European Commission proposal would ease cross-border investment fund distribution

The European Commission intends to align regulatory fees and marketing requirements across all European markets in efforts to help money managers distribute investment funds cross-border, the European Union legislator said in a proposal Monday.

Investment funds are pools of investors' capital that collectively invest through financial instruments that make loans to companies and projects in the real economy.

However, some 70% of assets invested in these funds are held by vehicles authorized for distribution only in the country of origin of the money manager running the fund. If the proposal is adopted, money managers will be able to market their funds to asset owners and retirement plans in the rest of the European countries without having to meet individual national criteria.

Money managers could save up to €440 million ($542 million) annually in cross-border distribution by launching fewer country-specific funds, the EC said.

The European Fund and Asset Management Association, however, criticized the proposal, warning it can create an additional barrier in the market.

"The main barriers to the cross-border distribution of funds, as identified by asset managers and investors, are the lack of clarity and transparency of existing rules, along with additional layers of regulatory requirements imposed at national level. The proposal unfortunately adds yet a new layer of rules. EFAMA would strongly support supervisory convergence and legal certainty on the basis of a common understanding among national regulators and can be developed and implemented within a much shorter period of time than a legislative proposal," Peter De Proft, director general of EFAMA, said in an emailed comment.

The proposal needs to be approved by the European Parliament and the European Council before it can go into effect.