The trade body representing over 245,000 advisers and intermediaries in Europe is actively supporting the creation of a Capital Markets Union (CMU) by the European Commission, to facilitate the marketing of funds outside of their domicile member states.
The organisation said in a statement that it supports the creation of a “truly unified capital markets industry, where barriers that prevent and/or have a material impact on the cross-border distribution of funds, or financial services in general, are reduced or abolished”.
National barriers
Fecif maintains that cross-border competition and efficiency must be introduced and the only way to achieve that is by deregulating national barriers and introducing harmonised rules across all member states.
“We strongly believe and assert that the underlying purpose of the CMU initiative must specifically be to abolish national barriers, which have proven to prohibit and limit the cross-border distribution of funds for instance,” Fecif board member Kevin Mudd said.
Especially after Brexit, these developments are highly desirable and need to be actively sought.
“We believe that following Brexit, the need and necessity to modernise and clarify this overly regulated and, in some instances, unnecessarily complicated sector is greater than ever,” Mudd explained.
Fecif made its views known in its recent submission to the EU’s Inception Impact Assessment Initiative in relation to ‘Reducing barriers to cross-border distribution of investment funds’.
Certainty needed
The primary source of uncertainty and confusion is that the interpretations across the EU vary widely, as the negative example of the implementation of the Alternative Investment Fund Marketing Directive (AIFMD) by different EU member states shows.
“The member states which have implemented it into national law and national rules have ended up with significantly different rules and regulations between them,” Mudd noted.
“This was the obvious result of the flexibility and elasticity of rules and definitions which were allowed within the wording of the AIFMD.”
This is why legal certainty is “a pivotal element for the efficient and continuous distribution of funds across a CMU”, Fecif secretary general Paul Stanfield added.
“What should have been a simple and cost efficient process – the cross-border distribution of AIFs – has unfortunately proved to be a very expensive and burdensome process.”
Recommendations
Fecif has drafted a series of recommendations to achieve a common definition of rules and procedures for the distribution of funds outside of their domicile member states. These are:
- the creation of a standardised glossary;
- the removal of the rule to inform individual countries of marketing activity, except where funds or products are structured solely on national legislation;
- That is because, as Fecif explains, “meeting regulatory promotional requirements in one EU country should automatically mean meeting them in any others, where EU criteria have been met”.
- the abolition of the need for manufacturers to take responsibility for distribution when dealing through regulated intermediaries;
- the elimination of legal requirements in some countries that require the involvement of local agents; and
- the establishment of a uniform agreement across the EU on what constitutes a “well informed, certified, experienced or sophisticated investor” to fit between retail and professional categories.
