CMU  consultation  and  to  the  Call  for  Evidence,  respondents  were  asked  to  provide 
specific examples and - where possible - quantitative and financial evidence on the financial 
impact  of  the  barriers.  This  included  the  impact  of  marketing  rules,  administrative 
arrangements imposed by host countries, regulatory fees and notification procedures and also 
the most pertinent features of the tax environment.  

1.  About the respondents 

The  majority  of  responses  to  the  consultation  were  from  industry  associations,  representing 
circa  a  third  of  the  replies.  Individual  firms  represented  a  further  29%  of  responses.  The 
remainder of replies came from public authorities and a range of other respondents including 
consumer organisations and private individuals. 

Are you replying as: 
a private individual 
an organisation or a company 

Answers  Ratio 
4 
52 

6% 
81% 
13% 

a public authority or an international organisation 

8 

Type of organisation: 

Academic institution 

Company, SME, micro-enterprise, sole trader 

Consultancy, law firm 

Consumer organisation 

Industry association 

Media 

Non-governmental organisation 

Think tank 

Trade union 

Other 

Type of public authority 

International or European organisation 

Regional or local authority 

Government or Ministry 

Regulatory authority, Supervisory authority or Central bank 

Other public authority 

Answers  Ratio 

0 

15 

1 

2 

27 

0 

1 

1 

1 

4 

0% 

29% 

2% 

4% 

52% 

0% 

2% 

2% 

2% 

8% 

Answers  Ratio 

0 

0 

4 

4 

0 

0% 

0% 

50% 

50% 

0% 

97 

 
 
 
Roughly a quarter of responses came from the United Kingdom, with Belgium (most of the 
European association are based in Belgium), France, Germany, the Netherlands, Italy and 
Luxembourg providing most of the remaining replies. 

Of the firms and trade bodies responding, 37 - circa 60% were asset managers, 19% were 
banks and 10% were distributors/platforms.  

Field of activity or sector (if applicable): [respondents could select more than one field]  Answers 

Banking 

Distributors / platform 

Family office 

Institutional investors 

Insurance 

12 

6 

0 

8 

5 

Investment management (e.g. hedge funds, private equity funds, venture capital funds, money 
market funds, securities) 

37 

Law firm 

Legal advisors 

Market infrastructure operation (e.g. Stock exchanges) 

Pension provision 

Retail investors 

Retail investors representatives 

Other 

Not applicable 

2 

2 

4 

7 

8 

6 

7 

4 

The  overwhelming  majority  of  asset  managers  responding  market  both  UCITS  and  AIFs. 
Both  UCITS  and  AIFs  are  marketed  extensively  to  professional  and  retail  investors  –  but 
slightly more to professional investors for both categories of funds (see graph below).  

98 

 
 
 
Respondents reflect the use of a fairly even spread of channels used to distribute funds cross-
border,  with  direct  distribution,  online  distribution  and  use  intermediary  distributors  all 
represented. 

Responses  to  the  consultation  confirm  that  the  marketing  passport  is  widely  used  by  asset 
managers for the marketing of their funds across the EU. 87% of respondents to this question 
use  the  UCITS  marketing  passport  and  79%  use  the  AIF  marketing  passport  in  order  to 
market their funds in the EU. 

Question 1.5 – Do you use the UCITS passport in order to market your 
UCITS funds in other EU Member States? 
Yes 
No 
Don’t know / no opinion / not relevant 

Answers  Ratio 

27 
2 
2 

87% 
6% 
6% 

99 

 
 
 
Question 1.6 – Do you use the AIFMD passport in order to market your EU 
AIFs in other EU Member States? 
Yes 
No 
Don’t know / no opinion / not relevant 

Answers  Ratio 

23 
2 
4 

79% 
7% 
14% 

The  largest  markets  in  Europe  unsurprisingly  see  the  greatest  marketing  by  respondents  – 
given they are likely to have the biggest pool of investors, with significant representation also 
by the Member States traditionally acting as fund domiciles.  The majority of respondents to 
this question market in at least 10 Member States, with 10 respondents marketing to between 
10 and 15 MS, and three marketing to 27 or 28. 

100 

 
 
 
 
 
2.  Overall findings 

There  was  strong  support  from  respondents  for  the  aims  of  the  consultation.  Detailed 
responses clearly identify barriers than can be addressed to improve functioning of the single 
market  in  the  area  of  fund  distribution.  Lack  of  a  clear  definition  of  marketing  in  AIFMD, 
host  Member  State  marketing  requirements,  regulatory  fees,  and  taxation  were  the  main 
concerns  of  respondents,  followed  by  administrative  requirements  such  as  local  agents  and 
difficulties with the notification process. However, rather than any one these individual areas 
being the major problem, responses from the consultation suggest that the overall complexity 
of  the  requirements  and  their  cumulative  effects  seem  to  diminish  the  effectiveness  and  the 
efficiency of the EU passport.  

101 

 
 
 
A  number  of  Member  States  and  National  Competent  Authorities  (NCAs)  consider  the 
marketing passport of funds to function smoothly overall, citing the high and rising number of 
cross-border activities and low associated costs. They also refer to their initiatives to restore 
investor confidence and the risk of miss selling damaging that confidence.  

Other factors cited by industry, consumer groups, regulators and others stakeholders that have 
a (negative) impact on cross-border distribution include: 

  Vertical distribution models owned by national banks; 
  Size of the host market; 
  Cultural reasons, including a strong home bias and differing levels of consumer financial 

sophistication across the EU; 

  Cost involved in penetrating a foreign market (as in any industry); and 
  Lack of understanding/awareness by retail investors of their rights and mediation options. 

The challenge of encouraging broader distribution to smaller Member States is also clear from 
the responses to the consultation (see graph below), with a lack of demand or a small market 
size cited as a dominant factor for some of these countries (albeit responses were from a small 
number of managers).  

To  address  the  barriers  identified,  there  were  some  calls  by  industry  respondents  for 
harmonising  diverging  national  rules  and  practices  through  ESMA  rather  than  Level  1 
legislation. Reasons given for this were speed of implementation and regulatory stability. 

A  more  detailed  account  of  the  feedback  received  in  the  various  areas  covered  by  the 
consultation, is provided below. 

3.  Marketing 

When EU funds are marketed across borders to investors, they are usually required to comply 
with  national  requirements  set  by  host  Member  States.  In  the  case  of  AIFMD,  marketing  is 
defined but there are wide varieties in interpretation of what is considered marketing. In the 
case of UCITS Directive there is no definition at all. In summary, consultation responses: 

102 

 
 
  Argued for harmonised definitions of marketing in the AIFMD and the UCITS Directive, 
which address inconsistent application of the definition through carve-outs including for 
pre-marketing and reverse solicitation; 

  Identified a range of practical burdens impeding the use of the marketing passports, 

including pre-authorisation requirements, different disclaimer and disclosure 
requirements, registration procedures, and differing approaches in language requirements 
in marketing. 

  Did not identify examples out outright protectionism by Member States, but rather 

considered gold plating to be a greater challenge.  

  Saw a strong role for ESMA in harmonising requirements but there was a mixed reaction 

to expanding its remit. 

3.1.  Identifying the barriers 

a.  Definitions of marketing in the AIFMD and the UCITS Directive 

Diverging interpretations across Member States – AIFMD defines the scope of marketing 
as "a direct or indirect offering or placement at the initiative of the AIFM or on behalf of the 
AIFM  of  units  or  shares  of  an  AIF  it  manages  to  or  with  investors  domiciled  or  with  a 
registered office in the Union", whereas UCITS leaves marketing undefined and for member 
states to define.  However, many respondents noted a wide divergence  for both  directives in 
the activities Member States consider being marketing. 

Activities  which  may  or  may  not  be  considered  to  be  marketing  depending  on  the  Member 
State practises include, for example: 

  Pre-marketing and reverse solicitation (e.g. responses to Requests for Proposal); 
  Acquisition of a fund within discretionary portfolio management; 
 
  Transactions in the remuneration of professionals of the management company or 

Investments made by another investment fund; 

AIFM and transactions on their behalf; 
  Participation in conferences and events; and 
  Raising brand awareness. 

In  some  Member  States  (such  as  Germany),  the  same  definition  of  marketing  is  used  for 
UCITS  and  AIFs,  whereas  in  other  Member  States  it  differs.  This  was  argued  to  be 
inappropriate given the different needs of professional investors. In some jurisdictions, filing 
requirements are not just triggered when an activity is defined as marketing but also whether 
this is an initial registration of a fund or additional share classes have to be filed separately. 

The majority of respondents stating a view claimed that this difference materially affected the 
cross-border  distribution  of  investment  funds.  Respondents  (including  NCAs)158  called  for 
greater  convergence  and  clarity  in  order  to  reduce  costs  and  complexity  in  interpreting 
differing  requirements  across  the  EU  and  to  ensure  that  market  practices  beneficial  for 
managers  and  investors,  such  as  the  ability  to  shape  funds  to  meet  professional  investors' 
needs, are preserved. Nonetheless, those NCAs stressed the need to protect retail investors as 
they  are  a  more  vulnerable  group  of  investors.  For  this  reason,  one  NCA  considers  that  the 
concept of reverse solicitation should not apply to retail investors.  

158  These  NCAs  agree  with  the  approach  retained  by  the  Expert  Group  on  barriers  to  the  free  movement  of 
capital. The suggested definitions of pre-marketing and reverse solicitation are reasonable. 

103 

 
                                                 
Question 3.1a – Are you aware of member state interpretations of marketing 
that you consider to go unreasonably beyond of what should be considered as 
marketing under the UCITS Directive*? 
Yes 
No 

Don't know / no opinion / not relevant 

Question 3.1b – Are you aware of member state interpretations of marketing 
that you consider to go unreasonably beyond the definition of marketing in 
AIFMD? 
Yes 
No 

Don't know / no opinion / not relevant 

Question 3.1c – Are you aware of any of the practices described above having 
had a material impact upon the cross-border distribution of investment 
funds? 
Yes 
No 

Don't know / no opinion / not relevant 

Answers  Ratio 

18 
13 

9 

45% 
33% 
23% 

Answers  Ratio 

16 
10 

11 

43  
27% 
30% 

Answers  Ratio 

22 
5 

12 

56% 
13% 
31% 

Pre-marketing – Many stakeholders, and in particular asset managers, asked for recognition 
of pre-marketing and a harmonised approach to pre-marketing. This was mainly in the context 
of AIFMD but some respondents desired this for UCITS. Arguments here were that managers 
need to be able to determine investor needs prior to refining their products – and also cannot 
justify registering in  all jurisdictions with  the associated regulatory  and  administrative  costs  
without knowing if there is demand from investors. 

Pre-marketing reflects normal market practice in certain asset management segments targeting 
professional investors or high net worth individuals, such as private equity or venture capital. 
Unlike UCITS which are offered on a continuous basis to retail investors, many AIFs which 
are  closed-ended  or  which  only  offer  periodic  opportunities  to  invest  may  need  significant 
prelaunch commitments from professional  investors. It was argued that Member States which 
did  not  permit  pre-marketing  are  denying  their  investors  the  opportunity  to  participate  (and 
benefit  from)  initial  capital  rounds  on  advantageous  terms,  meaning  they  could  only 
participate in later rounds or the secondary market. 

b.  Practical burdens impeding the use of the marketing passport 

Respondents considered there to be a wide range of issues with the practical implementation 
of the marketing passport which impinge upon managers' use of it to distribute funds across 
borders.  Different  interpretations  of  what  constitutes  marketing,  as  described  above,  was 
considered the most burdensome challenge, together with different methods for managers to 
comply with the requirements such as approaches to approval and content of documentation 
including  the  marketing  documents.  A  number  of  respondents  reported  that  this  prevents  or 
reduces their marketing of funds in some Member States, particularly where they would have 
to change all their marketing materials. 

Pre-approval  of  marketing  documents  –  A  number  of  Member  States,  including  France, 
Belgium,  Finland  and  Croatia  require  NCA  pre-approval  of  documents  marketing  to  retail 
investors  for  some  or  all  funds.  This  pre-approval  is  significantly  more  time-consuming  in 
some  Member  States  than  others  and  can  take  up  to  four  months,  rendering  the  material 

104 

 
 
 
 
 
outdated when informing clients on evolving market conditions. The scope for changes means 
a lack of certainty over documentation and that it's not possible to reuse it across the EU. One 
trade  body  reports  this  has  led  to  managers  providing  less  explanatory  material  for  retail 
investors in Member States with a lengthy approval process. Other NCAs are more principles-
based and supervise marketing documents ex-post.  

Most NCAs also require marketing materials addressed to retail investors to be translated into 
a domestic language. This requirement is also seen as burdensome by some respondents. 

Small  differences  in  approach  can  cumulatively  add  to  cost  and  complexity  according  to 
respondents.  For  example,  while  some  Member  States  require  pre-approval  of  marketing 
documentation,  others  merely  require  copies  of  marketing  documents  to  be  lodged  with  the 
relevant  NCA  while  others  have  no  such  obligation.  Different  methods  for  complying  with 
marketing requirements, for example operational filing processes and how updates to KIIDs 
are submitted also add to costs. When filing, aspects such as feedback, deadlines and language 
requirements are sometime not clear. 

Some Member States also require some modifications to the KID or the prospectus or product 
sheet.  For  example,  Belgium  requires  particular  types  of  chart  to  be  used.  So  asset 
management companies need to have a specific process for producing Belgian product sheets. 

Several NCAs consider that taking additional measures based on random samples and/or as a 
response to complaints received is in the interest of (retail) investor protection. 

Distinction  between  retail  and  professional  investors  –  Some  asset  managers  also 
experienced different interpretations of what constitutes a retail or professional investor. They 
considered this to be a particular burden, though others did not. However, differences in rules 
in  marketing  to  retail  investors included different requirements  for investor disclosure (with 
some Member States supplementing  mandatory investor disclosure requirements), minimum 
subscription limits and different approaches to the definition of complexity. 

The  differing  approach  to  semi-professional  investors  was  also  cited,  including  by  private 
equity managers, who want to market to high net worth and sophisticated investors for whom 
the  MiFID  definition  is  too  stringent  (for  example  investments  are  made  infrequently  by 
Private Equity investors) and for whom the AIFMD does not allow the marketing on a cross 
border basis of AIFs to high net worth individual via the passport. 

The  NCA  of  one  Member  State,  which  was  considered  by  managers  to  have  relatively 
burdensome  requirements,  argues  that  these  requirements  do  not  in  practice  prevent 
marketing. It cited that since 80% of the funds marketed in its jurisdiction are from other EU 
Member States its requirements cannot be considered to act as major obstacles to marketing.  

105 

 
 
 
c.  Lack  of  harmonisation  on  marketing  requirements  for  funds  passporting  into 

Member States  

Respondents  generally  did  not  report  stricter  marketing  rules  being  applied  to  funds 
passported  in  to  Member  States  compared  to  domestic  funds.  Rather,  the  patchwork  of 
domestic  requirements  and  differing  application  of  rules  could  put  up  costs  and  act  as  a 
disincentive  to  exercising  widely  the  marketing  passport.  It  was  also  argued  that  the 
application  of  additional  requirements  for  funds  passporting  in  to  Member  States  was  itself 
against the principle of the marketing passport. 

Another  trade  body  raised  the  impossibility  for  registered  AIFMs  (sub-threshold  fund 
managers)  to  market  under  the  national  private  placement  regimes  into  Denmark  and  the 
Netherlands.  Neither  of  these  countries  allows  non-domestic  sub-threshold  fund  managers 
(i.e.  sub-threshold  managers  based  in  another  EU  country)  to  market  under  the  NPPR  into 
their domestic markets. 

Respondents  from  Liechtenstein  reported  that  their  attempts  to  use  the  marketing  passport 
were often rebuffed, despite being in the EEA and having full passporting rights. It is possible 
that  this  problem  has  eased  since  the  EEA  treaty  was  updated  to  include  AIFMD,  but  this 
needs to be reviewed. 

Two NCAs argued that any reduction of the ability of national competent authorities  to take 
action in their own markets – for example over marketing material from companies based in 
other Member States - could lead to investor detriment and a loss of confidence. This view is 
also shared in some extent by some other industry stakeholders.  

Several  NCAs  and  also  one  Member  State  noted  that  host  NCAs  know  best  their  markets' 
specificities, the level of financial education and all applicable regulatory requirements (e.g. 
taxation  law,  advertisement  rules,  consumer  protection  rules,  etc.)  and  are  more  able  to 
supervise marketing communication in their local jurisdiction.   

106 

 
 
 
 
Moreover,  one  NCA stated that care must  be taken to ensure that opportunities for fraud or 
failures  in  investor  protection  are  not  created  owing  to  the  lack  of  a  genuine  supervisory 
mechanism.  

One Member State mentioned that marketing communication rules for marketing investment 
funds  to  retail  investors  could  be  harmonized,  as  long  as  a  sufficient  level  of  consumer 
protection is safeguarded 

Question 3.3 – Have you seen any examples of Member States applying stricter 
marketing requirements for funds marketed cross-border into their domestic 
market than funds marketed by managers based in that Member State? 
Yes 
No 

Don't know / no opinion / not relevant 

Answers  Ratio 

6 
14 

13 

18% 
42% 
39% 

d.  Ease of finding and understanding Member State rules 

A  number  of  respondents  reported  that  Member  State  marketing  requirements  are  often  not 
clear and not translated into English or into another language. Requirements need to be found 
and  translated  by  the  asset  managers  or  its  advisors.  In  consequence,  asset  managers  and 
distributors  face  a  risk  of  having  an  inaccurate  translation  and  incur  extra  costs  for  hiring 
external counsel. 

It is often not clear at first glance which (local) marketing requirements apply exactly unless a 
manager  or  distributor  has  very  detailed  knowledge  of  the  applicable  local  law.  Local 
regulators often give additional guidance on how to interpret local law which is not always in 
a single rule book. There are also Member States that refer to non-financial legislation (such 
as regulation on advertising and marketing practices (Spain, Sweden). In practice this means 
that  external  counsel  needs  to  be  engaged  to  determine  how  to  comply  with  local  rules. 
Regular changes to marketing requirements introduce additional cost, meaning such costs are 
incurred on a regular basis. 

In  some  EU  Member  States,  guidance  is  not  available  in  writing.  Direct  contact  with  the 
regulators  can  provide  the  clarity  required,  but  then  managers  claim  that  there  is  no  way  to 
know whether this guidance is arbitrary, applied consistently to other fund managers or likely 
to  change  the  next  time  the  same  question  is  asked,  particularly  if  a  different  person  in  the 
same office is contacted. 

Some responses also noted that the scope of what Member States considered to be marketing 
did not always appear to be publicly available – and that where this was available, it needed to 
be clearer, for example on whether pre-marketing is allowed.   

The  interaction  with  MiFID  –  which  provides  for  specific  rules  regarding  marketing 
communication, was also considered to be problematic by a limited number of respondents – 
with one manager noting that the rules are interpreted differently among the Member States, 
for  example  regarding what  is  allowed  to  show  as  past  performance,  which  costs  should  be 
taken into account etc.  

Question 3.4 – Are domestic rules in each Member State on marketing 
requirements (including marketing communications) easily available and 
understandable? 
Yes 
No 

Don't know / no opinion / not relevant 

Answers  Ratio 

4 
23 

8 

11% 
66% 
23% 

107 

 
 
 
3.2.  Addressing the barriers 

a.  Cross-EU alignment of marketing rules 

Question 3.15 – Do you consider that rules on marketing communications* 
should be more closely aligned in the EU? 
Yes 
No 

Don't know / no opinion / not relevant 

Answers  Ratio 

36 
3 

6 

80% 
7% 
13% 

An  overwhelming  majority  of  respondents  expressing  a  view  agreed  that  marketing 
communications should be more closely aligned, in order to eliminate duplication, divergence 
and conflict among national regulators. This would bring benefits of simplicity and reduced 
administrative burden. 

The majority of responses (including responses from NCAs) focused on the definition of what 
constitutes  marketing,  as  described  in  responses  to  earlier  questions  (in  particular  pre-
marketing, reverse solicitation, and practical activities that should be considered marketing). 
However, a single set of requirements for the content of marketing communications was also 
requested by a significant number of respondents, which sought greater convergence on areas 
falling outside the KID / KIID: 

  Examples of divergence given are the calculation of performance and cost disclosures  – 

divergence in the components, the basis and the time period of measurement 

  The benchmarking of past performance – divergence in the specification of benchmarks 

and disclosure of benchmarks in key investor information and the prospectus 

  Risk warnings – divergence in the definition, content and thresholds for risk disclosure 

  The treatment of disclosure of intra-group service arrangements. 

  Prior approval of pre-approval for marketing materials. One respondent requested at least 
a  prescribed  time  period  for  the  host  Member  State  review  of  UCITS  marketing 
communications required under local rules. 

108 

 
 
One  trade  body  referred  to  the  potential  for  MiFID  II  and  PRIIPs  to  reduce  discrepancies 
between  national  practices  regarding  marketing  communications  over  the  next  few  years  – 
and that major measures should not be taken before the impact of these is understood. They 
also noted a general statement confirming that all marketing material compliant with MiFID II 
can be used in any jurisdiction for direct distribution would be helpful. 

Another request was for a single definition of "obligatory investor disclosures" under UCITS.  

One  company  noted  in  particular  the  need  to  update  guidance  on  the  use  of  marketing 
technology and the development of social media on a pan-European Level, using a benchmark 
for  example  the  Social  Media  Foundation  initiative.  Most  Member  States  offer  no  specific 
guidance on the use of websites or online communication as a marketing tool. 

A number of trade bodies argued that harmonisation should be undertaken by ESMA through 
guidelines  to  harmonise  pre-marketing  and  reverse  solicitation  based  upon  existing  national 
practices,  complemented  by  positive  examples  of  what  should  be  considered  as  pre-
marketing. A small number of responses also referred positively to the work being carried out 
by  the  Expert  Group  on  the  Free  Movement  of  Capital  to  achieve  consensus  through 
voluntary agreement. 

Increased dialogue between the national supervisory authorities would also be deemed helpful 
– for example publishing examples of good and bad practices, feedback on peer reviews and 
individual thematic reviews. 

National  authorities  and  competent  authorities  were  somewhat  more  cautious.  One  Member 
State  supported  closer  alignment  provided  a  sufficient  level  of  consumer  protection  is 
safeguarded – citing description of the investment strategy, risk profile, fees, presentation and 
the wording of information about the funds as being areas that could be harmonised for retail 
investors  –  this  wouldn’t  be  relevant  for  marketing  materials  targeted  at  professional 
investors.  Another  Member  State  noted  that  its  regulator  adopts  a  risk-based  approach 
whereas  others  use  a  rule-based  approach  –  as  mentioned  also  by  other  Member  States  and 
NCAs  further  work  through  ESMA  or  voluntary  arrangements  to  assess  the  scope  to 
harmonise more could be helpful though it was important to remain some flexibility so that 
regulators  more  familiar  with  local  consumers’  needs  could  choose  the  most  suitable 
approach. 

One other Member State argued that marketing communication requirements should depend 
of  the  type  of  fund.  The  marketing  communication  requirements  for  complex  investment 
funds (e.g. private equity or high leverage funds) to retail investor should be more detailed. 
Marketing requirements for plain vanilla investment funds could be more general containing 
the main elements of the investment fund. One asset manager considered that complex funds 
or  high  leverage  funds  should  be  marketed  to  retail  investors  with  extra  caution  and  clear 
explanation. In consequence, the marketing requirements on marketing communication should 
take the level of complexity of the funds into consideration 

One  trade  body  argued  that  harmonised  requirements  should  include  recognition  that  any 
information document produced under a mandatory requirement should not automatically be 
considered a marketing activity.  

b.  Harmonising marketing communications for other types of investment products 

(other than investment funds) 

There  were  a  range  of  responses  on  this  topic.  Responses  in  favour  noted  the  potential  to 
reduce costs and improve comparability for consumers: 

109 

 
  Further  harmonisation  based  upon  MiFID  –  especially  with  regard  to  insurance-based 
investment  products  covered  by  IDD  –  where  EIOPA  guidance  should  be  given 
specifying  how  the  principle  of  fair,  clear  and  not  misleading  information  should  be 
applied. 

  Exchange traded products (other than UCITS ETFs which are already covered by UCITS, 
structured notes and other instruments marketed to retail investors) should be covered. 

  The PRIIPs approach of ensuring a level playing field across all investment types should 
be further enhanced by moving towards a set of marketing rules covering other types of 
investment product such as insurance, though one national industry association noted that 
insurance  products  are  already  subject  to  similar  marketing  disclosure  rules.  Several 
Member States and NCAs expressed a similar view that marketing requirements should 
not only be harmonised for funds but also to other products marketed to retail investors. 

  Article  15  (now  21)  of  the  Prospectus  Regulation  foresees  general  principle  that  are 
applicable  to  advertisements  for  public  offerings  of  securities159    and  give  the  power  to 
the host authority to exercise control on the advertising activity. Several NCAs and one 
Member State are also in favour of a harmonised approach across investment products.  

  One respondent  argued that  ESMA's initial  focus should be on harmonising disclosures 
for  investment  funds.  Several  investors  associations  also  advocated  harmonising 
advertisements for public offerings of securities. 

  The  few  respondents  giving  reasons  for  why  there  should  be  not  harmonisation  argued 

that the impact of PRIPS should be assessed first. 

Question 3.16 – Is there a case for harmonising marketing communications for 
other types of investment products (other than investment funds)? 
Yes 
No 

Don't know / no opinion / not relevant 

Answers  Ratio 

13 
5 
16 

38% 
15% 
47% 

c.  The role of ESMA and NCAs in relation to the supervision and the monitoring of 
marketing communications and in the harmonisation of marketing requirements 

There were a range of views on the relationship between ESMA and Competent Authorities, 
focusing on different features of ESMA's work. 

Some  supported  the  status  quo,  with  ESMA's  contribution  to  the  EU  single  rulebook 
providing a degree of guidance. It would then be up to NCAs to interpret and implement the 
guidance, working in close cooperation with NCAs.  

There was considerable support from industry, but also from Member States and NCAs, for 
ESMA providing guidance through guidelines - or to a lesser extent through Level 2 based on 
ESMA advice - on the marketing concepts subject to different interpretations in order to avoid 
inconsistent  implementation.  One  manager  cautioned  against  further  harmonisation  beyond 
this as it could take too long to achieve. 

159  Article  21.3  of  the  Prospectus  Regulation:  Advertisements  shall  be  clearly  recognisable  as  such.  The 
information contained in an advertisement shall not be inaccurate or misleading. The information contained in an 
advertisement shall also be consistent with the information contained in the prospectus, where already published, 
or with the information required to be in the prospectus, where the prospectus is published afterwards 

110 

 
                                                 
Other contributors sought the eventual development of a maximum harmonised pan-European 
set of cross-border  marketing  guidelines, distinguishing in  the guidelines between retail and 
professional  investors  and  including  examples.  The  contributors  highlighted  the  benefits  in 
their being able to market across the EU with one set of marketing documents. 

Some  respondents  argued  that  ESMA  should  play  an  additional  role,  becoming  a  common 
repository for marketing passport notifications and AIFMD regulatory reporting. 

A  number  of  industry  respondents  were  keen  for  ESMA  to  reduce  costs  for  managers  by 
publishing on its website, ideally in English (and possibly German and French) the marketing 
requirements of each member state. 

Very few respondents saw ESMA taking on a direct supervision and monitoring role, with the 
argument  instead  made  that  national  competent  authorities  are  best  placed  to  undertake  this 
role in the interests of efficiency and investor protection. One NCA argued that ESMA could 
only  begin  fulfilling  the  role  of  regulating  marketing  communications  once  the  legal 
provisions are aligned. This means that ESMA would need additional staff in order to check 
marketing communication in numerous languages. In consequence, this NCA concluded that 
developing  new  roles  for  ESMA  that  are  now  already  taken  by  the  NCA  seems  to  be  less 
desirable. 

Two consumer groups argued that ESMA and NCAs should play an active ex-ante role. Two 
investor groups proposed that all Member States should require ex-ante approval of marketing 
communications. 

A number of NCAs argued the need for NCAs to be able to take appropriate action in their 
Member State, given their knowledge of  their national market and its specificities including 
regulatory requirements and levels of investor education.  This might include addressing, for 
example, aggressive marketing to retail investors of complex products with the potential for 
high capital losses. This is particularly the case where the home authorities of NCAs fail to act 
or do not have resources to act. 

d.  Degree of harmonisation when marketing to retail investors 

Most respondents were in favour of at least general principles being imposed at the EU level 
for marketing communications aimed at retail investors, but respondents – including industry 
responses – were split over whether detailed rules would be desirable as well.  

Most of the industry respondents who were supportive of both general principles and detailed 
rules  argued  that  they  were  necessary  to  reduce  the  difference  in  approach  between  NCAs, 
allowing greater efficiency in marketing – though there was some acknowledgement that this 
would  take  time  and  the  prioritisation  would  be  needed.  Most  of  the  asset  manager 
representatives  suggested  that  ESMA  guidelines  would  be  more  appropriate  than  level  1 
regulation, given the time and detail needed. 

They  noted  that  introducing  more  detailed  requirements  would  impose  further  burdens,  but 
that general principles such as compliance requirements laid down in MiFID II should also be 
sufficient would be helpful. 

Several  respondents  noted  the  need  to  note  that  sophisticated  investors  could  sometimes  be 
deemed  ‘retail’  and  that  the  principle  of  marketing  communications  facilitating  availability 
was an important one.  

111 

 
The  majority  of  respondents  considered  that  it  was  appropriate  for  retail  marketing 
communication  requirements  to  depend  upon  the  type  of  fund  –  where  funds  are  more 
complex or there is a higher potential risk, for example. This would be necessary in order to, 
for example, provide  greater  detail so that  the risk or  complexity  could be understood or  to 
draw the attention of investors to a specific characteristic. 

One manager argued that specific requirements should be linked to the MiFID target market 
analysis,  with  the  marketing  of  products  not  designed  for  retail  clients  or  execution  only 
distribution  reflecting  this  decision,  and  differentiation  between  direct  and  intermediated 
marketing. 

Managers arguing against this dependence argued that the prospects of each fund have to be 
explained in a transparent, easy-to-understand, balanced and comprehensive way in any case 
– and that different types of disclosure could prove confusing, burdensome and costly. 

Consumer  and  user  groups  argued  that  marketing  communication  requirements  should  be 
applicable to all types of fund, though detailed rules may reflect specificities. The argument 
was also made that AIFs sold to retail investors should be subject to the same requirements as 
UCITS.  Consumer  and  used  groups  also  stated  that  marketing  communications  should  be 
made available in the local languages of the Member State in which the fund is marketed. 

Two investor associations considered that detailed marketing rules should be harmonised at 
ESMA level (level 2 or level 3) in order to avoid fragmentation of the EU market. However, 
the  actual  supervision  and  enforcement  should  stay  at  national  level,  with  the  NCAs.  In 
addition, they suggested that marketing communications should be approved ex-ante on the 
basis of detailed ESMA requirements (level 2 or level 3).   

Question 3.19 – Do you consider that the requirements on marketing 
communications should depend on the type of funds or the specific 
characteristics of some funds (such as structured funds or high leverage funds) 
when those funds are marketed to retail investors? 
Yes 
No 

Don't know / no opinion / not relevant 

Answers  Ratio 

16 
9 

3 

57% 
32% 

10% 

112 

 
 
 
e.  Degree of harmonisation when marketing to professional investors 

The  majority  of  respondents  argued  that  detailed  requirements  set  at  EU  level  were  not 
required for distribution to professional investors; specific principles were sufficient. 

Respondents  favouring  detailed  requirements  argued  that  as  Member  States  were  in  some 
cases requiring detailed rules, it would be better to ensure these were consistent, in order to 
reduce costs and ensure a level playing field. However, the rules would not have to be as strict 
as those for retail investors. 

Respondents arguing against detailed requirements made the case that general principles only 
should apply – in practice professional investors would be unlikely to use the information that 
was specified under detailed requirements as it would need to be tailored to their own specific 
needs  and  other  regulation  they  had  to  comply  with.  Professional  investors  are  also  more 
likely to undertake their own due diligence. 

A number of respondents agreed that only general principles should apply, but considered it 
important to clarify that professional investors would genuinely need expertise in the financial 
sector. For example, a public body or high net worth individuals without this specialism may 
need further protection. 

4.  Costs of cross-border distribution 

Consultation respondents were asked about the overall costs of distributing funds  – in terms 
of  work  to  comply  with  regulations  and  costs  of  distribution.  In  practice,  few  respondents 
were able to indicate costs directly and solely linked to cross-border distribution by type and 
Member State because of the complexity involved and sometimes due to the confidentiality of 
the  information.  However,  answers  given  by  some  respondents  can  be  taken  as  illustrative. 
Regulatory fees are covered separately in the next section. 

According to respondents, factors that can trigger costs or influence their level include: 

  Individual price schedulers of service providers; 
  Openness of the distribution network; 
  Frequency of documentation updates; 
  Fund volume; and 

113 

 
 
  Complexity and different national requirements of host markets (e.g. appointment of 

paying agents, specific marketing requirements). 

As an illustration, two trade bodies ranked the regulatory costs of asset managers in relation to 
cross-border distribution as: 

1.  Administrative arrangements: principally the costs of local facilities/local agents 
2.  Marketing  requirements:  such  as  the  obligation  to  provide  translation  of  documents, 
specific  document  and/or  supplement  (e.g.  prospectus  supplement),  development  of 
multi-market  websites,  the  local  marketing  communication  rules  which  are  not 
harmonised in the EU, etc.  

3.  Legal costs: third party (law firms, consultants, etc.) 
4.  Legal costs: internal legal analysis 
5.  Other (e.g. notification and maintenance of notification, filing requirements, translation) 

a. 

UCITS costs 

One stakeholder reported that on average, for an umbrella UCITS with 5 sub-funds that are 
registered in key markets in the EU such as the United Kingdom, Germany, France, Austria, 
Italy, Spain the registration and distribution costs are estimated at €150,000 to €200,000 per 
year. Costs associated with tax reporting in the UK, Germany and Austria (also Switzerland) 
make  up  the  biggest  part  of  that  amount,  followed  by  costs  for  the  appointment  of  local 
agents, such as paying agents of local representatives. Legal advice on compliance marketing 
is also a significant cost.  

Local representatives  and/or paying agents are mandatory  in  most  EU jurisdictions (e.g. the 
United  Kingdom,  Germany,  France,  Italy,  Spain,  Austria,  Nordic  countries).  According  to 
industry  respondents,  local  agents  charge  on  average  from  €5,000  to  €10,000  on  an  annual 
basis,  but  are  rarely  used  in  practice,  unless  they  are  performing  additional  distribution  or 
trading services. 

Table – Example of additional costs (without taking into account tax reporting costs and regulatory fees) that 
have to pay an UCITS manager when it markets its funds across the EU to retail investors 

Member States 
AT 

Translations costs 
KIID Translations 
€150/€200 per KIID 

Service Provider Fees* 
Information/Paying Agent – 
Minimum Annual Fees €6,000 

DE 

FR 

Switzerland 
(Non-Qualified 
Investors) 

KIID Translations 
€150/€200 per KIID 

Information Agent –  
Minimum Annual Fees €6,000 

KIID Translations - 
€150/€200 per KIID 

French Centralizing 
Correspondent –  
Minimum Annual Fees €6,000 

Circa CHF 15,000 

Swiss Rep –  
Initial Fees CHF 10,000 

Annual Fees CHF 10,000 for 1st 
sub fund 

CHF 7,000 for additional sub 

Additional Costs 
Third Party registration 
services: 
Initial: €2,000 
Annual: €4,000 
Addendum to Prospectus is 
required. (Legal Costs) 

Third Party registration 
services: 
Initial: €2,000 
Annual: €4,000 
Third Party registration 
services: 
Initial: €2,000 
Annual: €4,000 
Third Party registration 
services: 
Initial: €2,000 
Annual: €1,000 

114 

 
 
 
 
 
 
 
 
UK 

KIID Translations - 
€150/€200 per KIID 

funds 

Paying Agent – CHF1,500 – 
3,000 per fund 
Facilities Agent –  
Minimum Annual Fees €6,000 

Third Party registration 
services: 
Initial: €2,000 
Annual: €4,000 

b. 

AIF costs 

Aside  from  regulatory  fees160,  overall  costs  for  obtaining  the  AIFM  licence  are  significant 
according to respondents, as well as cost for reporting. In addition, the costs of filing Article 
42 AIFMD notifications for AIFs in multiple jurisdictions are significant and each country has 
specific requirements which can require customisation of formatting and method of delivery 
of the documents. 
 The  level  of  the  various  types  of  costs161  (in  particular  legal  costs,  regulatory  fees  and 
administrative  arrangements)  in  relation  to  the  overall  fund  costs  varied  and  depend  on 
various parameters such as individual price schedules of service providers, frequency of fund 
prospectus updates as well as the fund volume, etc.  

The national requirements of host Member States (e.g. appointment of a local paying agents, 
up  to  the  different  level  of  marketing  costs)  also  have  a  direct  impact  on  the level  of  costs. 
Based upon an analysis of a sample of individual funds, a trade body estimated the cost level 
between 1% and 4% of the overall fund costs in some individual situations.  

Even where direct costs are relatively low, coordinating the legal and organisational aspects 
of  a  cross  border  distribution  require  dedicated  resources  due  to  deviating  requirements  of 
different  markets.  Consequently,  respondents  considered  that  any  harmonisation  would 
contribute to cost saving. 

Table – Example of additional costs (without taking into account tax reporting costs and regulatory fees) that 
have to pay an AIF manager when he markets its funds across the EU to professional investors 

Member State 

AT 

DE 

FR 

Switzerland 
UK 

Translations 
costs 
N/A 

N/A 

N/A 

N/A 

Service Provider Fees*  Additional Costs 

N/A 

N/A 

N/A 

N/A 
N/A 

Third Party registration services: 
Initial: €3,000 

Third Party registration services: 
Initial: €3,000 

Third Party registration services: 
Initial: €3,000  
N/A  
Third Party registration services: 
Initial: €3,000 

160 See section 7 focused on Regulatory fees. 
161  Other  costs,  such  as  retrocession  fees  payments  to  the  distributors  that  vary  from  country  to  country  or 
distribution  situations  are  excluded  from  the  analysis,  the  percentage  of  costs  related  to  the  overall  fund  costs 
would significantly raise. 

115 

 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
5.  Regulatory fees 

Respondents to the Call for Evidence and the CMU Green Paper have referred to the range of 
regulatory  fees  charged  by  host  Member  States  as  hindering  the  development  of  the  cross-
border  marketing  of  funds  across  the  EU.  A  preliminary  assessment  by  the  Commission 
services showed that the level of fees levied by host Member State on asset managers varies 
considerably, both in absolute amount and how they are calculated, including some Member 
States who may not apply fees.  

The consultation sought further evidence from NCAs and industry on the level of regulatory 
fees, and to what extent they constitute a barrier to the cross-border distribution of funds.  

The  vast  majority  of  respondents  do  not  consider  regulatory  fees  to  be a  significant  barrier. 
However, they consider the cumulative effect of the regulatory fees with other requirements 
to constitute such a barrier. The responses162 received confirm the initial expectations of the 
Commission and set out the following issues: (a) lack of transparency; (b) diverging level of 
fees  levied;  (c)  lack  of  harmonisations  regarding  the  method  of  calculation  and  payment  of 
fees; (d) absence of a deregistration procedure; and (e) absence of an invoice. More details are 
set out below.  

a.  Lack of transparency 

In order to compare regulatory fees, consultation respondents were asked to set out costs for 
two  examples:  1)  a  UCITS  fund  with  5  sub-funds  marketed  on  cross-border  basis  to  retail 
investors and 2) an AIF with 5 sub funds marketed to professional investors on cross border 
basis. 

Responses received vary considerably; this lack of consistency in responses to such a simple 
scenario  suggests  that  it  is  challenging  for  asset  managers  -  and  especially  small  ones  -  to 
determine  the  level  of  regulatory  fees  charged  by  host  competent  authorities.  Nonetheless, 
responses illustrated the considerable variance in fees between NCAs. 

Example 1: an asset manager will have to pay €1,500 as one off fees and €10,275 yearly to 
market its UCITS with 5 sub-funds in Belgium when the stakeholders expect to pay between 
€1,500-1,885 for one off fees and €10,275 - €12,900 for ongoing fees.  

Example 2:  an asset manager  will  have  to  pay €4,000 of ongoing  fees to  market its UCITS 
with 5 sub-funds in Italy when stakeholder expect to be charged between € 0 and €4,000 of 
one off fees and between €4,000 and €10,800 of ongoing fees.  

The  uncertainty  illustrated  is  likely  due  to  a  lack  of  transparency  over  regulatory  fees 
frameworks,  including  that  they  are  not  always  available  in  languages  other    than  those 
accepted in the Member State. A further difficulty reported by managers is that an invoice is 
not  always supplied  by the  NCA  to  the  entity  acting  on  behalf  of  the  asset  manager/  or  the 
asset manager.   

b.  Level of fees charged 

The level of fees charged by host competent authorities varies significantly from one Member 
State  to  the other.  Fees  charged  for a  single  UCITS  marketed  to  retail  investors  are  usually 
comprised  of  both  one-off  and  ongoing  fees.  According  to  respondents,  the  level  can  vary 
from: 

162 A vast majority of the respondents has replied to the question on regulatory fees via the European trade body 
for investment funds. 

116 

 
 
                                                 
-  €0 to €2,500 for the one-off fees, 

-  €0 to €4,000 for the ongoing fees.  

Host  NCAs  argued  that  fees  are  necessary  in  order  to  fund  their  supervisory  functions,  in 
particular marketing supervision, with one NCA noting the importance of supervisions costs 
being paid by those institutions being supervised. 

Many national regulators levy fees for the marketing of AIFs in their jurisdiction. Depending 
on  the  level  of  the  fee,  this  additional  charge  is  likely  to  make  the  AIFMD  passport  less 
attractive.  

One  national  trade  association  stated  that  while  some  national  regulators  apply  no  or 
reasonable fees, the fees levied by the other regulators seem to be particularly high. The fees 
levied by most regulators do not seem to be excessive, but still not proportionate to the work 
performed.  

c.  Lack of harmonisation in the calculation and differences in terms of payment 

Depending on the jurisdiction, the regulatory fees take the form of a tax levy set by national 
parliament  or  fees  determined  by  the  market  authority  of  the  host  country  or  ministry  of 
finance.  

These fees may in turn be broken down into several different categories, including the cost of 
applying to enter the country, the cost of the passport itself, publication and public offering 
fees,  plus  potential  annual  or  monthly  supervision  fees.  Several  Member  States  draw  also  a 
distinction based on the number of single funds, umbrella funds and sub-funds while others 
does not. These fees may further increase depending on the number of sub-funds or the type 
of funds (AIF versus UCITS) or if the funds is marketed to retail or not. Other Member States 
provide  a  discount  for  the  first  sub-fund  ,others  have  capped  the  level  of  fees  or  decreased 
marginal costs after the first few sub-funds. 

The  regulatory  fees  are  calculated  in  different  ways  across  the  EU:  some  Member  States 
charge  one  off  fees  and  ongoing  fees,  while  others  charge  only  one  or  none.    In  several 
Member  States  when  the  AIF  is  marketed  to  professional  investors  there  is  no  fee  charged, 
however in most Members States one off fees and/or ongoing fees apply.  

Furthermore, the fees structure differs between Member States, and may apply at the level of 
the  fund,  the  umbrella  and  sometimes  the  level  of  the  sub-fund.  Moreover,  the  method  of 
calculation varies - for example in some Member States, no fees are levied beyond  a certain 
number  of  sub-funds  or  marginal  fees  are  lower,  whereas  other  Member  States  do  not  take 
into account the number of sub-funds.   

More details on the calculation methodology of regulatory fees in each Member State can be 
found in annex 11.  

d. 

Absence of invoice received 

According to industry respondents, in some Member States (e.g. Germany and Austria) pre-
payment  is  required  for  marketing  notifications;  in  others  this  is  not  expected.  In  Ireland, 
written confirmation to the regulator in a prescribed format of the appointment of the paying 
agent  is  required;  although  this  is  not  required  elsewhere.  In  the  UK,  Ireland,  Denmark, 
Austria and Germany, there is a requirement for a country specific annex to be appended to 
the fund Prospectus. Overall, this variation in practices is costly and time consuming to keep 
track of and limit the benefits of the marketing passport. 

117 

 
 
Some  stakeholders  describe  not  receiving  invoices  for  regulatory  fees.  This  can  create 
accounting difficulties – and they may be obliged to wait for reminder notices in order to pay 
the  regulatory  fees.  Sometimes,  this  can  lead  to  delay  the  passporting  process  as  proof  of 
payment is required by some host NCAs to be send to them before marketing commences. 

6.  Administrative requirements 

The consultation has sought feedback on (a) what arrangements and requirements imposed by 
host  Member  States  are  barriers  to  the  cross-border  distribution  of  funds,  including 
quantitative  and  financial  evidence  of  the  impact  of  these  barriers.  Additionally,  the 
consultation has sought input on (b) what administrative arrangements would be necessary to 
support and protect (retail) investors and (c) possible measures to improve the efficiency and 
effectiveness  of  administrative  arrangements  in  Member  States.  Specifically  from  the 
perspective of (retail) investors, the consultation has sought feedback on (d) the problems and 
obstacles when investing in funds domiciled in another Member State.        

a.  Identified barriers 

Local  (paying)  agents  –  Almost  all  respondents  pointed  to  the  national  requirement  to 
appoint  a  local  (paying)  agent  or  a  transfer  agent  for  UCITS  or  AIFs  marketed  to  retail 
investors  as  an  unnecessary  and  costly  barrier  to  the  cross-border  distribution  of  funds. 
Respondents note that the initial and ongoing costs of appointing local agents are significant – 
it can be in the region of up to €10,000 a year163 per agent or 47 bps – while they are hardly 
used  by  investors  and  fund  managers.  The  appointment  of  a  local  agent  is  also  time-
consuming and can lead to significant delays in marketing funds, as negotiating the agreement 
involves the management company's legal and business teams as well as the fund's depository 
and operational oversight teams.   

A  large  number  of  respondents  –  including  some  Members  States  and  NCAs  –  consider 
technological  developments  to  have  negated  the  need  to  appoint  a  local  agent,  as  access  to 
information,  payments  and  issue  handling  services  can  be  provided  by  other  means,  most 
notably electronically. However, some respondents (banks and financial intermediaries, who 
typically act as local agents) caution against removing this requirement with the argument that 
local  agents  also  actively  support  the  functioning  of  the  asset  manager  by  providing  a  full 
range of services and act as a point of contact and are thus useful from an investor protection 
perspective.  In  this  context,  some  of  these  respondents  noted  that  even  if  new  information 
channels have been introduced over the recent years, not all end-investors are systematically 
equipped to access information electronically. In addition, they may need to exchange with an 
interlocutor in a language they can fully understand. They also noted that local agents are a 
privileged contact for NCAs who  may have some difficulties in getting access to  a relevant 
interlocutor of an EU foreign asset management company. 

Besides  questioning  the  need  to  appoint  local  agents,  many  respondents  consider  the 
diverging requirements between Member States regarding the appointment and role of local 
agents  as  a  significant  barrier.  Consequently,  several  respondents  would  welcome  further 
harmonisation in this area.  

Some  respondents  noted  that  the  appointment  of  local  agents  can  also  be  required  for  AIFs 
marketed to investors and called for harmonisation of these requirements. In addition, when 

163  One  trade  body  estimates  the  costs  for  local  agents  at  €5.000-10.000  per  agent  on  an  annual  basis  (in  their  section  4 
response), One asset manager (markets UCITS & AIFs to professional investors) estimates costs at between 0bps and 47bps 
for MS it markets in. Another asset manager estimates 3-6 bps per fund for administrative arrangements. 

118 

 
 
                                                 
AIFs  are  marketed  to  retail  investors,  Member  States  can  impose  stricter  requirements  than 
those applicable to AIFs marketed to professional investors. Certain Member States seem to 
have  used  this  option  to  require  the  appointment  of  local  agent(s)  when  marketing  AIFs  in 
their jurisdiction. However, since marketing of AIFs to retail investors is not harmonised on 
an EU-level and these AIFs not eligible for the marketing passport, this is outside the scope of 
this consultation.  

Additional  disclosure  requirements  -  Several  respondents  mentioned  that  certain  Member 
States require additional documentation to be provided with the prospectus (addenda) for the 
benefit of local investors, sometimes subject to pre-approval by the NCA, including proof of 
payment  of  the  regulatory  fees.  This  delays  cross-border  marketing  and  adds  costs  as  local 
expertise is needed to complete and file the documentation. 

Other barriers – One respondent also mentioned the lack of a depositary passport for UCITS 
as  a  barrier  to  the  cross-border  distribution  of  funds,  although  this  was  not  further 
substantiated.  Another  respondent  pointed  to  the  requirement  in  some  Member  States  (e.g. 
Poland) to operate a registry of local unit/shareholders.  

b.  Ensuring investor protection 

No  local  administrative  arrangements  necessary  –  When  asked  what  local  administrative 
arrangements  would  be  necessary  to  support  and  protect  retail  investors  when  marketing 
funds cross-border, a large majority of the respondents  – including a consumer association– 
answered that no local (additional) administrative arrangements are necessary. In  their  view 
the  requirements  that  apply  to  the  fund  in  the  home  Member  State  and  the  technology 
available  to  receive  cross-border  payments,  remotely  access  information  and  contact  the 
distributor or the management company are sufficient to protect and support retail investors. 
Additionally, a consumer association [Better Finance] stressed that it is essential that the all 
facilities and administrative arrangements are available in the local language of the Member 
state where the fund is marketed. Some respondents also referred to the draft RTS under the 
ELTIF  Regulation,  which  would  allow  management  companies  to  provide  their  services 
electronically.  

Even  so,  several  respondents  consider  that  instead  of  existing  arrangements,  a  requirement 
should be in place to ensure access to the selling intermediary and asset manager via a number 
of  means:  (a)  online  access  to  information  related  to  the  investment;  (b)  possibility  to 
introduce  complaints  via  electronic  means  and  in  a  language  customary  in  the  sphere  of 
international  finance;  and  (c)  access  to  information  provided  by  NCAs  on  funds  that  are 
notified for marketing in their country of residence. The creation of an online repository with 
(detailed) information on the funds available in a particular jurisdiction is also advocated by 
some  other  respondents,  although  they  do  not  specify  who  should  be  responsible  for 
administering such a repository.   

Distinguishing between retail and professional investors – Since most respondents do not 
think administrative arrangements physically present in the host Member State are necessary 
for retail investors, respondents think this is equally so for professional investors. In general, 
respondents  consider  that  professional  investors  should  be  treated  differently  due  to  their 
more extensive knowledge and ability to access the most relevant information.   

c.  Measures  suggested  by  respondents  to  increase  efficiency  and  effectiveness  of 

administrative arrangements 

119 

 
 
 
Remove requirement to appoint local agents – Consistent with the provided input regarding 
the  main  barriers  to  the  cross-border  distribution  of  funds,  many  respondents  recommend 
removing  the  requirement  to  appoint  local  agent(s)  in  the  host  Member  State  for  UCITS 
marketed on a cross-border basis.  

Encourage further adoption of digital technologies – Building upon the recommendation to 
remove  the  requirement  to  have  a  physical  presence  in  the  host  Member  State,  some 
respondents  desired  a  more  encouraging  regulatory  environment  towards  the  use  of  digital 
technology and digital distribution of funds.  

Improving  settlement  of  cross-border  transactions  –  Multiple  respondents  recommend 
removing  limitations  with  regard  to  the  processing  of  transactions  of  fund  units  by  a  local 
distributor directly or indirectly through the management company, the custodian bank or the 
transfer agent of the fund. 

d.  Problems with cross-border investing – investors' perspectives 

Question 6.9 – In general have you experienced any problems in being able to 
obtain information on, and invest, in foreign EU funds? 
Yes 
No 
Don't know / no opinion / not relevant 

Answers  Ratio 

5 
3 
1 

56% 
33% 
11% 

Lack of comprehensive information regarding funds - Although we have received only a 
limited  number  of  responses  to  the  questions  aimed  at  investors  in  this  section,  consumer 
associations  seem  to  agree  that  the  main  problem  when  trying  to  invest  cross-border  is  the 
lack of comprehensive and independent information enabling investors to compare investment 
funds  across  different  jurisdictions  (e.g.  through  a  website).  According  to  these  consumer 
associations  the  current  requirement  in  the  UCITS  Directive  to  translate  the  KIID  into  the 
local language of the Member State where the fund is marketed should be retained.  

Distribution  –  Other  respondents  (investor  associations  and  NCAs)  point  to  the  closed 
architecture of distribution networks as a barrier for cross-border investing. They note that in 
many Member States banks are the biggest distributors of retail investment funds, offering in 
some  cases  predominantly  in-house  funds.  According  to  these  respondents,  independent 
advice should be promoted in order ensure retail investors are made aware of opportunity to 
invest in funds domiciled in other Member States.  

Local  tax  rules and practices  – Several respondents note that local  tax rules  and practices 
pose a problem for investors as they typically need to hire (local) expertise in order to comply, 
which is costly. Furthermore, investors often face difficulties reclaiming dividend tax paid in 
other  Member  States.  In  this  context,  some  respondents  would  welcome  relief-at-source 
mechanisms, as suggested in the CMU action plan.  

Language barriers – Respondents seem divided on whether language is an important issue 
when  investing  cross-border.  Three  respondents  note  that  language  is  not  important,  while 
other respondents (consumer groups) are of the opinion that language is a barrier if the KIID 
and other relevant information are not translated into the local language. 

Other  problems  –  Other  issues  with  cross-border  investing  that  were  mentioned  by 
respondents were residence requirements, currency risks, home-bias of investors, information 
asymmetry and diverging consumer/investor protection rules.   

120 

 
 
 
 
7.  Direct and online distribution of funds  

The increasing use of online platforms to distribute funds has the potential to support cross-
border distribution. However, this opportunity is not being exploited to its full potential. For 
example,  investors  in  one  Member  State  are  rarely  able  to  purchase  funds  from  a  platform 
located elsewhere in the EU. Hence, respondents were asked about the barriers that hinder the 
use of online and direct distribution across borders.  

a)  Challenges faced in marketing directly and online cross-border 

Respondents reported a range of factors that prevent them from distributing directly, which to 
some  extent  mirror  the  factors  that  prevent  distribution  more  broadly,  such  as  marketing 
requirements,  administrative  arrangements  and  tax  rules.  There  are  factors  which,  however, 
pose a particular challenge for managers seeking to distribute directly – and these range right 
across the transaction – from marketing through to administrating orders: 

Cultural  and  home  bias  –  Industry  respondents  pointed  out  that  there  is  a  strong  cultural 
challenge in that many investors are not used to purchasing funds directly from managers as 
they normally go through intermediate distributors such as banks and may have a home bias 
towards funds from their domestic market.  

Distribution  model  -  One  trade  body  noted  that  the  current  distribution  model  is  complex, 
risky and expensive both at the sales and operational levels. In consequence, it does not leave 
sufficient  room  for  the  value  added  activities  (e.g.  client  advice  and  service)  because  too 
much cost, time and energy goes to transaction costs. In particular, this stakeholder claimed 
that  no EU harmonised operating model for fund transaction is  available in the EU. An EU 
fund  transaction  costs  a  few  dozen  Euro  while  a  US  funds  transaction  costs  a  few  dozen 
cents..  The  EU  funds  transaction  may  take  several  days  while  a  transaction  security  on  a 
market is settled in a second.  

KYC and AML requirements – Divergent, paper-based requirements, such as Know Your 
Customer and Anti-Money Laundering checks in many Member States, were considered by a 
significant number of managers as a costly complication where managers are seeking market 
directly  online.  The  current  process  is  regarded  as  costly  and  labour-intensive,  requiring 
renewing  and  maintaining  Know  Your  Customer  processes,  monitoring,  maintenance  of 
sanctions  lists,  on-site  visits  etc.  In  consequence,  the  absence  of  a  single  digital  platform 
available  across  the  EU  is  seen  by  one  stakeholder  as  hindering  the  development  of  online 
distribution. 

One  asset  manager  also  considered  there  to  be  very  low  interest  among  retail  investors  for 
non-domestic funds. 

In  addition,  one  NCA  noted  that  technological  evolution  and,  more  precisely,  the  increased 
use of internet platforms pose also new challenges to NCAs, especially when the platform is 
domiciled in another Member State.  One Member State suggested the Commission to further 
assess the EU fund frameworks in the light of the development of the digital environment in 
order to check whether these are compatible. An investor association considered it important 
that  a  fund  platform  is  independent  or  fully  transparent  about  their  links  with  specific  fund 
providers  and  the  inducements  they  receive  from  these  providers.  In  addition,  full 
transparency on costs is of major importance.  

121 

 
 
Managers and distributors seeking to create a digital platform to sell funds cross-border face 
all  of  the  factors  above.  However,  in  addition  to  the  factors  described  above,  there  are  a 
number  of  particularly  prominent  challenges  relating  to  both  cross-EU  rules  and  local 
legislation when seeking to distribute online. 

Robo-advice  –  Many  retail  investors  are  required  to  –  or  choose  to  (in  the  case  of  non-
complex  UCITS  products)  –  take  advice  when  purchasing  funds.  However,  one  investor 
association noted that they have seen a decline in personal investment advice in their country 
as it is getting rather expensive for retail investors with a portfolio below €25.000. This relates 
to the full ban on commissions that was introduced in 2014.  

In  consequence,  robo-advice  offers  the  potential  to  provide  advice  online,  but  the  EU 
regulatory framework is not considered to allow for this by industry respondents, as there is 
insufficient clarity on whether this can constitute advice, and the liabilities that flow from this. 
One or  two  Member States  are reviewing how they consider  robo-advice  – for example  the 
UK,  but  a  more  consistent  approach  is  needed.  One  asset  manager  suggested  that  the  EU 
should look at the US securities regulatory regime, which has proved more permissive. 

A lack of clear marketing rules means local microsites are often necessary,  with additional 
rules not necessarily related to financial regulatory requirements (for example rules related to 
privacy and data retention). 

A number of managers noted that online distribution shouldn't be seen as a panacea – client 
acquisition costs are still high, as traditional marketing can be required to build scale. Related 
to this, there isn't at present much demand in most EU countries as investors don't yet expect 
to purchase funds online. 

Question 7.3 – Are there aspects of the current European rules on marketing, 
administrative  arrangements,  notifications,  regulatory  fees  and  other  aspects 
(such  as  know  your  customer  requirements)  that  hinder  the  development  of 
cross–border  digital  distribution  of  funds  beyond  those  described  in  earlier 
sections? 
Yes 
No 
Don't know / no opinion / not relevant 

Answers  Ratio 

11 
3 
8 

50% 
14% 
36% 

122 

 
 
 
 
 
Question 7.3b – Are there aspects of the current national rules on marketing, 
administrative arrangements, notifications, regulatory fees and other aspects 
(such as know your customer requirements) that hinder the development of 
cross–border digital distribution of funds beyond those described in earlier 
sections? 
Yes 
No 
Don't know / no opinion / not relevant 

Answers  Ratio 

10 
2 
4 

63% 
13% 
25% 

b)  A framework for pan-EU distribution of funds 

Asset managers and distributors proposed a number of steps to promote cross-border online 
distribution of funds: 

  There  was  widespread  agreement  over  the  need  for  greater  coordination  of  national 
AML / KYC requirements – a number of respondents also favoured an approach which 
allows this check to be carried out by one provider and used for others. 

  More  broadly,  several  industry  associations  [EFAMA,  ICI  Global]  repeated  its  call 
made  in  response  to  the  Green  Paper  on  retail  financial  services  for  a  "digital 
passport",  which  once  completed  and  validated  by  a  single  provider  would  allow  a 
consumer  to  purchase  investments  with  more  providers  across  Member  States.  This 
could potentially be based upon the ongoing eIDAS work. 

  The  development  of  common  standards  for  digital  advice  was  considered  to  provide 
clarity. Such standards would need to distinguish between tools that guide investors and 
those that make clear recommendations. 

  Harmonisation of online marketing requirements was also considered helpful – both in 
terms  of  what  is  captured  as  marketing  and  requires  notification,  and  the  details  of 
requirements  so that documents can  be translated without having to  be redesigned. At 
the  very  least,  increased  standardisation  of  marketing  requirements,  together  with  the 
use of standard form documentation could help to address barriers caused by the use of 
different languages by reducing translation costs. 

  Harmonisation  of  consumer  redress  arrangements  was  regarded  as  helpful  –  one 
approach  suggested  is  akin  to  rights  have  passengers  have  with  airlines,  so  they  are 
confident about their rights when dealing with managers without a physical presence in 
their Member State. 

  One trade body also encouraged the Commission to examine Member State and ESAs' 
FinTech  initiatives  which  may  in  time  help  to  address  issues  such  as  post-trade 
fragmentation. 

  One  Member  State  encouraged  a  more  general  simplification  in  administrative 
arrangements in the light of further digitalisation – especially where funds are marketed 
to professional investors. 

c)  The investors' perspective 

Very  few  respondents  gave  their  views,  but  those  that  did  noted  the  utility  of  price 
comparison websites. However, these had the potential to mislead if there wasn't transparency 
over  the  range  of  providers  listed  and  whether  inducements  caused  certain  products  to  be 
highlighted. 

123 

 
 
 
 
 
 
 
Question  7.6  –  Do  you  invest  in  funds  via  an  on–line  fund  platform  or  a 
website? 
Yes 
No 
Don't know / no opinion / not relevant 

Answers  Ratio 

6 
0 
2 

75% 
0% 
25% 

8.  Notification 

A  number  of  respondents  to  the  CMU  Green  Paper  and  the  Call  for  Evidence  noted 
difficulties  with  the  notification  process  where  funds  are  marketed  on  a  cross-border  basis. 
Respondents also found the need for documentation to be updated or modified burdensome, in 
part because changes in the information provided to the NCA of the home Member State have 
to be notified to the NCA of the host Member State as well.    

The consultation has sought input on (a) difficulties with the UCITS and AIFMD notification 
process for the EU marketing passport;  (b) unjustified delay in the notification process; and 
(c) possible measures to improve cross-border distribution of funds.  

a.  Difficulties notification process 

UCITS 

Question 8.1 – Do you have difficulties with the UCITS notification process? 
Yes 
No 
Don't know / no opinion / not relevant 

Answers  Ratio 
18 
10 
3 

58% 
32% 
10% 

Initial notification process – Almost all respondents consider the initial notification process 
– which is done in the home Member Sate – efficient and sufficient to allow a UCITS to be 
distributed to retail investors in almost all Member States. Nonetheless, some respondents say 
that  there  is  often  a  delay  in  updating  the  host  Member  State's  register  (following  the 
transmission of the initial notification from the home Member State), resulting in uncertainty 
about  whether  there  is  permission  to  commence  marketing  activities  in  the  host  Member 
State.  Furthermore,  respondents  noted  that  some  NCAs  of  the  host  Member  State  ask  for  a 
proof of payment of the regulatory fees164 or require other information to be disclosed before 
allowing  the  marketing  of  the  fund  in  their  jurisdiction,  although  this  is  not  foreseen  in  the 
UCITS Directive.  

Maintenance of notification – A majority of the respondents indicated they have difficulties 
with the UCITS process for the maintenance of notifications, as this is managed by the host 
Member State and is not harmonised or standardised. Under the UCITS Directive, the initial 
notification is send to the NCA of the home Member State, who subsequently transmits the 
notification  and  all  accompanying  documentation  to  the  NCA  of  the  host  Member  State. 
However,  changes  to  the  information  contained  in  the  initial  notification  have  to  be  sent 
directly to the NCA of the host Member State. In this context, respondents reported that some 
host Member States impose burdensome requirements like ongoing information on approved 
distributors, sales and risk classification of the funds marketed in their jurisdiction.  

De-registration  –  Respondents  also  noted  that  in  many  Member  States  no  clear  procedure 
exists  for  de-registering  a  fund.  Additionally,  several  respondents  note  that  some  Member 
States  only  permit  de-registration  of  a  fund  once  the  number  of  investors  drops  below  a 
minimum specified amount or after certain publication requirements are fulfilled. Moreover, 

164 See section on regulatory fees. 

124 

 
 
                                                 
in some Member States NCAs charge significant costs for deregistration. According to these 
respondents,  difficulties  with  de-registration  considerably  influence  the  decision  of  a  fund 
manager to access a market in the first place.   

AIFMD 

Question 8.3 – Do you have difficulties with the AIFMD notification process? 
Yes 
No 
Don't know / no opinion / not relevant 

Answers  Ratio 
14  
9 
5 

50% 
32% 
18% 

Initial notification – Several respondents that indicated having difficulties with the AFIMD 
notification  process,  noted  that  in  practice  a  large  number  of  NCAs  (of  the  home  Member 
State) regularly ask for amendments to the initial notification, with the consequence that the 
notification  period  (of  20  working  days)  starts  again.  This  can  lead  to  significant  delays  in 
marketing  AIFs  on  a  cross-border  basis.  Consequently,  respondents  call  for  further 
standardising the notification process.   

Notification  of  material  changes  –  Other  respondents  noted  that  the  requirement  under 
AIMFD  to  update  notifications  when  there  are  material  changes  (Article  23  AIFMD)  can 
create  difficulties  as  it  is  unclear  what  constitutes  a  material  change  and  whether marketing 
activities  are  allowed  during  that  period.  Since  Member  States  have  taken  different 
approaches on this, respondents indicated they would welcome further guidance from ESMA.  

Marketing  to  retail  investors  –  Although  not  directly  related  to  the  notification  process,  a 
number of respondents called for harmonising the requirements applicable to the marketing of 
AIFs to retail investors. Currently, AIFMD does contain any requirements or procedures for 
marketing to retail investors, but simply gives Member States the option to allow AIFMs to 
market to retail investors in their territory. In such cases, Member States may impose stricter 
requirements  than  those  applicable  to  AIFs  marketed  to  professional  investors  in  their 
territory (Article 43).  

b.  Unjustified delay notification process 

UCITS 

Question  8.3  –  Have  you  experienced  unjustified  delay  in  the  notification 
process before being able to market your UCITS in another Member State? 
Yes 
No 
Don't know / no opinion / not relevant 

Answers  Ratio 

7 
15 
5 

26% 
56% 
19% 

Use  of  full  notification  period  –  Although  a  majority  of  the  respondents  have  not 
experienced unjustified delay in the notification process for UCITS, several respondents note 
that there are significant differences between Member States with regards to the time used by 
NCAs  to  verify  and  transmit  notifications.  For  example,  in  Luxembourg  a  notification  is 
typically processed within two working days, while in other Member States NCAs reportedly 
use the full notification period of ten working days as specified in the UCITS Directive.   

Unjustified delay – Most respondents who did experience unjustified delay in the notification 
process,  attribute  this  to  the  diverging  interpretations  of  what  constitutes  'marketing'  across 
Member  States.  Fund  managers  often  have  to  hire  local  expertise  to  advise  on  the 
requirements  of  each  jurisdiction,  which  results  in  delays  and  adds  considerable  cost  to  the 
notification  process.  One  respondent  pointed  to  the  practice  of  some  NCAs  to  suspend  the 
notification  period  in  case  amendments  need  to  be  made  to  the  notification,  regardless 
whether these are material or not, as an example of unjustified delay.  

125 

 
 
 
AIFMD 

Question  8.5  –  Have  you  experienced  unjustified  delay  in  the  notification 
process before being able to market your AIFs in another Member State? 
Yes 
No 
Don't know / no opinion / not relevant 

Answers  Ratio 

7 
6 
9 

32% 
27% 
41% 

Initial notification – Two industry associations note that many NCAs use the full notification 
period  of  20  working  days  before  transmitting  the  notification  file  to  the  Member  States 
where the AIFM intends to market it funds. One of these respondents notes that it also occurs 
that  NCAs  do  not  respond  within  the  notification  period,  which  prevents  the  fund  manager 
from  marketing  their  AIF  before  the  (full)  notification  period  has  lapsed.  One  other 
respondent referred to the practice of some NCAs to suspend the notification period in  case 
amendments need to be made to the notification – regardless whether these are material or not 
– as a source of unjustified delay.  

Notification  of  material  changes  (1)  –  Several  industry  respondents  that  indicated  having 
experienced  unjustified  delay  in  the  notification  process  were  of  the  opinion  that  the 
procedure  for  notifying  material  changes  to  the  initial  notification  is  disproportionate.  They 
noted  that  the  initial  notification  letter  is  very  detailed  (format  and  content  determined  by 
Level  2)  and  therefore  any  material  changes  to  the  offering  documentation  have  to  be  fully 
reviewed and notified to the NCA of the home Member State one month before the changes 
are implemented. Since most changes only relate to the marketing materials, this procedure is 
considered  disproportionate  by  respondents  in  comparison  to  the  costs  and  delay  incurred. 
One  respondent  remarks  that  notification  process,  in  particular  the  requirement  to  notify 
material changes, is difficult to apply to closed-end funds where marketing takes place on an 
iterative basis.  

Notification of material changes (2) – Other industry respondents found it difficult that there 
is  no  clear  timeframe  applicable  to  the  notification  of  material  changes,  in  particular  with 
regards  to  the  approval  by  the  NCA  of  the  home  Member  State.  This  leads  to  uncertainty 
about  when  the  updated  documentation  can  be  used  and  provided  to  local  investors.  In  this 
context,  one  respondent  wonders  whether  fund  managers  have  to  wait  for  the  NCA  of  the 
home Member State to confirm that the changes have been transmitted to the NCA of the host 
Member State before being allowed to distribute the updated documentation.        

c.  Measures to improve cross-border distribution of funds 

Centralised notification platform or record (1) – Many industry respondents suggested or 
supported calls for a centralised platform or record of notifications for European investment 
funds. Such a system would allow for a single EU notification for cross-border distribution, as 
the fund manager would submit its notification only to the NCA of the home Member State, 
which  in  turn  would  transmit  the  notification  to  a  centralised  platform  or  record  for 
notifications,  hosted  by  ESMA.  This  platform  or  record  would  then  be  accessible  for  all 
NCAs, fund managers and possibly investors. Respondents believe that this platform should 
not only cover initial notifications, but also any updates or changes to fund documentation and 
marketing materials and de-registration of funds. In this context, respondents also refer to the 
Commission proposal on EuVECA/EuSEF for a publicly accessible central database listing all 
managers  and  funds  using  the  designations  EuVECA/EuSEF  as  an  example  and  a  welcome 
step forwards. 

126 

 
 
 
Centralised  notification  platform  or  record  (2)  –  Additionally,  several  asset  managers 
considered that such a platform or record could also cover the reporting requirements under 
AIFMD,  as  this  type  of  platform  would  have  the  basic  benefit  of  reporting  under  the  same 
publicly  available  conditions  and  requirements,  thus  eliminating  additional  costs  needed  for 
local  services  such  as  research,  translation,  etc.  Moreover,  the  respondents  believe  that  for 
UCITS  it  could  include  any  subsequent  update  of  relevant  fund  documentation  such  as  the 
prospectus,  (semi-)annual  reports  and  accounts,  KIID/KID,  etc.  and  act  as  a  comprehensive 
source of information for investors.  

Harmonise  de-registration  of  funds  –  Quite  a  few  respondents  note  that  due  to  lack  of 
consistency and clear information as to the de-registration procedure in Member States, fund 
managers  are  hesitant  to  start  cross-border  marketing  of  their  funds.  They  believe  a  more 
harmonised approach, possibly through ESMA guidelines, could help foster the cross-border 
distribution of funds.  

Further harmonise maintenance of notification – A number of respondents call for further 
harmonisation of the process for updating notifications for the EU marketing passport. In this 
context,  some  of  these  respondents  believe  that  fund  managers  should  only  be  required  to 
notify the NCA of the home Member State of changes to the initial notification, as is currently 
the case under AIFMD for AIFs marketed to professional investors.  

Other  suggested  measures  –  Other  stand-alone  suggestions  made  by  respondents  were: 
harmonising the national private placement regime (NPPR), including a specified timeframe; 
creating a central register  outlining the applicable national requirements and regulatory  fees 
per  Member  State;  aligning  the  timeframe  of  the  AIFMD  notification  procedure  for  the  EU 
marketing passport with UCITS; and improving the format of the notification letters.  

9. 

Taxation 

Many respondents to the CMU Green Paper pointed to taxation as an important barrier to the 
cross-border distribution of funds. The issues seem to range from a lack of access to double 
tax treaties to difficulties with tax reporting to unjustified tax discrimination.  

The  consultation  has  sought  input  from  industry  on  (1)  whether,  and  if  so,  which  tax  rules 
impair the cross-border distribution and take-up of funds; (2) difficulties with access to double 
tax treaties and claiming of withholding tax relief under these treaties; (c) difficulties with tax 
reporting; and (3) any form of tax discrimination.  

Specifically from investors, the consultation has sought input on (4) difficulties with taxation 
of investments in funds sold on a cross-border basis; and (5) to what extent tax rules prevent 
investing cross-border. Finally, all respondents were asked (6) whether they see any other tax 
barriers to the cross-border distribution of funds.   

127 

 
 
 
9.1. Tax barriers 

Question 9.1 – Have you experienced any difficulties whereby tax rules across 
Member States impair the cross–border distribution and take–up of your fund? 

s
e
s
n
o
p
s
e
r

f
o
r
e
b
m
u
N

25

20

15

10

5

0

Yes

No

UCITS

AIFMD

ELTIF

EuVECA

EuSEF

A  vast  majority  of  the  respondents  considered  tax  rules  to  be  a  barrier  to  the  cross-border 
distribution  of  UCITS  and  AIFs.  For  ELTIFs,  EuVECA  and  EuSEF  the  (limited)  responses 
offer no obvious conclusions. This might be explained by the fact that these frameworks are 
relatively  new  and  take-up  has  been  limited  so  far.  Nonetheless,  it  is  likely  that  where  tax 
rules impair the cross-border distribution and take-up of UCITS and AIFs this is equally or at 
least partially so for funds under the ELTIFs, EuVECA and EuSEF frameworks.  

Identifying  the  tax  barriers,  respondents  agreed  that  the  following  issues  are  the  main  tax 
barriers that impair the cross-border distribution and take-up funds: 

Lack  of  or  difficulties  with  access  to  double  tax  treaties  –  Respondents  pointed  out  that 
investment  funds  struggle  to  meet  the  eligibility  criteria  for  double  tax  treaties.  Investment 
funds  are  generally  exempt  from  tax  in  the  territory  where  they  are  located,  whereas  tax 
treaties often make eligibility dependent upon being a 'tax resident'. Furthermore, in order to 
benefit from double tax treaties investment funds are often confronted with the requirement to 
show that its investors meet particular residence or nationality requirements, which is difficult 
or even impossible to proof for widely distributed funds.  

Difficulties in obtaining refunds of withholding taxes (WHT) or relief at source – When 
they  did  have  access  to  double  tax  treaties,  respondents  reported  several  difficulties  due  to 
inconsistent  WHT  recovery  processes,  which  are  defined  and  applied  at  a  national  level. 
Deadlines, forms and required supporting documentation for WHT refunds diverge between 
Member States. Furthermore, Member States often require physical tax reclaim forms, which 
have  to  be  signed  and  stamped  by  all  relevant  actors  in  the  distribution  chain,  translation 
services are required and foreign intermediaries are excluded from offering WHT relief.  

National  requirements  for  income  tax  reporting  –  Certain  Member  States  (e.g.  Austria, 
Belgium,  Denmark  Finland,  Germany,  Italy,  Sweden  and  UK)  impose  requirements  for 
investor income tax reporting, which are meant to facilitate investor compliance with local tax 
law. However, respondents noted that these requirements are widely different among Member 
States,  resulting  in  additional  complexity  and  costs  for  funds  distributed  on  a  cross-border 
basis.  In  this  context  several  respondents  also  referred  to  the  requirement  in  some  Member 
States to appoint a tax agent or representative for foreign domiciled funds as burdensome.  

Tax  discrimination  of  non-resident  investment  funds  –  Respondents  claim  to  have 
encountered local tax rules – not related to specific tax reporting requirements – that make it 

128 

 
 
 
 
 
much easier for investors to buy domestic funds compared to foreign funds. For example, in 
some  countries  local  income  tax  on  distributions  or  redemptions  is  collected  at  source  by 
imposing  a  final  withholding  tax  on  any  distributions,  reportable  income  or  capital  gains. 
However, such rules typically only apply for domestic funds; for their investments in foreign 
funds investors have to file a special tax return, thus discouraging (retail) investors to invest 
cross-border.  

9.1.1.  Difficulties with double tax treaties 

Question 9.2 – Have you experienced any specific difficulties due either to the 
absence of double taxation treaties or to the non–application of treaties or to 
terms  within  those  treaties  which  impede  your  ability  to  market  across 
borders? 
Yes 
No 
Don't know / no opinion / not relevant 

Answers  Ratio 

17 
2 
3 

77% 
9% 
14% 

a)  Access to double tax treaties  

An overwhelming majority of the respondents reported difficulties with access to double tax 
treaties.  Identifying  the  difficulties,  respondents  distinguished  between  (1)  whether  an 
investment fund is eligible to claim the benefits of a double tax treaty and (2) whether it can 
meet the administrative requirements to support its claim.  

Tax  residency  –  With  regards  to  eligibility,  respondents  noted  that  double  tax  treaties  – 
which are negotiated on a bilateral basis – are typically intended to benefit only residents of 
the two treaty countries and are often silent on the specific treatment of investment vehicles. 
Consequently,  investment  funds  that  pool  investors  from  multiple  jurisdictions  have 
difficulties  meeting  the  criteria  for  eligibility  as  they  are  usually  exempt  from  tax  in  the 
territory where they are located, whereas double tax treaties often make eligibility dependent 
upon being a 'tax resident'. Although this was recognised in 2010 by the OECD report on the 
granting  of  treaty  benefits  with  respect  to  the  income  of  collective  investment  vehicles 
(CIVs)165, little progress has been made in improving tax treaty access for investment funds 
according to respondents. Additionally, a couple of respondents voiced their concerns about 
the  work  undertaken  by  the  OECD  on  BEPS  Action  6  on  'preventing  the  granting  of  treaty 
benefits in inappropriate circumstances', which – in their view – would further limit the access 
to double tax treaties for investment funds that are distributed globally. 

Limitation  of  benefits  requirement  –  As  for  the  administrative  requirements,  respondents 
indicated that the main difficulty is the 'limitation of benefits' (LoB) requirement in double tax 
treaties. This requires funds to proof that its investors meet particular residence or nationality 
requirements  in  order  to  benefit  from  the  treaty.  However,  since  many  funds  are  widely 
distributed  and  held  by  or  through  distributors  or  through  central  securities  depositories 
(CSDs),  information  with  respect  to  the  end  investor  resides  with  these  parties,  which  – 
mostly  for  commercial  and  legal  reasons  –  often  are  not  willing  or  able  to  share  the 
information with the fund. This makes it difficult or even impossible for funds to comply with 
the LoB rules.  

Treatment of fund vehicles - Other difficulties with access to double tax treaties arise from 
differences in how fund vehicles are treated under local tax rules. For example, respondents 
noted that some fund vehicles (e.g. contractual or partnerships) may not benefit from double 
tax  treaties  because  they  are  not  considered  legal  entities  and  therefore  deemed  as  tax 

165 https://www.oecd.org/tax/treaties/45359261.pdf 

129 

 
                                                 
transparent  (which  means  the  investors  instead  of  the  fund  should  claim  tax  relief).  On  a 
related  note,  respondents  reported  that  more  country  specific  investment  vehicles  are  not 
always understood by foreign tax authorities, making it even more difficult to obtain access to 
double tax treaties.  

b)  Measures suggested by respondents to improve access to double tax treaties 

Several respondents offered possible solutions to address the difficulties with or lack of access 
to double tax treaties.  

Fund as beneficial owner of income – One proposed solution – which was supported by a 
number  of  respondents  –  was  to  regard  the  fund  (and  not  the  investors)  as  the  beneficial 
owner of income or a qualified person and to impose no further (LoB) requirements on funds 
in order to qualify for double tax treaties. This solution, which according to respondents is in 
part supported by the 2010 OECD report on CIVs, should be applied at least to all widely held 
open  ended  funds.  Similar  to  the  aforementioned  solution,  one  respondent  recommended 
treating all widely-held funds as tax opaque vehicles eligible to double tax treaties benefits in 
their  own  right.  He  noted  that  a  similar  rationale  is  applied  by  the  OECD  in  their  BEPS  6 
recommendation for exchange-traded funds (ETFs). Under BEPS 6, ETFs benefit from much 
lighter double tax treaty eligibility requirements on the basis that such funds cannot properly 
track their investor base. The respondent believed that the same rationale should be applied to 
all widely-held funds, irrespective of whether such funds are traded on an exchange or not.  

Equivalent beneficiaries clause – Other respondents referred to the option proposed by the 
OECD  to  include  an  "equivalent  beneficiaries"  clause  in  double  tax  treaties.  This  would 
enable  a  fund  to  meet  the  LoB-requirement  if  sufficient  investors  are  either  resident  in  the 
treaty  country  or  in  other  countries  which  have  a  double  tax  treaty  with  the  other  treaty 
country which is at least as favourable. They note that in today’s global marketplace, it makes 
little  sense  to  limit  treaty  benefits  to  the  residents  of  the  two  treaty  countries  if  a  source 
country provides the same benefits to residents of other countries – and those residents invest 
in globally-distributed funds.  

In general respondents agreed that the Commission should encourage or even require Member 
States to include the abovementioned arrangements in any double tax treaty being negotiated.     

Abolishing  or  limiting  WHT  rate  -  A  more  ambitious  –  but  widely  supported  –  solution 
offered  by  respondents  is  the  abolishment  of  WHT  on  transferable  securities  for  payments 
made to UCITS and AIFs within the EU or, alternatively, to impose an EU wide limit on the 
WHT  rate  equal  to  the  rate  foreseen  in  most  double  tax  treaties,  which  is  15  percent. 
Respondents  argued  that  this  is  a  less  radical  proposal  than  it  may  at  first  appear.  First, 
generally  abolishing  WHT  or  limiting  applicable  WHT  rates  on  cross  border  dividend 
payments were possible options presented by the Commission in its 2011 consultation on tax 
problems  that  arise  when  dividends  are  paid  across  borders.166  Second,  further  to  the 
judgement of the European Court of Justice (ECJ) on the principles of the free movement of 
capital167  some  Member  States  already  abolished  WHT  for  certain  types  of  foreign  CIVs 
under  certain  circumstances  (e.g.  France,  Spain  and  Poland)  or  limited  the  WHT  rate  to  15 
percent  (e.g.  Netherlands,  Belgium  and  Germany  from  2018).  Other  Member  States  do  not 
levy WHT on certain types of income paid on the basis of their domestic legislation (e.g. UK).  

166http://ec.europa.eu/taxation_customs/sites/taxation/files/resources/documents/common/consultations/tax/withh
olding_taxes/wht_public_consutation_en.pdf 
167 See in particular ECJ Judgement of 10 May 2012, Santander, C-338/11, EU:C:2012:286 and ECJ Judgement 
of 10 April 2014, Emerging Markets, C-190/12, EU:C:2014:249.  

130 

 
                                                 
9.1.2.  Claiming withholding tax relief  

Although  some  respondents  acknowledged  that  the  ECJ  decisions  on  free  movement  of 
capital – and the subsequent step by some  Member States to abolish or to reduce the rate of 
WHT  on  dividends  and/or  interest  for  funds  domiciled  in  other  jurisdictions  –  had  reduced 
some  of  the  difficulties  with  WHT  relief,  all  respondents  indicated  having  experienced 
difficulties  with  claiming  WHT  relief.  Respondents  attributed  these  difficulties  mainly  to 
diverging national procedures and practices:  

Practical difficulties – Forms for tax reclaims, filing frequency and deadlines differ for each 
Member State. The supporting documentation needed to supplement the tax claim varies and 
can  be  substantial.  In  some  Member  States  documentation  has  to  be  translated.  In  many 
Member States the reclaim forms also need to be signed and stamped by all relevant parties in 
the  distribution  chain  (investors,  local  tax  authorities,  paying  agents,  etc.).  Moreover,  the 
possibility for an investment fund to appoint a local representative, such as a depository bank, 
to file tax reclaims on its behalf is not always granted. Respondents also reported differences 
in interpretation between local and foreign tax authorities as to who is eligible to claim WHT 
relief, often resulting in a refusal by tax authorities to issue certificates of residence or to sign 
foreign tax certifications. All these conditions make it impossible according to respondents to 
standardise  the  tax  reclaim  process,  thus  making  the  reclaim  process  expensive  and  time 
consuming.  One  respondent  noted  that  the  reclaim  process  can  take  up  to  10  years  in  some 
cases and can cost between €10,000 and €100,000 for each fund, which equals up to 50% of 
the expected WHT refund.  

Different  tax  treatment  of  transferable  securities  –  Respondents  reported  substantial 
differences  between  Member  States  on  the  tax  treatment  of  transferable  securities.  Some 
Member  States  impose  WHT  on  dividends  and/or  interest,  while  others  do  not.  For  those 
Member States that impose WHT, the rates are different. Furthermore, some Member States 
provide  tax  relief  at  source  (taxes  or  not  withheld  from  dividend  and/or  interest  or  against 
reduced rate) while other Member States provide tax relief through a (ex-post) tax reclamation 
system. Respondents pointed out that the lack of a relief at source mechanism increases costs 
for funds and investors and advocated for adopting relief at source as  the standard tax relief 
mechanism in all Member States. As regards reclaiming tax relief ex post, respondents noted 
that a key issue is the differences in timing and delay in getting the reclaim back. For an open-
ended fund, this can lead to pricing difficulties if irrecoverable WHT is accrued in the fund 
price.  One  industry  association  reported  that  one  of  its  members  files  tax  reclaims  in  27 
Member  States  and  that  60%  of  its  claims  have  not  yet  been  recovered  and  are  outside  the 
standard timeframe suggested by its custodian.  

Implementation of  TRACE  – In  order to ease the difficulties with WHT relief and reduce 
tax  barriers,  several  respondents  called  for  implementation  of  the  OECD  Treaty  Relief  and 
Compliance  Enhancement  (TRACE)  package  in  all  EU  Member  States.  TRACE  is  a  self-
contained set of agreements and forms to be used by any country that wants to implement a 
standardized system for claiming WHT relief at source on portfolio investments. Respondents 
believe TRACE could provide more reliable treaty access for funds; increased comfort for tax 
authorities  that  treaties  benefits  are  only  given  to  qualified  end  recipients;  and  reduced 
administrative  burden  for  both  tax  authorities  and  fund  industry  through  avoiding  the 
requirement  of  certificates  of  tax  residence.  Nevertheless,  one  of  the  respondents  voiced 
concerns that implementation of TRACE will not in all cases ensure treaty access for widely 
held investment funds and stressed that harmonised WHT rules remain necessary. 

Compliance costs WHT regimes - Most respondents could not quantify the compliance costs 
of  managing  withholding  tax  regimes.  The  few  respondents  that  did,  reported  estimates 

131 

 
 
ranging  from  1  to  7  basis  points  of  assets  under  management,  although  one  respondent 
reported that compliance costs for WHT amounted up to 15% of its total costs. A number of 
respondents (fund managers) also pointed out that managing WHT regimes can be part of an 
all-inclusive  fee  agreement  with  the  custodian,  making  it  difficult  to  determine  which  costs 
are attributable to managing WHT relief.  

Respondents agreed that the compliance costs for managing WHT regimes essentially consist 
of costs for tax and legal advisors and that these costs vary depending on the Member State 
and  volume  of  business.  Most  respondents  indicated  that  the  costs  of  managing  WHT 
generally  did  not  have  a  material  impact  on  the  distribution  strategy,  although  it  was 
recognised that high compliance costs could create a barrier to entry, particularly for smaller 
funds. Other respondents noted that these costs are taken into account when determining the 
overall marketing strategy in a particular Member State.  

9.1.3.  Difficulties with tax reporting 

National requirements income tax reporting – Respondents indicated that difficulties with 
tax reporting do not so much arise from the existence of the obligation itself, but from the fact 
that  (national)  requirements  for  tax  reporting  are  widely  different  among  Member  States. 
Consequently, fund managers have to provide different information in relation to each of its 
funds and run several reporting systems, which is considered costly and time consuming. In 
this context, respondents pointed in particular to the requirement for fund managers to prepare 
income  tax  reports  for  their  investors  in  certain  Member  States  (e.g.  Austria,  Belgium, 
Denmark, Germany Italy and UK). Moreover, several respondents noted that in some Member 
States  foreign  domiciled  funds  are  even  required  to  appoint  a  tax  representative  for  this 
purpose.  

Single  income  tax  reporting  format  –  A  large  majority  of  the  respondents  agreed  that 
introducing  a  single  income  tax  reporting  format  in  those  Member  States  that  require 
reporting,  could  provide  a  solution  to  the  difficulties  with  income  tax  reporting  and 
significantly  reduce  costs.  Although  most  respondents  were  unable  to  quantify  the  costs 
saved,  one  fund  manager  estimated  that  introducing  a  harmonised  income  reporting  format 
would  save  him  up  to  €400,000-500,000  a  year.  Some  respondents  noted  that  since  tax 
reporting  is  based  on  national  requirements,  it  may  be  necessary  to  harmonise  these 
requirements first before introducing a single (EU) reporting format. One trade body believed 
that a single income reporting format should not be introduced for investors' taxable accounts, 
as it could raise privacy issues if a host Member State requires detailed investor information 
because  it  treats  its  funds  as  tax  transparent,  while  the  fund  is  considered  tax  opaque  in  its 
home Member State.  

9.1.4.  Tax discrimination  

Although  respondents  acknowledged  that  case  law  by  the  ECJ  and  national  courts  has 
significantly  contributed  to  eliminating  discriminatory  tax  treatment  with  regard  to  WHT, 
they also indicated that differing treatment between domestic and foreign investment funds in 
relation to WHT still occurs.  

Discriminatory  tax  treatment  -  In  this  context,  a  significant  number  of  respondents  noted 
that in certain Member States (France  and the Netherlands)  investors are entitled to claim a 
tax  credit  for  WHT  incurred  by  a  (local)  fund  domiciled  in  that  Member  State,  but  not  for 
WHT incurred by foreign funds. Other reported practices or local tax rules that differentiate 
between  foreign  and  local  funds  were:  complex  procedures  and/or  requirements  for  foreign 
funds to receive the same (beneficial) tax treatment (Poland and Spain); and taxes levied by 

132 

 
Member  States  on  foreign  funds  on  the  value  of  shares/units  placed  in  its  jurisdiction 
(Belgium). For more details on some of these practices, please see the box below.  

Although  the  following  may  not  qualify  as  tax  discrimination,  some  local  tax  rules  or 
practices do make it easier and more attractive for investors to buy domestic funds compared 
to foreign funds.  

Double taxation due to tax treatment of fund vehicle – Several respondents indicated that 
some Member States (e.g. Belgium and Germany) do not accept that a foreign fund vehicle 
itself is a taxable person (tax opaque). Accordingly, the foreign fund should demonstrate that 
the investors are also resident in  the country  where the fund is  domiciled in  order to obtain 
double  tax  treaty  benefits.  This  is  especially  a  problem  for  funds  that  are  marketed  cross-
border in many different countries, since these funds cannot fulfil this requirement. Although 
this does not result in double taxation for the fund, this may be the case for its investors. For 
example,  a  fund  domiciled  in  Member  State  A  can  be  subject  to  WHT  on  its  dividend  or 
interest as a result of it structure being considered tax opaque. However, the domicile of the 
investor in Member State B may treat the fund as tax transparent and impose income taxes on 
the same (after-tax) dividends or interest distributed by the fund and received by the investor, 
thus resulting in double taxation for the investor.  

9.2. Investors' perspective  

a)  Difficulties with taxation of investments in funds   

Very  few  respondents  gave  their  views,  but  those  that  did  indicated  that  direct  retail 
investments into UCITS typically do not have the same tax advantages as investing in specific 
purpose  AIFs  and  funds  in  wrapped  products  such  as  unit-linked  insurance  products  or 
personal  pension  products.  Another  respondent  reported  difficulties  with  taxation  of 
accumulation ETFs, as these are taxed differently among Member States.  

b)  Tax burden of cross-border investments in funds  

In  response  to  the  question  whether  investors  are  worse  off  tax-wise  if  investing  in  cross-
border  funds,  several  consumer  groups  reiterated  their  criticism  on  the  less  favourable  tax 
treatment of  pan-European UCITS compared to  (domestic)  AIFs and wrapped  products like 
unit-linked insurance products and personal pension products.   

One  of  these  respondents  also  noted  that  differences  in  tax  treatment  of  fund  vehicles  (tax 
transparent  versus  tax  opaque)  among  Member  States  may  result  in  a  higher  tax  burden  for 
foreign funds, as investors may be subject to double taxation (see also previous section 9.2.4.)  

Finally,  two  respondents  (investor  associations)  pointed  out  that  difficulty  with  reclaiming 
WHT  for  dividends  received  through  foreign  investment  funds  may  result  in  a  higher  tax 
burden vis-à-vis domestic funds.   

c)  Tax rules as an obstacle for cross-border investing  

Almost all respondents that expressed their views [five] indicated that tax rules prevent them 
from investing across borders in funds. Unfortunately, only one respondent provided further 
explanation.  He  indicated  that  the  risk  of  not  complying  with  (unknown)  foreign  tax  rules 
deterred him from investing cross-border.  

9.3. Other tax barriers 

Tax treatment of mergers of UCITS or AIFs – Several industry associations identified the 
diverging tax treatment of mergers of UCITS or AIFs as a tax barrier. Under UCITS IV all 

133 

 
 
 
EU countries are obliged to allow cross-border mergers from a legal and regulatory point of 
view. While some countries allow tax neutrality for domestic mergers, many countries impose 
tax on foreign and cross-border fund reorganizations at the level of the fund and/or at level of 
the investors. Industry associations argued that in practice this prevents funds from realising 
cost savings and increasing the size of funds – which is an objective of CMU. Respondents 
offered different solutions to this issue. Two industry associations recommended introducing 
a  separate  EU  directive  for  fund  mergers  in  order  to  ensure  and  promote  the  further 
development of the EU fund  market. Another trade body recommended that Member States 
should  be  required  to  respect  the  tax  treatment  provided  by  another  Member  State  to  the 
merger of two funds organised in the funds’ Member State – specifically where this is treated 
as tax-neutral.  

Financial Transaction Tax – A number of industry associations voiced concerns about the 
current  discussions  in  relation  to  the  introduction  of  a  financial  transaction  tax  (commonly 
named FTT) in certain EU Member States. They believe it would negatively affect investment 
in funds and the ability of investors to alter their investment, as a FTT – even if not applied to 
interests  in  funds  –  will  tend  to  increase  the  cost  of  capital  and  depress  liquidity  in  the 
secondary  market.  Further,  respondents  argued  that  transactions  will  involve  parties  and 
intermediaries not located in FTT jurisdictions, which will render the single market imperfect 
as well as less competitive than capital markets outside the EU.  

Cross-border  master-feeder structures  – Two industry associations reported that negative 
tax  consequences  may  occur  when  it  comes  to  cross-border  master-feeder  structures.  The 
main  problem  is  that  WHT  might  be  levied  on  profit  distributions  from  the  master  to  the 
feeder  fund.  The  reason  this  is  a  problem  according  to  the  industry  associations  is  that  the 
feeder  funds  are  normally  exempt  from  tax  in  the  registration  country.  Accordingly,  the 
withholding tax in the country where the master fund is registered is an extra cost. However, 
the feeder funds may in many cases be able to reclaim the withheld tax on basis of ECJ case 
law,  since  such  withholding  taxes  may  discriminate  foreign  feeders  compared  to  domestic 
feeders.  Nevertheless,  funds  will  incur  the  administrative  burden  of  WHT  relief  and  cash 
deferral disadvantages. 

Tax barriers for outbound distribution – Two investor associations noted that some local 
tax rules prevent local funds managers from distributing their investment funds in other EU-
member states. An example is when local dividend taxes are levied upon foreign investors on 
any distributions/reportable income or capital gain (e.g. in Denmark). Foreign investors will 
have to ask for tax relief in order to reduce the WHT in the source country (where the fund is 
domiciled)  and  secondly,  they  will  have  to  ask  for  a  tax  credit  against  the  local  tax  in  the 
country of residence in order to avoid any double taxation. This will discourage investors to 
buy this fund, thus preventing manager from cross-border distribution of the funds.   

Tax  barriers  for  cross-border  management  of  funds  –  One  industry  association  reported 
that  complex  tax  issues  arise  when  investments  funds  are  managed  cross-border.  Many  EU 
countries  define  tax  residency  where  the  business  is  effectively  managed.  Accordingly,  the 
investment  funds  that  are  managed  cross-border  may  become  liable  to  tax  in  the  country 
where  the  management  company  is  established,  given  rise  to  several  taxation  issues.  For 
example,  since  no  taxation  rules  exist  for  the  relocation  of  an  investment  fund  from  one 
jurisdiction to another, some jurisdictions may consider the transfer to be a liquidation of the 
fund in their country. This may trigger taxation of unrealized capital gains on the underlying 
investments. Furthermore, the jurisdictional separation of the management company and the 
fund  could  lead  to  double  taxation  or  double  non-taxation  at  fund  level.  Although  certain 
Member  States  have  introduced  rules  and  guidelines  to  eliminate  the  taxation  risk  with  the 
single  management  company  passport  (e.g.  Germany,  Ireland,  Italy,  Luxembourg  and  the 

134 

 
Netherlands),  the  industry  association  argues  that  an  investment  manager  exemption  should 
be introduced in EU legislation.  

10.  Other issues raised in the consultation 

Respondents  have  raised  a  number  of  other  issues  in  the  consultation  response  which  fall 
outside the categories above.  

NCA home regulation- A broad point, made by severals NCAs, is that in order for there to 
be  acceptance  of  the  marketing  passport  without  significant  host  NCA  involvement,  there 
needs to be reassurance that home NCAs have sufficient skilled resources.  For example, there 
are currently significant concerns about unsuitable marketing of products cross-border such as 
Forex  and  binary  option  products.  In  this  context,  home  NCAs  seem  to  have  difficulties 
supervising products and services that are offered/provided only in other Member States and 
sometimes more than thousands of kilometers away and marketed using languages other than 
the  home  Member  State's  national  languages.  Although  the  determination  to  facilitate  the 
cross-border  marketing  of  investment  products  is  considered  laudable  by  NCAs,  they  warn 
that care must be taken to ensure that opportunities for fraud or failures in investor protection 
are not created owing to the lack of a genuine supervisory mechanism. 

Notification fees – A trade body argued that regulatory fees charged upon notification in the 
host Member State should not be charged at all – and if they are charged should be limited to 
the manager rather than levied on individual AIFs, as AIFMD regulates the manager. 

Explore benefits of the creation of a European ISIN-code – Several respondents suggested 
that the creation of a centralised platform or record for notification could be combined with 
opportunity for funds compliant with one or more of the EU fund-frameworks to be granted a 
".eu" ISIN code (instead of the national codes). According to these respondents, the merit of 
this proposal is that a European label would enhance transparency and safety to the benefit of 
the end investor.  

Single  fund  authorisation  process  –  A  few  industry  respondents  suggested  to  replace  the 
authorisation  process  for  UCITS,  AIFs,  ELTIF,  EuVECA  and  EuSEF  with  one  single 
authorisation  covered  by  only  one  regulation  or  directive  that  harmonises  all  the  rules  for 
funds (with maximum harmonization), taking into account the differences between marketing 
funds to professional investors and marketing funds to retail investors. 

ANNEX 8: Other EU legislative frameworks for investment funds (in addition to UCITS 
and AIFMD) 

The European Venture Captial (EuVECA) Regulation covers a subcategory of AIFs that 
focus on start-ups and early stage companies. In order to qualify for the EuVECA label and 
benefit from the EU-wide marketing passport, managers must prove that their fund invests 70 
%  of  the  capital  it  receives  from  investors  in  supporting  young  and  innovative  companies; 
provides  equity  or  quasi-equity  finance  to  these  SMEs;  and  does  not  use  leverage.  The 
regulation  also  sets  out  uniform  quality  criteria  for  managers  that  wish  to  use  the  EuVECA 
label.  These  requirements  cover  everything  from  the  way  they  organise  and  conduct 
themselves to the manner in which they inform investors about their activities and investment 
policies. 

The  European  Social  Entrepreneurship  Funds  (EuSEF)  Regulation  covers  AIFs  that 
focus on social enterprises. These are companies that are set up with the explicit aim to have a 
positive social impact and address social objectives, rather than only maximising profit. Funds 
that  market  themselves  using  this  label  have  to  direct  at  least  70  %  of  their  investments  to 
social  businesses.  In  addition,  they  have  to  provide  key  information  to  investors  about  the 

135 

 
fund’s social objectives; the social businesses it invests in; and how it assesses whether these 
businesses achieve their social goals. Once a fund has provided the required information and 
meets  the  requirements  on  its  organisation  and  operation,  it  can  benefit  from  an  EU-wide 
marketing passport.  

European  Long  Term  Investment  Funds  (ELTIF)  are  also  a  subcategory  of  AIFs  and 
equally benefit from an EU-wide marketing passport. Their managers must fully comply with 
the AIFMD Directive. ELTIFs have a fixed lifetime and usually offer no early redemptions. 
ELTIFs  need  to  invest  at  least  70%  of  the  money  in  the  fund  in  eligible,  illiquid  long-term 
assets,  which  must  be  diversified  and  can  cover:  equity  or  quasi-equity,  debt  instruments, 
loans  granted  by  the  ELTIF  to  a  qualifying  portfolio  undertaking  with  a  maturity  no  longer 
than the life of the ELTIF, other  ELTIFs,  EuVECAs and  EuSEFs as  well as  individual real 
assets with a value of at least EUR 10 million. Under the marketing passport, ELTIFs can also 
be marketed to retail investors, but additional rules need to be respected in this case. 

More  recently,  a  Regulation  on  Money  Market  Funds  (MMF)  has  been  added  to  the 
investment  funds  and  managers.  The  regulation  reflects 
legislative  framework  for 
commitments taken on international level (within the framework of G20 and FSB) and aims at 
making MMFs' markets more robust. The Regulation lays down common standards to ensure 
that MMFs invest in well-diversified assets of a good credit quality. Moreover the Regulation 
introduces common standard to increase the liquidity of money market funds, so that they can 
face sudden redemption requests.   

136 

 
 
ANNEX 9:  Number of investment funds (broken down by Member State, data source and type) 

Table 1 - percentage of non domestic funds registered for sale in each MS (including EEA countries) 

Source: Morningstar database and EFAMA Fact Book 2017

137 

CountryHome-domiciled UCITS (EFAMA- December 2016)Home-domiciled UCITS (Morningstar- June 2017)Home-domiciled AIFs (EFAMA- December 2016)Home-domiciled AIFs (Morningstar- June 2017)Total domestic funds (EFAMA - December 2016)Total domestic funds (Morningstar - June 2017)Foreign funds registered for sale (EFAMA -December 2016)Foreign funds registered for sale (Morningstar - June 2017)Total nr. of funds (EFAMA - December 2016)Total nr. of funds (Morningstar-June 2017)% of total market foreign funds (EFAMA -December 2016)% of total market foreign funds (Morningstar - June 2017)Austria1 021                      9481 010                      211                         2 031                      1 159                      7 305                                      5 819                      9 336                      6 978                      78%83%Belgium613                         708532                         611                         1 145                      1 319                      577                                         205                         3 041                      1 524                      19%13%Bulgaria118                         193                              53                            121                         72                            -273                         -345                         -79%Croatia89                            29                            118                         -                          22                                            -                          140                         -                          16%-Cyprus21                            0148                         -                          169                         -                          27                                            627                         196                         627                         14%100%Czech Republic141                         4182                         14                            323                         18                            1 453                                      1 115                      1 794                      1 133                      81%98%Denmark595                         586354                         77                            949                         663                         -2 742                      -3 405                      -81%Estonia110-                          11                            536                         54798%Finland350                         374109                         90                            459                         464                         -                                          4 015                      -4 479                      -90%France3 164                      2 9157 788                      2 320                      10 952                    5 235                      -5 542                      -10 777                    -51%Germany1 754                      1 2544 257                      295                         6 011                      1 549                      9 890                                      8 264                      17 450                    9 813                      57%84%Greece158                         927                              14                            165                         106                         110                                         1 571                      381                         1 677                      29%94%Hungary21                            12587                         321                         608                         333                         2 993                                      981                         3 934                      1 314                      76%75%Ireland4 051                      2 4552 419                      368                         6 470                      2 823                      -2 102                      -4 925                      -43%Italy923                         1 036723                         34                            1 646                      1 070                      3 748                                      6 655                      6 464                      7 725                      58%86%Latvia221                              -                          23                            406                         429                         95%Liechtenstein334                         305336                         89                            670                         394                         140                                         820                         1 204                      1 214                      12%68%Lithuania91                              -                          10                            410                         420                         98%Luxembourg9 805                      9 1394 406                      1 410                      14 211                    10 549                    1 291                                      1 671                      26 051                    12 220                    5%14%Malta91                            48557                         58                            648                         106                         -497                         606                         603                         -82%Netherlands105                         1211 706                      221                         1 811                      342                         -5 011                      -5 353                      -94%Norway720                         306-                          65                            720                         371                         1 100                                      3 151                      2 191                      3 522                      50%89%Poland322                         29575                         303                         897                         332                         -875                         -1 207                      -72%Portugal127                         124281                         44                            408                         168                         2 916                                      2 507                      3 492                      2 675                      84%94%Romania75                            024                            -                          99                            -                          96                                            172                         195                         172                         49%100%Slovakia70                            017                            -                          87                            -                          461                                         787                         548                         787                         84%100%Slovenia105                         11711                            2                              116                         119                         196                                         215                         431                         334                         45%64%Spain1 656                      1 982747                         2 790                      2 403                      4 772                      941                                         5 621                      8 116                      10 393                    12%54%Sweden498                         54394                            182                         592                         725                         8 544                                      4 768                      9 861                      5 493                      87%87%United Kingdom1 960                      2 154592                         824                         2 552                      2 978                      1 153                                      5 409                      6 683                      8 387                      17%64%Total/average28 887                    25 313                    27 494                    10 398                    56 381                    35 711                    42 963                                    72 767                    102 114                 108 478                 46%78% 
 
 
ANNEX 10:  Statistical data from ESMA on cross-border marketing activity  

138 

 
 
ANNEX 11: Mapping of the regulatory fees charged in the EEA 

Table 1 - Regulatory fees for UCITS with 5 sub-funds marketed to professional investors on cross-
borders basis – Figures provided by national competent authorities168 

Member State  

One-off fees 

On-going fees 

Austria (AT) 
Belgium (BE) 
Bulgaria (BG) 
Croatia (HR) 
Cyprus (CY)169 
Czech Republic (CZ) 
Denmark (DK) 
Estonia (EE) 
Finland (FI) 
France (FR) 
Germany (DE) 
Greece (GR) 
Hungary (HU) 
Ireland (IE) 
Italy (IT) 
Latvia (LV) 
Liechtenstein (LI) 
Lithuania (LT) 
Luxembourg (LU) 
Malta (MT) 
Netherlands (NL) 
Norway (NO) 
Poland (PL) 
Portugal (PT) 
Romania (RO) 
Slovakia (SK) 
Slovenia (SI) 
Spain (ES) 
Sweden (SE) 
The United Kingdom (UK) 

€1,980 
None 
None 
- 
€2,400 
None 
€50 
None  
€1,600 
€10,000 
€575 
€5,120 

None 
None  
None  
€2,957  
€2,500 
€5,000 
€4,750 
€1,500 

€4,500 

None 
None 
€4,000 
€1,000 
None 
€1,159 

€1,400 
None 
None 
€3,480  
€2,000 
None 
€2,405 
None 
None 
€10,000 
€2,470 
€5,120 

None 
€4.000 
None 
€5,687  

€5,000 
€5,500 
None 

None 
€125 
€5,000 
None 
€1,800 
€2,500 
None 
€1,159 

168  The  figures  for  MS  that  are  not  in  the  Euro  Zone  have  been  converted  in  €  in  order  to  facilitate  the 
comparison.  
169  The  Cypriotic  national  competent  authority  (CySEC)  is  currently  in  the  process  of  evaluating  its  pricing 
policies  and  considering  whether  to  amend/abolish  some  of  the  fees  charged  currently.  The  methodology 
considered  for  calculating  the  new    fee  policy,  is  the  amount  of  actual  work  required  by  CySEC  to  supervise 
these entities. 

139 

 
 
 
 
 
  
  
  
  
 
 
                                                 
Table 2  - Regulatory fees for UCITS with 5 sub-funds marketed to  retail investors on cross-borders 
basis – Figures provided by national competent authorities170 

Member State  

Austria (AT) 

Belgium (BE) 
Bulgaria (BG) 

Cyprus (CY) 

Croatia (HR) 

Czech Republic (CZ) 

Denmark(DK) 

Estonia (EE) 

Finland (FI) 

France (FR) 

Germany (DE) 

Greece (GR) 

Hungary (HU) 

Ireland (IE) 

Italy (IT) 

Latvia (LV) 

Liechtenstein (LI) 

Lithuania (LT) 

Luxembourg (LU) 

Malta (MT) 

Netherlands (NL) 

Norway (NO) 

Poland (PL) 

Portugal (PT) 

Romania (RO) 

Slovakia (SK) 

Slovenia (SI) 

Spain (ES) 

Sweden (SE) 

The United Kingdom (UK) 

One-off fees 

On-going fees 

€1,980 

€1,500 
None 

€2,400 

None 

€750 

None 

€1,600 

€10,000 

€575 

€5,120 

None 

None 

None  

€2,957 

€2,500 

€5,000 

€4,750 

€1,500 

-  

€4,500 

None  

None 

None 

€4,000 

€1,000 

None 

€1,159 

€1,400 

€10,275 
None 

€2,000 

€3,480  

None 

€2,405 

None 

None 

€10,000 

€2,470 

€5,120 

None 

€10,000 

None 

€5,687 

None  

€5,000 

€5,500 

None 

-  

None 

€125 

€5,000 

None 

€1,800 

€2,500 

None 

€1,159 

170 The figures for Member States that are not in the Eurozone have been converted in € in order to facilitate the 
comparison.  

140 

 
 
 
 
 
 
 
 
 
                                                 
Table  3  -  Regulatory  fees  for  AIF  with  5  sub-funds  marketed  to  professional  investors  on  cross-
borders basis – Figures provided by national competent authorities171 

Member State  

One-off fees 

On-going fees 

Austria (AT) 

Belgium (BE) 

Bulgaria (BG) 

Croatia (HR) 

Cyprus (CY) 

Czech Republic (CZ) 

Denmark(DK) 

Estonia (EE) 

Finland (FI) 

France (FR) 

Germany (DE) 
Greece (GR) 

Hungary (HU) 

Ireland (IE) 

Italy (IT) 

Latvia (LV) 

Liechtenstein (LI) 

Lithuania (LT) 

Luxembourg (LU) 

Malta (MT) 

Netherlands (NL) 

Poland (PL) 

Portugal (PT) 

Romania (RO) 

Slovakia (SK) 

Slovenia (SI) 

Spain (ES) 

Sweden (SE) 

The United Kingdom (UK) 

€1,980 

None 

None  

None 

None  

None  

None  

None  

€800 

€10,000 

€3,860 
€5,120  

None  

None  

€1,209  

€2,957 

€5,000 

€4,750 

None 

€4,500 

None  

None 

None 

€4,000 

€12,500 

None 

€1,159 

€1,400 

None 

None  

€3,500 

None 

None 

€3,000 

None  

None 

€10,000 
€1080172 
€5,120  

None 

€4,000 

None 

€5,687 

€5,000 

€5,500 

None 

None 

€125 

€5,000 

None 

€1,200 

€15,000  

None 

€1,159 

171  The  figures  for  MS  that  are  not  in  the  Euro  Zone  have  been  converted  in  €  in  order  to  facilitate  the 
comparison. 
172 In case of modification of the information and documents concerning arrangements made for marketing are 
changed 

141 

 
 
 
 
  
  
 
 
 
                                                 
Table 4 - Calculation methodology regulatory fees for UCITS per Member State173 

Member State  

Stand-alone/ 
Umbrella/ Sub-
funds 

One off fees  

On-going fees 
(annual) 

Austria (AT) 

Stand alone 

€1,100 

€600 

Sub-funds 

€,1,100 for the first sub fund and €220 
for each sub-fund 

€600 for the first sub fund and €200 
for each sub-fund 

Belgium (BE) 

Stand-alone/ Sub 
funds 

Bulgaria (BG) 

Croatia (HR) 

 Stand-alone/ 
Umbrella/ Sub-
funds 
Stand-alone 

Umbrella/ Sub-
funds 

Cyprus (CY) 

Czech Republic 
(CZ) 

Denmark(DK) 

Estonia (EE) 

Finland (FI) 

Stand-alone/ 
Umbrella/ Sub-
funds 
 Stand-alone/ 
Umbrella/ Sub-
funds 
Umbrella 

 Stand-alone/ 
Umbrella/ Sub-
funds 
Stand-alone 

France (FR) 

Umbrella/sub-
funds 

Stand-alone/  
Sub-funds 

€377 for each sub-fund when the fund is 
offered to the public.  
If not, the fees are €0. 
None 

€2,580 for each sub-fund when the 
fund is offered to the public. If not, 
the fees are €0. 
None 

€1,880 or €2,700 if marketed 
through a branch. 
*should be paid on monthly basis 
€1,880 or €2,700 from the second 
sub-fund and each subsequent sub-
fund €400 
*should be paid on monthly basis 

€1000 for a stand-alone fund 
€2000 for umbrella funds 

None 

€2,405 annual fee 

 None 

None 

None 

€800 for the first sub-funds and €400 for 
each additional sub-fund (up to 15th) 
and €250 per sub fund as from the 16th 
None 

€750 for each notification or application 
on cross-border marketing 
 None 

€1,600 for the first fund and an 
additional €200 for any subsequent 
undertakings.  

€1,600 per umbrella 

€2,000 per fund and per sub-fund 

€2,000 per fund and per sub-fund (no 
ongoing fee the first year) 

Germany (DE) 

Sub-funds 

€115 per sub-fund 

€494 per sub-fund 

€1,024 per sub-fund 

€1,024 per sub-fund 

Greece (GR) 

Hungary (HU) 

Stand-alone/ 
Umbrella/ Sub-
funds 

Stand-alone/ 
Umbrella/ Sub-
funds 

173The  figures  for  MS  that  are  not  in  the  Euro  Zone  have  been  converted  in  €  in  order  to  facilitate  the 
comparison. 

142 

 
 
  
  
 
 
                                                 
Ireland (IE) 

Italy (IT) 

 Stand-alone/ 
Umbrella/ Sub-
funds 
Stand-alone/ 
Umbrella 

Umbrella/ Sub-
funds 

None 

None 

€4,000 per fund  
(when the fund is marketed to 
professional investors) 
€ 4.000 for the first two sub-funds 
marketed to retail investors and € 
2.000 from the 3rd sub-funds + € 
1.410 in case of public offer closed 
in the previous years but the fund has 
got Italian residents as subscribers 

Latvia (LV) 

Liechtenstein 
(LI) 

Stand-alone/ 
Umbrella/ Sub-
funds 
Stand-alone/ 
sub-funds 

 None 

None 

€682 per fund 
€682 for the first sub-fund and  €455 for 
each additional sub-fund 

€1,137 per fund 
€1,137 per sub-fund 

Lithuania (LT) 

Luxembourg 
(LU) 

Stand-alone/ 
Umbrella/ Sub-
funds 
Stand-alone 

Umbrella/ 
sub-funds 

€2,500.000 per fund 

€2,650 per fund 

€5,000 per umbrella 

Malta (MT) 

Stand-alone 

€2,500 per fund 

Umbrella 

Sub-funds 

€2,500 per umbrella 

€450 per sub-fund  

Netherlands 
(NL) 
Norway (NO) 

Stand-alone/ 
Umbrella 

€1,500 per fund174  

None 

Poland (PL) 

Umbrella 

€4,500 per umbrella 

Portugal (PT) 

Umbrella 

Romania (RO) 

Stand-alone/ 
Umbrella/ Sub-
funds 

None 

None 

€2,650 per fund 

€5,000 per umbrella 

€3,000 per fund 

€3,000 per umbrella 

€500 per sub-fund (up to the 15th) 
and €0 as from the 16th 

None 

None 

None 

€125 per umbrella 

€1,000 per fund/sub funds  

Slovakia (SK) 

Stand-alone/ 
Umbrella/ Sub-
funds 

None 

None 

174http://www.digitaal.loket.afm.nl/en-US/Diensten/Beleggingsinstellingen/Melding/Pages/aanmelding-
buitenlandse-icbe-beleggingsinstelling.aspx?tab=2 

143 

 
  
  
  
  
  
  
                                                 
Slovenia (SI) 

Stand-alone/ 
Umbrella/ Sub-
funds 

 € 1,200 per fund (stand-alone) 
€ 2,000 per umbrella 
€ 800 per sub-fund 

€ 200 per fund for execution of the 
procedure  
€ 800 per year for supervising 
compliance with rules regarding 
marketing  
€2,500 per umbrella or funds 

Spain (ES) 

Sweden (SE) 

The United 
Kingdom (UK) 

Stand-alone/ 
Umbrella 

Stand-alone/ 
Umbrella/ Sub-
funds 
Stand-alone/ 
Umbrella/ Sub-
funds 

€1,000 per umbrella or funds 

None 

None 

From 1-2 sub-funds= £410 
From 3-6 =£1,025 
From7-15: £2,050 
From 16-50=£4,510 
>50 = 9,020 

From 1-2 sub-funds= £410 
From 3-6 =£1,025 
From7-15: £2,050 
From 16-50=£4,510 
>50 = 9,020 

Table  5-  Calculation  methodology  regulatory  fees  for  AIF  marketed  to  professional  investors  per  
Member State175 

Member State  

Stand-alone / 
Umbrella / Sub-
funds 

Austria (AT) 

Stand-alone/ 
Umbrella 

Sub-funds 

Belgium (BE) 

Bulgaria (BG) 

Croatia (HR) 

Stand-alone/ 
Umbrella 

 Stand-alone/ 
Umbrella 
Stand-alone 

 Umbrella/ Sub-
funds 

Cyprus (CY) 

Stand-alone/ 
Umbrella/ Sub-
funds 

Czech Republic 
(CZ) 
Denmark(DK) 

Stand-alone / 
Umbrella 

One-off fees 

On-going fees 

€1,100 

€600 

€1,100 for the first sub fund and 
€220 for each subsequent sub-
fund 
None 

None 

€600 for the first sub fund and €200 for 
each subsequent sub-fund 

None 

None 

€1,880 or €2,700 if marketed through a 
branch 
*should be paid on monthly basis 
Freedom of services 
€1,880 or €2,700 + from the second and 
each subsequent sub-fund €400 
*should be paid on monthly basis  

€100 for notification by an 
AIFM in the Republic for the 
marketing of EU AIFs in the 
Republic.  
None 

None 

€600 per registered AIF and for each 
compartment registered €600 

Estonia (EE) 

None 

None 

175The  figures  for  MS  that  are  not  in  the  Euro  Zone  have  been  converted  in  €  in  order  to  facilitate  the 
comparison. 

144 

 
 
 
 
  
  
 
  
 
  
                                                 
Liechtenstein 
(LI) 

Stand alone/ 
Sub-funds 

Stand-alone / 
Umbrella 

€800 

None 

Stand-alone /  Sub-
funds 

€2,000 per fund and per sub-fund  €2,000 per fund and per sub-fund 

Stand-
alone/Umbrella/ 
Sub-funds 

Stand-alone/ 
Umbrella/ Sub-
funds 

Stand-alone / 
Umbrella/ Sub-
funds 
Stand-alone  / 
Umbrella 
Stand-alone / 
Umbrella 

€2,520  

€1,024 per sub-fund 

+ €216 per AIF or compartment, in case 
where the information and documents 
concerning the arrangements made for 
marketing are changed  
€1,024 per sub-fund 

None 

None 

€4,000 per fund  

€1,137 per fund 
€1,137 per sub-fund 

€1,209 per fund 

€682 per fund 
€682 for the first sub-funds and  
€455 for each additional sub-
fund 
€2,500 

Finland (FI) 

France (FR) 

Germany (DE) 

Greece (GR) 

Hungary (HU) 

Ireland (IE) 

Italy (IT) 

Latvia (LV) 

Lithuania (LT) 

Luxembourg 
(LU) 

Stand-alone 

€2,650 per fund 

€2,650 per fund 

Umbrella/ Sub-
funds 

€5,000 per umbrella 

€5,000 per umbrella 

Malta (MT) 

Stand-alone 

Umbrella 

Sub-funds 

€2,500 per fund 

€2,500 per fund 

€450 per sub-fund  

€3,000 per fund 

€3,000 per fund 

€500 per sub-fund (up to the 15th) and 
€0 as from the 16th 

Netherland (NL)  Stand-alone/ 

None 

Norway (NO) 

Poland (PL) 

Umbrella 

Stand-alone/ 
Umbrella 

Portugal (PT) 

Umbrella 

Romania (RO) 

Stand-alone/ 
Umbrella/ Sub-
funds 

None 

None 

None 

None 

None 

None 

None 

€125 per umbrella 

€1,000€ per fund/sub fund 

Slovakia (SK) 

Stand-alone/ 
Umbrella/ Sub-
funds 

None 

None 

145 

 
 
 
 
  
 
  
  
  
Slovenia (SI) 

Stand-alone/ 
Umbrella/ Sub-
funds 

€ 1,200 per fund (stand-alone) 
€ 2,000 per umbrella 
€ 800 per sub-fund 

Spain (ES) 

Stand-alone/ Sub-
funds 

€2,500 per sub-fund 

€ 200 per fund for notification for 
marketing  
€ 200 per year for supervising 
compliance with rules regarding 
marketing 
€3,000 per sub-fund   

Sweden (SE) 

The United 
Kingdom (UK) 

Stand-alone/ 
Umbrella/ Sub-
funds 
Stand-
alone/Umbrella 

None 

None 

From 1-2 sub-funds= £410 
From 3-6 =£1,025 
From7-15: £2,050 
From 16-50=£4,510 
>50 = 9,020 

From 1-2 sub-funds= £410 
From 3-6 =£1,025 
From7-15: £2,050 
From 16-50=£4,510 
>50 = 9,020None 

Table 6 – Overview of type of regulatory fee charged per Member State 

No fees 

Either one-off fees or on-
going fees 

One-off fees and on-going 
fees 

UCITS marketed to 
retail investors 

BG, CZ, EE, IE, NO, SK, 
SE, LV. 

HR, FI, IT, NL, PL, PT, 
RO 

UCITS marketed to 
professional investors 
AIF marketed to 
professional investors 

BE, BG, EE, IE, SE SK, 
LV 
BE, BG, CZ, EE, IE, NL, 
NO, PL,  SK, SE 

HR, IT, FI, NL, PT, RO 

CY, HR, FI, IT, LT, LV, 
PT, RO 

AT, BE, CY, DK, FR, GE, 
GR, LU, LI, MT, ES, SI, 
UK 
AT, FR, ES, DK, GE, GR, 
LI, LU, SI, UK 
AT, DE, DK, FR, GE, GR, 
LI, LU, MT, ES SI, UK 

Table 7 – Overview of calculation methodology per Member State 

Fees apply at the level of the 
funds and the umbrella only 

Fees apply at the level of the funds and 
umbrella and/or sub-funds 

UCITS marketed to 
retail investors 
UCITS marketed to 
professional investors 
AIF marketed to 
professional investors 

CY, FI, LU, NL, PT, ES 

IT, ES, CY, FI, LU, NL, PT 

FI, DK, IT, LV, LU, PT. 

AT, BE, BG, CY, FR HR, DK, DE, GR, IT, LI, 
LT, MT, RO, SI, UK 
AT, BG, HR, DK, FR DE, GR, LI, RO, SI, UK 

AT, CY, HR ES, FR, DE, GR, LI, MT, RO, SI, 
UK. 

146 

 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ANNEX 12: Costs and cost reductions 

Mapping exercise 

Drivers 

Type of costs  

Costs for industry 
Marketing: 
national 
requirements 
differ and lack 
transparency 

Compliance costs in 
order to be able to fulfil 
national requirements: 
legal advice 

Description of 
costs/challenges 

Target 
group 

Impact 

Identify national 
requirements and comply 
with them 

Asset 
managers 

Quantitative element: 
Low to medium* 

Legal uncertainty 
regarding what does not 
qualify as marketing 

Delay176 or abstain from  
pre-marketing in certain 
Member States 

Asset 
managers 

Qualitative element: 
not applicable 

Regulatory 
fees: national 
requirements 
differ and lack 
transparency 

Compliance costs in 
order to be able to fulfil 
national requirements: 
legal advice 

Regulatory charges to be 
paid 

Identify the moment when 
the payment needs to be 
done, the methodology 
how to calculate and the 
amount to be paid 
Payment 

Administrative 
requirements: 
local agents 

Compliance costs in 
order to be able to fulfil 
national requirements:  
legal advice 

Find out whether a local 
agent is needed and which 
roles the agent needs to 
fulfil 

Asset 
managers 

Quantitative element: 
Low to medium* 

Asset 
managers 

Quantitative element: 
Low to medium 

Asset 
managers 

Quantitative element: 
Low to medium* 

Notification 
requirements: 
conditions for 
updates as well 
as for de-
notification 
differ 

Compliance costs in 
order to be able to fulfil 
national requirements: 
external service by local 
facility 

Compliance costs in 
order to be able to fulfil 
national requirements 
regarding updates and 
de-notification: legal 
advice  

Administration 
associated with all new 
fund launches, changes, 
country registrations, 
dissemination of 
regulatory documents to 
host authorities. 
Uncertainty regarding  or 
lack of de-notification in 
some Member States 

176 This would cause hassle costs.  
177 This would cause hassle costs. 

Find a local facility, sign a 
contract with it, pay for its 
services 

Asset 
managers 

Quantitative element: 
Medium- High (due 
to huge discrepancies 
between Member 
States) 

Identify national 
requirements and comply 
with them 

Asset 
manager 

Quantitative element: 
Low- Medium* 

Prepare and send required 
forms and documentation 

Asset 
manager 

Quantitative element:  
Low 

Sometimes asset managers 
hesitate177 to or abstain 
from entering a host 
market, because there is no 

Asset 
manager 

Qualitative element: 
not applicable 

147 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
(clear) exit strategy 

Enhanced transparency 

Costs for Competent Authorities: Enforcement costs 
Marketing: 
national 
requirements 
differ and lack 
transparency 
Regulatory 
fees: national 
requirements 
differ and lack 
transparency 

Enhanced transparency 

Publish marketing 
requirements on the 
website of the competent 
authority and ESMA 

Publish regulatory fees on 
the websites of the 
competent authority and 
ESMA 

Competent 
authorities 
and ESMA 

Competent 
authorities 
and ESMA 

Quantitative element: 
Low 

Quantitative element: 
Low 

Adapt fee collection 
procedure   

Reinforce debt collection 
activities, cooperation with 
other authorities 

Competent 
authorities 

Quantitative element: 
Low  to medium 

Regulatory fee calculator  ESMA to set up and 

update fee calculator based 
on input by competent 
authorities 

ESMA and 
competent 
authorities 

Quantative element: 
medium (ESMA), 
Low (for competent 
authorities) 

Database for 
notifications 

ESMA to set up and update 
database, input by 
competent authorities 

Notification 
requirements: 
conditions for 
updates as well 
as for de-
notification 
differ 
*Legal  advice  is  attributed  mostly  "low  to  medium"  burden  per  element,  however  in  total  the  burden  of  legal 
advice is estimated as "high". 

Quantitative element: 
Low to medium 
(ESMA),  
Low (for competent 
authorities) 

ESMA and 
competent 
authorities 

Cost quantification 

The next tables analyse the quantitative elements classified as at least medium. They indicate 
price  examples  for  the  costs  linked  to  cross-border  distribution  barriers  on  a  per  fund  basis 
and on a total industry basis.  

The total industry figure is calculated using the December 2016 figure of cross-border funds 
and the average number of host jurisdictions these funds are marketed to.  

For  industry  the  tables  show  the  costs  barriers  currently  cause.  The  tables  also  indicate 
estimated cost reductions on a per fund and on a total industry basis. The latter figure shows 
thus only expected cost reductions for existing funds, while the initiative aims at raising the 
number of cross-border funds. In this context, it is highlighted that the number of cross-border 
funds  increased  over  the  last  5  years  on  average  per  6.8%  p.a.  and  growth  should  further 
accelerate thanks to this initiative. Therefore the figures below show conservative estimates of 
costs  reductions  (additional  growth  is  indicated  in  footnotes  of  the  total  cost  reduction 
sections). 

For competent authorities (national competent authorities and ESMA) the final table shows 
new costs stemming from the initiative. 

The figures used are based on public data sources, input by stakeholders (indications received 
were used to calculate an average), indications by ESMA and some NCAs. 

148 

 
 
 
 
 
 
 
 
 
 
 
 
 
Costs and cost reductions for industry: 

Scenario  A  describes  quantitative  elements  of  costs  assuming  that  the  asset  management 
company uses in-house legal advice and undertakes fund administration itself. 

Type of cost 

Description of 
action 

in-house 
compliance/ 
counsel, linked to 
analysis of 
marketing 
requirements, 
administrative 
requirements, 
notification, 
regulatory fees 
and out of scope 
drivers and to 
undertaking 
administration 

Administrative 
requirements/ 
local facilities 

Regulatory fees 
on national level 
in host Member 
States 

Substantive 
compliance 
costs: direct 
labour costs  

Substantive 
compliance 
costs: costs of 
external 
services 
Regulatory 
charges 

Example for 
total costs 

Base of evidence 

Price example178   Frequency  Costs for all 

funds marketed 
cross-border179 
€264,059,244 

One-off  

Anecdotal 
evidence 
(feedback from 
two fund 
associations) on 
man hours, salary 
based on Robert 
Walters Global 
Salary Survey180 

€4,297 one-off 
cost per fund and 
jurisdiction 

(50-100 man 
hours one-off: for 
calculation 75 
man hours are 
used) 

Feedback 
received from 
industry regarding 
15 host 
jurisdictions. 
Calculations 
based on Annex 9 

ongoing 
(annually) 

€70,423,992 

Ongoing 

€302,958,360 

One-off 

€111,781,188 

Ongoing 

€134,825,688 

One-off  

€678,798,792 

ongoing 
(annually) 

€508,208,040 

€1,146 per fund 
and jurisdiction 
(ongoing) 
(20 man hours 
annually) 
On average 
€4,930 annually 
per fund and 
jurisdiction 

Average: €1,819 
one-off 

Average: €2,194 
ongoing 
Up to €11,046 
annually per fund 
and jurisdiction in 
the first year 
when entering 
into the 
jurisdiction 

Up to €8,270 
annually per fund 
and jurisdiction 
(ongoing, 
supposing the 
fund is still 
marketed) 

178 If possible, average figures are presented. 
179 11,380 existing cross-border fund with ongoing marketing in an average of 5.4 host jurisdictions 
180 Robert Walters Global Salary Survey 2015: fund lawyer Luxembourg: 110k pa : 12:4 :40= salary per hour x 
hours indicated in the column 

149 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
Cost reductions for Scenario A 

Type of cost  Description of 

action 

in-house 
compliance/ 
counsel,  linked 
to analysis of 
marketing 
requirements, 
administrative 
requirements, 
notification, 
regulatory fees 
and out of 
scope drivers 

Administrative 
requirements/ 
local facilities 

Regulatory fees 
on national 
level in host 
Member States 

Substantive 
compliance 
costs: direct 
labour costs  

Substantive 
compliance 
costs: costs 
of external 
services  

Regulatory 
charges 

Example for 
total costs  

Change compared to 
current situation for 
one fund (in %) 

- 25-50%181: advice 
linked to taxation and 
market structure 
remains, evaluation of 
other elements and 
administration is 
simplified but not 
eliminated 

Change compared to 
current situation for 
one fund (in monetary 
terms) 
- €1,074.25 to 2,148.5  
(one-off costs) 

Change compared to 
current situation for all 
funds marketed cross-
border  
- €66,014,811 to 
132,029,622 (one-off) 

- €286.5 to 573 
(ongoing) 

- €17,605,998 to 
35,211,996 (ongoing) 

- 90 %182 

- €4,437 annually 

- €272,662,524 annually 

- 5%183 

- € 90.95 one-off 

- €5,589,059 one-off 

- €109.70 ongoing 

- €6,741,284 ongoing 

- €5,602.2 to 6,695.2 
annually per fund and 
jurisdiction in the first 
year when entering into 
the jurisdiction 

- €344,266,394.4 to 
411,433,430184 

- €4,833.2 to 5,119.7 
annually per fund and 

- € 297,009,806 to 
314,615,804 

181 The estimated change is based on the following elements: The initiative does not cover out of scope drivers, 
most  importantly  taxation.  The  public  consultation  showed  that  stakeholders  consider  that  about  40%  of  the 
barriers  are  linked  to  out  of  scope  drivers.  With  respect  to  each  addressed  barrier,  the  improvement  will  be 
significant, but not materialize in a 100% reduction, e.g. the barrier national marketing requirements sometimes 
lack transparency is addressed by creating transparency, while asset managers will still need to need legal advice 
to analyse the provided information. Moreover, the implications will differ from Member State to Member State, 
e.g.  addressing  the  barrier  national  marketing  requirements  lack  transparency  will  have  little  effect  in  France 
where  information  is  already  available  while  the  impact  in  other  Member  States  will  be  high,  because  these 
Member States do not (sufficiently) provide relevant information. As a consequence, an estimate with a positive 
impact of 25-50% cost reduction has been calculated.  
182  Costs  for  local  facilities  will  fall,  but  some  costs  will  be  linked  to  providing  information  in  the  investor's 
language. 
183 The level of regulatory fees is not directly affected by the retained policy options, but increased transparency 
can have a slight indirect positive impact. 
184 Projection: One year later, the cost reduction for ongoing costs would be more important, as the number of 
cross-border  funds  would  continue  to  increase  (on  average  by  6.8%).  This  would  lead  to  savings  of 
434,332.656,45  in  the  second  year  (instead  of  406,678,517.28  as  indicated  above).  Moreover  growth  should 
further accelerate thanks to this initiative. This remark is also valid for scenario B. 

150 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
jurisdiction (ongoing, 
supposing the fund is 
still marketed) 

Scenario  B  describes  quantitative  elements  of  costs  assuming  that  the  asset  management 
company fully outsources legal advice and fund administration. 

Type of cost  Description of 

action 

Base of 
evidence 

Price example185  

Frequency  Costs for all funds 

Legal counsel 
costs, linked to 
marketing 
requirements, 
administrative 
requirements, 
notification, 
regulatory fees 
and out of 
scope drivers 

Administrative 
requirements/ 
local facilities 

Regulatory fees 
on national 
level in host 
Member States 

Substantive 
compliance 
costs: costs 
of external 
services  
(part 1) 

Substantive 
compliance 
costs: costs 
of external 
services 
(part 2) 
Regulatory 
charges 

Example for 
total costs  

Range based 
on anecdotal 
evidence from 
6 respondents  
(5 industry, 
1 lawyer) 

One-off  

Average: €8150 
(range: 1,000-15,000) 
one-off costs per fund 
and jurisdiction187 

marketed cross-
border186 
Average:  
€500,833,800 
(range: €61,452,000 
to 921,780,000) 

Feedback 
received from 
industry 
regarding 15 
host 
jurisdictions. 
Calculations 
based on 
Annex 9 

Average: €6983 
(range: €1,000-
10,000) annually per 
fund and jurisdiction 
(ongoing) 
On average €4,930 
annually per fund and 
jurisdiction 

ongoing 
(annually) 

Average: 
€429,119,316 
(range: €61,452,000 
to 614,520,000) 

Ongoing 
(annually) 

Average: 
€302,958,360 

One-off 

€111,781,188 

Ongoing 

€134,825,688 

One-off 

Average: 
€915,573,348  

Ongoing 
(annually) 

Average: 
€866,903,364 

Average: €1,819 one-
off 

Average: €2,194 
ongoing 
Average: €14,899 
annually per fund and 
jurisdiction in the 
first year when 
entering into the 
jurisdiction 
Average: €14,107  
annually per fund and 
jurisdiction (ongoing, 
supposing the fund is 
still marketed) 

185 If possible average figures 
186 11,380 existing cross-border fund with ongoing marketing in 5.4 host jurisdictions (PwC, Benchmark your 
Global Fund Distribution, March 2017) 
187 Jurisdiction to be understood as host jurisdiction 

151 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
Cost reductions for Scenario B 

Type of cost 

Description of action  Change compared 

Substantive 
compliance 
costs: costs of 
external 
services  (part 
1) 

Substantive 
compliance 
costs: costs of 
external 
services (part 
2) 

Regulatory 
charges 

Example for 
total costs 

Legal counsel costs, 
linked to analysis of 
marketing 
requirements, 
administrative 
requirements, 
notification, 
regulatory fees and 
out of scope drivers 
and to undertaking 
administration 

Administrative 
requirements/ local 
facilities 

to current 
situation for one 
fund (in %) 

- 25-50%: advice 
linked to taxation 
and market 
structure remains, 
evaluation of other 
elements and 
administration is 
simplified but not 
eliminated 

- 90 %: No local 
facility anymore, 
but website and 
customer service to 
be further 
developed 

Change compared 
to current situation 
for one fund (in 
monetary terms) 

- €2,037.50 to 4,075 
one-off 

Change compared 
to current situation 
for all funds 
marketed cross-
border  
- €125,208,450 to 
250,416,900 
one-off 

- €1,745.75 to 
3,491.50 
ongoing 

- €107,279,829 to 
214,559,658 
ongoing 

- €4,437 annually 

- €272,662,524 
annually 

Regulatory fees on 
national level in host 
Member States 

- 5%  

- €90.95 one-off 

- €109.70 ongoing 

- €6,565.45 to 
8,621.70 annually per 
fund and jurisdiction 
in the first year when 
entering into the  
jurisdiction  

- €6,292.45 to 
8,038.2 annually per 
fund and jurisdiction, 
supposing the fund is 
still marketed 

- €5,589,059  
one-off 

- €6,741,284.4 
ongoing 

- €403,460,033 to 
529,820,708 

- €386,683,637 to   
493,963,466 

152 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs for competent authorities: 

Type of cost 

Description of 
action 

Adapt fee 
collection 
procedure   

Regulatory fee 
calculator 

Notification 
database 

Competent 
authorities need to 
reinforce debt 
collection activities, 
cooperation with 
other authorities 

ESMA needs to set 
up and maintain a 
regulatory fee 
calculator for fees in 
host Member States 

ESMA needs to set 
up and maintain a 
database for 
notifications, updates 
and de-notifications 

Change compared 
to current 
situation for one 
fund (in %) 

+ ≈95%: costs 
caused by European 
initiative 

Change compared 
to current 
situation for one 
fund (in monetary 
terms) 
€  400 per fund and 
jurisdiction 
(ongoing)188 

+ 100%  

NA190 

+ 100% 

NA191 

Change compared to 
current situation for 
all funds marketed 
cross-border  

+ €682,800 (ongoing 
per host jurisdiction)  

+ €3,687,120 (ongoing 
for all host 
jurisdictions)189 

+ €500,000 one-off,  
€100,000 ongoing, and 
1 FTE 

+ €250,000 one-off, 
€50,000 ongoing, and 
1 FTE 

188 This figure is based on input from some Competent Authorities regarding salaries of persons involved in the 
debt collection activities and number of hours required to reinforce debt collection per fund. 
189 The total figure strongly depends on the number of funds which do not directly pay regulatory fees. For the 
indications above the estimation of 15% has been used, representing an average of some indications received by 
Competent Authorities. 
190 No data received from ESMA on a by fund basis. 
191 No data received from ESMA on a by fund basis. 

153