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European Fund Companies Gain Flexibility

The Council of the European Union has approved legislation that would allow fund companies to sell in any European Union country, as long as the fund is registered in one of them.

The Council of the Ministers of the Economy and Finances of the European Union voted to amend the 1985 UCITS (Undertakings for Collective Investment in Transferable Securities) Directive, which has jurisdiction over most European funds. The amendment also institutes a simplified prospectus, creating uniformity in prospectuses within the EU.

With the passage of this amendment, another amendment to the UCITS Directive, which was passed by the Council in October, will also take effect. The previous amendment adds funds of funds and money-market funds to those already regulated by the UCITS Directive, and relaxes limits on index funds, raising the maximum percentage of assets they can invest in a single issuer.

In February 1993, European authorities began to discuss widening the scope of the 1985 directive. The European Parliament proposed the amendments in 1998, and last June, they were approved by the European Commission.