The Directive 2009/65/EC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS IV), provided massive change to the existing legal regime for collective investment schemes. Although it was supposed to be transposed into national laws by July 1st, 2011, it was implemented in Greece just on the 20th of December 2012 by the adoption of Law 4099/2012.
UCITS activity has come to play a major role regarding EU’s market integration in the financial services area and the extent of retail investment. Still, the European Commission assessed that core areas of UCITS had not worked properly. UCITS IV brought various amendments in key areas.
Market integration
UCITS authorisation was an issue regulated by the previous Directives and provided authorisation by the competent Home Member State creating one single passport valid for all EEA . Nevertheless, UCITS right to offer their services across borders faced difficulties. Following the new rules, management companies, which comply with these, may benefit significantly. Authorisation and notification procedures are simplified while cooperation mechanisms between national supervisors are improved. New provision of crucial importance is the allowance of both domestic and cross border mergers between funds after authorisation from the competent authority of UCITS home Member State. Such a mechanism would facilitate the emergence of strong competitive investment funds instead of the current small and medium ones which would allow a bigger concentration and investment of pooled assets.
Retail investment
From the investors’ point of view, the new provisions bring huge change to the disclosure regime applying to them. Disclosure is maybe the most important tool of investor protection. As UCITS are addressed to retail investors, they should be able to understand the risk they take. However, the method under which UCITS operate is difficult to understand. Massive amount of information does not guarantee transparency and realisation of the risks. The new provisions apply a new disclosure regime which replaces the previous simplified prospectus (SP) with a Key Investor Information (KII) one. Under the latter, the same short document is provided to the potential investors free of charge in good time before the investment in any units. This document is in a standardised format and includes basic information on the UCITS in a non-technical language (A.78-82 of the Directive). Under those requirements, the new regime does not provide scope for divergence to the member states as exactly the same circulates in all Member States. Of course in each country where UCITS operates it is accompanied and distributed with the relevant translation.
It remains to be seen how the competent Hellenic Capital Market Commission will engage in the new procedures and how market forces will operate under the new regime. Investing in mutual funds is a very popular strategy in Greece. Even in days of crisis, statistics of the Hellenic Fund and Asset Management Association disclose increase of investment funds’ activity and profits. Hopefully, the new legislative regime will provide a bigger boost of Greece’s market finance.