Tag Archives: Financial legislation

Cross-border payments in euros

Cross-border payments in euros

Outline of the Community (European Union) legislation about Cross-border payments in euros

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Single market for capital

Cross-border payments in euros

Document or Iniciative

Regulation (EC) No 924/2009 of the European Parliament and of the Council of 16 September 2009 on cross-border payments in the Community and repealing Regulation (EC) No 2560/2001 (Text with EEA relevance).

Summary

This Regulation guarantees that national and cross-border payments made in the Community are subject to the same rules with regard to bank charges.

Scope

The payments concerned must not exceed EUR 50,000. They are to be made in euros or in the national currency of Member States wishing to apply the Regulation. Thus, following a request from Sweden, the principle of equality of charges also applies to payments made in Swedish kronor.

The Regulation shall not apply to payments made by payment service providers * for their own account or on behalf of other payment service providers. Furthermore, the Regulation shall not apply to currency conversion charges.

Equality of charges applicable to payments

Service providers shall levy identical charges for:

  • cross-border payments and electronically processed payment transactions where the payer’s payment service provider and the payee’s payment service provider are located in different States;
  • national payments and electronically processed payment transactions where the two service providers are located in the same State.

Facilitating the automation of payments

Payment service providers shall give each client an International Bank Account Number (IBAN). They shall also communicate their Bank Identifier Code (BIC). These codes shall be indicated by clients when making cross-border transactions. Failing this, the client may be subject to additional charges. Service providers must inform their clients of the amount of additional charges before a transaction takes place.

Compliance with regulatory obligations

Member States shall designate the competent authorities responsible for ensuring compliance with this Regulation.

If there is an infringement of the provisions by service providers, service users or any interested party may submit claims to national authorities. Member States shall establish out-of-court complaint and redress procedures. They shall designate or create competent bodies.

Member States shall lay down penalties to be applied in the event of infringement.

Cross-border cooperation

The competent authorities and the bodies responsible for out-of-court complaint and redress procedures shall expeditiously cooperate in solving cross-border disputes.

Context

Regulation (EC) No 2560/2001 is repealed, as from 1 November 2009.

Key terms
  • Payment service providers: means in particular credit institutions, electronic money institutions, payment institutions, post office giro institutions, the European Central bank and national central banks, Member States or their regional and local authorities (when not acting in their capacity as public authorities).

References

Act Entry into force Deadline for transposition in the Member States Official Journal
Regulation (EC) No 924/2009

1.11.2009

OJ L 266 of 9.10.2009

Related Acts

Communication from the Commission of 10 September 2009 – Completing SEPA: A Roadmap for 2009-2012 [COM(2009) 471 final – Not published in the Official Journal].

The Roadmap presented by the Commission lays down the priorities for the Single Euro Payments Area (SEPA) for the period 2009-2010. These priorities concern Member States which have adopted the euro or are preparing to do so, as well as Sweden. These priorities should:

  • accelerate the migration of financial products and payment standards towards SEPA products;
  • increase the visibility of SEPA and its products;
  • complete the legal environment for SEPA and strengthen compliance of its standards with those of the European Payments Council;
  • ensure standardisation, interoperability and security of the processing of payments;
  • improve governance of SEPA, through the establishment of a new competent body at European level.

Communication 2002/C 165/08 from the Commission of 11 July 2002 pursuant to Article 9 of Regulation (EC) No 2560/2001 of the European Parliament and of the Council [Official Journal C 165 of 11.7.2002].
The Commission received notification on 28 June 2002 of the decision of the Swedish authorities to extend the application of the Regulation to the Swedish kronor.


Another Normative about Cross-border payments in euros

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic

Other

Cross-border payments in euros

This Regulation provides that the charges levied on payments in euros between bank accounts in different Member States must not be higher than those levied on payments in euros within a Member State. Transactions by debit card and withdrawals from ATMs are also covered by the Regulation.

Document or Iniciative

Regulation (EC) No 2560/2001 of the European Parliament and of the Council of 19 December 2001 on cross-border payments in euro.

Summary

This Regulation is designed to put charges for cross-border payments in euros on the same footing as those for payments in that currency within a Member State. It sets a maximum amount of €50 000 and does not apply to cross-border payments between institutions for their own account.

Reducing costs and making cross-border payments easier for citizens

Cross-border payments comprise:

  • cross-border credit transfers: Transactions carried out by the originator via an institution in one Member State, in order to place a sum of money at the disposal of a beneficiary in the latter’s institution in another Member State (the originator and the beneficiary may be the same person);
  • cross-border electronic payment transactions: Cross-border funds transfers effected by an electronic payment method or cash withdrawals;
  • cross-border cheques: paper cheques.

An institution must make available to its customers in a readily comprehensible form, in writing and, where appropriate, by electronic means, prior information on the charges levied in respect of: cross-border payments, payments transacted within the Member State in which it is located and the exchange of currencies into and from euros.

Any change in the charges must be notified in advance of the date of application.

Facilitating cross-border transfers: IBAN number and BIC code

Institutions must notify customers on request of their International Bank Account Number (IBAN) and the institution’s Bank Identifier Code (BIC). In order to pay only the charges that apply to domestic transfers, customers are required to indicate the IBAN of the beneficiary and the BIC of the beneficiary’s institution.

Applying the Regulation to Member States outside the euro zone

This Regulation also applies to cross-border payments made in the currency of another Member State, once the latter has notified the Commission that it has decided to extend the Regulation’s application to its currency. To date, only the Swedish authorities have asked for the Regulation’s application to be extended to their currency, the Swedish krona. This means that cross-border payments within the European Union (EU) in Swedish kroner are covered by the Regulation in the same way as payments in euros. (For more information, please consult the document explaining the practical implications of Article 9 of the Regulation (pdf )).

This Regulation also applies to cross-border transfers to accounts in euros even if they have been opened in an EU country outside the euro zone, such as the United Kingdom.

References

Act Entry into force Transposition in the Member States Official Journal
Regulation (EC) No 2560/2001

31.12.2001

OJ L 344 of 28.12.2001

Related Acts

Proposal for a Regulation of the European Parliament and of the Council of 13 October 2008 on cross-border payments in the Community [COM(2008) 640 final – Not published in the Official Journal].
This proposed Regulation will replace the above Regulation, in order to realise an Internal Market for payment services in euro. Such an Internal Market will provide national and cross-border payments with the same rules and allow for more effective competition within the EU. The new Regulation will also improve consumer protection and establish the necessary legal framework to create an up-to-date and effective European level payment system.
The proposed amendments to the existing Regulation were derived, in particular, from the Commission’s report on its application (below). With the new Regulation, its scope will be extended so that:

  • national and cross-border direct debits will also be covered by the equality of charges principle, meaning that costs for these would be the same in each Member State;
  • the obligation for payment service providers to report on the statistics concerning the balance-of-payments (BoP) will be phased out.

In addition, Member States will be requested to appoint competent authorities and out-of-court redress bodies for ensuring that the new Regulation is applied correctly. These will also provide arbitration and mediation in payment-related disputes.
Co-decision procedure (2008/0194/COD)

Report from the Commission to the European Parliament and the Council of 11 February 2008 on the application of Regulation (EC) No 2560/2001 on cross-border payments in euro [COM(2008) 64 final – Official Journal C 207 of 14.8.2008].

This report examines the practical problems encountered in the application of Regulation (EC) No 2560/2001. It confirms that the Regulation has helped bring about a substantial reduction in the charges linked to cross-border transfers. Also, prompted by the Regulation, the financial services sector has taken the necessary action to realise the notion of an ‘internal payments area’ for non-cash payments, namely the Single Euro Payments Area (SEPA).
Nevertheless, the Commission notes in its report that the Member States should set up competent authorities and proper procedures to permit the amicable settlement of disputes between a bank and its client so as to protect consumers’ rights. In addition, the Regulation should be extended to cover direct debits, a payment method not yet available across borders. The Commission intends to submit a proposal for legislation in autumn 2008.

Communication from the Commission of 2 December 2003 concerning a New Legal Framework for Payments in the Internal Market (Consultative Document) [COM(2003) 718 final – Official Journal C 96 of 21.4.2004].
The purpose of this Communication is to consult interested parties on the general principles underpinning modernisation of the legal framework for retail payment services in the internal market. The consultation, which deals with a number of legal and technical issues, should enable the Commission to put forward appropriate proposals for a new legal framework for payments.

Communication from the Commission of 11 July 2002 pursuant to Article 9 of Regulation (EC) No 2560/2001 of the European Parliament and of the Council [Official Journal C 165 of 11.7.2002].

On 28 June 2002, the Commission received notification of the Swedish authorities’ decision to extend the application of the Regulation to the Swedish krona.

UCITS: organisational requirements and rules of conduct

UCITS: organisational requirements and rules of conduct

Outline of the Community (European Union) legislation about UCITS: organisational requirements and rules of conduct

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Financial services: transactions in securities

UCITS: organisational requirements and rules of conduct

Document or Iniciative

Commission Directive 2010/43/EU of 1 July 2010 implementing Directive 2009/65/EC of the European Parliament and of the Council as regards organisational requirements, conflicts of interest, conduct of business, risk management and content of the agreement between a depositary and a management company (Text with EEA relevance).

Summary

This Directive is an implementing measure of the Directive on the rules applying to UCITS. It specifies the organisational requirements with which management companies managing UCITS must comply, as well as rules of conduct and rules on handling conflicts of interest. Furthermore, the Directive establishes requirements concerning the risk management process for UCITS.

Entities concerned by the Directive

This Directive applies to:

  • management companies which manage UCITS;
  • depositaries;
  • investment companies that have not designated a management company.

Administrative procedures and control mechanism

Management companies have a duty to:

  • implement decision-making procedures, and an organisational structure;
  • ensure that information is transmitted to the relevant persons * in the proper way;
  • implement appropriate internal control mechanisms;
  • maintain records of their business and internal organisation.

Management companies must safeguard the security, integrity and confidentiality of information.

They must put in place operational accounting procedures in such a way that all assets and liabilities of the UCITS can be directly identified at all times. The accounting procedures must be in accordance with the accounting rules of the UCITS’ home Member States.

As regards internal control mechanisms, the senior management of management companies are responsible for general investment policy. They oversee the approval of investment strategies for each UCITS.

Management companies must ensure permanent compliance. This consists of evaluating the adequacy and effectiveness of the measures taken to address any failures of the management company in complying with its obligations. Compliance also consists of advising and assisting the persons responsible for carrying out the services and activities of the management company. This work is to be carried out by a person designated for this purpose.

Management companies shall be responsible for maintaining a risk management function at all times, independently of operational units, in particular responsible for:

  • implementing the risk management policy and procedures;
  • ensuring compliance with the UCITS risk limit system;
  • providing advice to the board of directors as regards the identification of the risk profile of each managed UCITS;
  • reviewing and supporting the arrangements and procedures for the valuation of over-the-counter (OTC) derivatives.

Management companies shall put in place a procedure to prevent certain relevant persons * from:

  • performing a personal financial transaction or advising another person to perform such a transaction;
  • divulging information that might influence the behaviour of other persons as regards the choice of their transactions.

Portfolio transactions must be recorded in order facilitate future reconstructions of the details of the order, as must be subscription and redemption orders. These records are then to be retained for at least five years.

Conflict of interests

The following situations may lead to conflicts of interest, where:

  • the management company is likely to make a financial gain, or avoid a financial loss, at the expense of the UCITS;
  • the management company has an interest in the outcome of a service provided to the UCITS or another client which does not share the interests of the UCITS;
  • the management company has an incentive to favour the interest of another client;
  • the management company carries out the same activities for the UCITS as for another client;
  • the management company receives money, goods or services illegally.

Management companies are therefore obliged to define in writing an effective policy as regards conflict of interest, which preserves the independence of the relevant persons.

Rules of conduct

Management companies must treat UCITS unit-holders * fairly. Where they have carried out a subscription or redemption order for a unit-holder, they must send the unit-holder notice containing in particular the following information:

  • the management company identification;
  • the name of the unit-holder;
  • the date and time of receipt of the order and method of payment;
  • the date of execution;
  • the UCITS identification;
  • the number of units involved.

Management companies are not permitted to carry out a UCITS order in aggregate with an order of another UCITS or another client or with an order on their own account.

Risk management

Management companies must implement an operational risk management policy. They are to calculate the global exposure of the UCITS once a day.

Key terms of the Act
  • Relevant person: in relation to a management company shall mean a director, partner or equivalent, or manager of the management company, an employee of the management company, as well as any other natural person whose services are placed at the disposal and under the control of the management company and who is involved in the provision by the management company of collective portfolio management, or a natural person who is directly involved in the provision of services to the management company under a delegation arrangements to third parties for the purpose of the provision by the management company of collective portfolio management.
  • Unit-holder: any natural or legal person holding one or more units in a UCITS.

Reference

Act Entry into force Deadline for transposition in the Member States Official Journal

Directive 2010/43/EU

30.7.2010

30.6.2011

OJ L 176 of 10.7.2010

Market abuse

Market abuse

Outline of the Community (European Union) legislation about Market abuse

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Financial services: transactions in securities

Market abuse

Document or Iniciative

Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003 on insider dealing and market manipulation (market abuse) [See amending acts].

Summary

This Directive aims at preventing market abuse in order to preserve the smooth functioning of European Union financial markets.

This Directive does not apply to transactions relating to:

  • monetary policy, exchange rates or public debt management by a Member State;
  • the European System of Central Banks;
  • national central banks.

Conditions for the prohibition of market abuse

Market abuse may arise in circumstances where investors have been unreasonably disadvantaged, directly or indirectly, by others who:

  • have used information which is not publicly available (insider dealing);
  • have distorted the price-setting mechanism of financial instruments;
  • have disseminated false or misleading information.

This type of conduct can undermine the general principle that all investors must be placed on an equal footing.

The Member States therefore prohibit any person possessing information from:

  • disclosing privileged information to any other person outside the scope of the exercise of their employment;
  • recommending any other person to acquire or dispose of financial instruments to which that information relates;
  • engaging in market manipulation.

These prohibitions do not apply either to trading in own shares in “buy-back” programmes or to the stabilisation of a financial instrument.

Managing information from the issuers of financial instruments

The issuers of financial instruments must publish information which concerns the said issuers as soon as possible and post it on their website. If an issuer discloses privileged information to a third party in the exercise of his duties, he must make public disclosure of that information.

Issuers must also draw up a list of persons in their employment who have access to privileged information.

The European Securities and Markets Authority (ESMA) may draft technical norms for implementation aimed at ensuring that acts adopted by the Commission are applied under uniform conditions.

Cooperation

The Directive requires each Member State to designate a single regulatory and supervisory authority with a common minimum set of responsibilities. These authorities use convergent methods to combat market abuse and should be able to assist each other in taking action against infringements, particularly in cross-border cases. The administrative cooperation procedure followed could in particular help to combat terrorist acts. The competent authorities are to collaborate with the ESMA.

Penalties

The same form of wrongful conduct shall incur the same penalty in each of the Member States.

If a competent authority adopts an administrative measure or penalty, it must inform the ESMA. If said penalty concerns an investment firm authorised pursuant to the Markets in Financial Instruments Directive (MiFiD), the ESMA shall add a reference to that penalty in the register of investment firms.

References

Act Entry into force Deadline for transposition in the Member States Official Journal

Directive 2003/6/EC

12.4.2003

12.10.2004

OJ L 96, 12.4.2003

Amending act(s) Entry into force Deadline for transposition in the Member States Official Journal

Directive 2008/26/EC

21.3.2008

OJ L 81, 20.3.2008

Directive 2010/78/EU

4.1.2011

31.12.2011

OJ L 331, 15.12.2010

Successive amendments and corrections to Directive 2003/6/CE have been incorporated in the basic text. This consolidated version is for reference purpose only.

Related Acts

Directive 2008/26/EC of the European Parliament and of the Council of 11 March 2008 amending Directive 2003/6/EC on insider dealing and market manipulation (market abuse), as regards the implementing powers conferred on the Commission [Official Journal L 81 of 20.3.2008].

Commission Directive 2004/72/EC of 29 April 2004 implementing Directive 2003/6/EC of the European Parliament and of the Council as regards accepted market practices, the definition of inside information in relation to derivatives on commodities, the drawing up of lists of insiders, the notification of managers’ transactions and the notification of suspicious transactions [Official Journal L 162, 30.04.2004].
This Directive defines the criteria to be taken into account when evaluating market practices for the purpose of implementing Article 6(10) of Directive 2003/6/EC. The practices of market participants must comply with the principles of fairness and efficiency in order to protect the integrity of the market. These practices must not compromise the integrity of other European Union markets that are linked to it.

Commission Directive 2003/124/EC of 22 December 2003 implementing Directive 2003/6/EC of the European Parliament and of the Council as regards the definition and public disclosure of inside information and the definition of market manipulation [Official Journal L 339, 24.12.2003].
This Directive fixes the detailed criteria for determining information that must be deemed to be of a precise nature and likely to have a significant effect on prices. In addition, it specifies a series of factors that are to be taken into consideration in determining whether specific behaviour constitutes market manipulation. Regarding issuers, it lays down the means and time-limits for public disclosure of inside information and the precise circumstance in which they are authorised to delay such public disclosure in order to protect their legitimate interests.

Commission Directive 2003/125/EC of 22 December 2003 implementing Directive 2003/6/EC of the European Parliament and of the Council as regards the fair presentation of investment recommendations and the disclosure of conflicts of interest [Official Journal L 339, 24.12.2003].
This Directive fixes the rules for the fair presentation of investment recommendations and the disclosure of conflicts of interest. It draws a distinction between persons producing investment recommendations (who must meet stricter standards) and those disseminating recommendations made by third parties. Under Article 6 of the Directive on market abuse, this second implementing Directive must take into account the rules, including self-regulation, governing the profession of journalist. This means that the highly specialised subcategory of financial journalists who produce or disseminate investment recommendations must respect certain general principles. Nevertheless, protective measures are provided for and the use of self-regulatory mechanisms is authorised in order to determine how those basic principles must be applied. The aim of this arrangement is to preserve the freedom of the press while protecting investors and issuers against any risk of market manipulation by journalists.


Another Normative about Market abuse

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic

Internal market > Financial services: transactions in securities

Market abuse (Proposal)

Fund mergers and master-feeder structures relating to undertakings for collective investment in transferable securities

Fund mergers and master-feeder structures relating to undertakings for collective investment in transferable securities

Outline of the Community (European Union) legislation about Fund mergers and master-feeder structures relating to undertakings for collective investment in transferable securities

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Financial services: transactions in securities

Fund mergers and master-feeder structures relating to undertakings for collective investment in transferable securities (UCITS)

Document or Iniciative

Commission Directive 2010/44/EU of 1 July 2010 implementing Directive 2009/65/EC of the European Parliament and of the Council as regards certain provisions concerning fund mergers, master-feeder structures and notification procedure (Text with EEA relevance).

Summary

This Directive lays down provisions relating to the mergers of undertakings for collective investment in transferable securities (UCITS) and master-feeder structures within the framework of the Directive on the rules applying to UCITS. It forms part of the implementing measures of the latter instrument, which include Directive 2010/43/EU, Regulation (EU) No 583/2010 and Regulation (EU) No 584/2010.

UCITS mergers

In the case of a merger of a UCITS, the unit-holders * must be informed of the conditions of the merger and of its potential influence on the receiving UCITS. The unit-holders shall receive other information including in particular:

  • their rights before and after the proposed merger takes effect;
  • a comparison of charges, fees and expenses for both UCITS;
  • whether the management or investment company of the merging UCITS intends to undertake any rebalancing of the portfolio * before the merger takes effect;
  • details concerning any accrued income in the respective UCITS.

The merging and receiving UCITS shall provide unit-holders with information on the approval procedure for the proposed merger and the date at which the merger is to take effect.

Key investor information of the receiving UCITS shall be provided to the unit-holders of the merging and receiving UCITS.

Master-feeder structures

Agreements and internal conduct of business rules between feeder UCITS and master UCITS

The master UCITS shall provide the feeder UCITS with:

  • a copy of its fund rules or instruments of incorporation and key investor information;
  • information on the delegation of investment management and risk management functions to third parties;
  • internal operational documents.

In addition, the master UCITS shall provide certain information with regard to the basis of investment and divestment:

  • a statement of which share classes of the master UCITS are available for investment by the feeder UCITS;
  • the amount of charges and expenses to be borne by the feeder UCITS;
  • the terms on which any initial or subsequent transfer of assets in kind may be made from the feeder UCITS to the master UCITS.

Procedures in the case of liquidation of the master UCITS

Where the feeder UCITS intends to invest at least 85% of its assets in units of another master UCITS, it shall provide:

  • its application for approval of that investment;
  • its application for approval of the proposed amendments to its fund rules;
  • the amendments made to its key investor information.

Where a feeder UCITS intends to convert into a non-feeder UCITS, it shall provide:

  • its application for approval of the proposed amendments to its fund rules;
  • the proposed amendments to its key investor information.

Where a feeder UCITS wishes to be liquidated, it shall provide notification of this intention.

The competent authorities shall be responsible for informing the feeder UCITS if it intends to invest at least 85% of its assets in units of another master UCITS or if it intends to convert into a non-feeder UCITS. This should take place 15 days after receipt of the documents. Once the feeder UCITS has obtained approval from the competent authorities, it shall inform the master UCITS.

Procedures in the case of merger or division of the master UCITS

The feeder UCITS shall provide the competent authorities with its application for approval in the following cases:

  • where it intends to continue to be a feeder UCITS of the same master UCITS;
  • where it intends to become a feeder UCITS of another master UCITS;
  • where it intends to convert into a non-feeder UCITS;
  • where it intends to be liquidated.

As with the liquidation procedure, the competent authorities shall inform the feeder UCITS 15 days after the documents have been received. Once the feeder UCITS has obtained approval from the competent authorities, it shall inform the master UCITS.

The law of the Member State applying in the case of liquidation, merger or division shall also apply to information sharing between the two depositaries.

Key terms of the Act
  • Unit-holder: any natural or legal person holding one or several shares in a UCITS.
  • Rebalancing of the portfolio: a significant modification of the composition of the portfolio of a UCITS.

Reference

Act Entry into force Deadline for transposition in the Member States Official Journal

Directive 2010/44/EU

30.7.2010

30.6.2011

OJ L 176 of 10.7.2010

Review of the Lamfalussy process

Review of the Lamfalussy process

Outline of the Community (European Union) legislation about Review of the Lamfalussy process

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Financial services: general framework

Review of the Lamfalussy process

References

Communication from the Commission of 20 November 2007 entitled “Review of the Lamfalussy process – Strengthening supervisory convergence” [COM(2007) 727 final – Official Journal C 55 of 28.2.2008]

Summary

The Lamfalussy process was launched in 2001 for the purpose of strengthening the European regulatory and financial sector supervision framework. It consists of four levels. It starts with the adoption of the framework legislation (Level 1) and detailed implementing measures (Level 2). For the technical preparation of the implementing measures, the Commission is advised by committees, made up of representatives of national supervisory bodies, which exist in three sectors: banking, insurance and occupational pensions, and the securities markets. These committees then contribute to the consistent implementation of Community directives in the Member States, ensuring effective cooperation between the supervisory authorities and convergence of their practices (Level 3). Finally, the Commission enforces the timely and correct transposition of EU legislation into national law (Level 4).

Based on the review of this process, the Commission proposes practical improvements to strengthen the Community supervisory framework, especially during periods of market instability.

The evaluation of the Lamfalussy process is positive on the whole. However, despite undeniable contributions (flexible regulatory system, convergence, cooperation, etc.), there is a need for certain improvements.

Improvements in the legislative process and enforcement

Experience with the adoption of framework legislation and implementing measures has generally been positive, with only a few adjustments necessary between institutions with regard to supervision and implementation.

The evaluation of the schedules for the sequencing of the measures for the adoption of legislation and implementation (Levels 1 and 2) proves to be complicated as the deadlines are so variable. Consequently, it is difficult to set reasonable deadlines for both transposition and application. To resolve this, the transposition deadline for the whole legislative package could be linked to the adoption of the last implementing measures identified in Level 1. Work on the Level 1 and Level 2 measures could also be carried out more in parallel for greater coherence and facility.

The Lamfalussy process has enabled sound regulatory principles to be introduced and applied. In particular it has led to improved quality of legislation and enhanced transparency and predictability of European Union (EU) policy-making. However, Member States must refrain from adding further national rules (“gold-plating”). For greater transparency regarding consultation, the systematic publication of contributions should also become general practice. Finally, impact assessment should be extended to all significant implementing measures.

In order to increase transparency regarding transposition, the impact of the various disclosure instruments put in place (under the Capital Requirements Directive, etc.) should be strengthened. The Commission publishes regular statistics on the state of play of transposition by Member States, especially concerning Level 1 and Level 2 directives. For their part, Member States should provide the Commission with transposition tables. In the case of late implementation, infringement proceedings will be launched under Article 226 of the EC Treaty.

Supervisory cooperation and convergence

Supervisory cooperation and convergence are one of the innovations of the process, but have not always had the expected effects.

Strengthening the Level 3 Committees [or committees of regulators] is essential. As regards political accountability, an overall two-step approach (political guidance from the European Parliament, the Council and the Commission and committee reports) should enable them to deliver more results. In addition, the mission of the national supervisors is to be extended to include a cooperation and convergence requirement at European level. As regards the legal status of Level 3 Committees, changes to the legal framework will be considered concerning the decisions setting them up and the definition of their role.

Reducing the practical obstacles at European and national levels would strengthen mutual trust and the implementation of the measures. Decision-making, especially of the committees of regulators, should be facilitated (extension of qualified majority voting and definition of solutions in the case of a blocking minority) and carry more authority (even if non-binding) in relation to the national regulators and supervisors.

Member States also have a key role to play to guarantee the application in full of the standards and guidelines concerning:

  • the powers of national supervisors and sanctions. In view of the divergence of the national systems, the regulators and supervisors should have sufficient supervisory powers and tools, including sanctions, to be able to fulfil their obligations;
  • the guarantee of the operational independence of national supervisory authorities in four fields: institutional, regulatory, budgetary and supervisory;
  • the proposals strengthening cooperation between home and host regulators. The Commission’s role is to raise awareness, evaluate and take measures (delegation of tasks, multilateral memoranda of understanding, role of ‘lead’ supervisor, etc.).

The development of common standards to ensure optimum cooperation between colleges of supervisors would guarantee greater coherence and uniformity of application and would allow the problems of competences between home and host countries to be resolved.

Cross-sector cooperation is based on a joint protocol on cooperation, signed in 2005, and is provided for when added value can be expected from a joint action. Level 3 Committees have agreed on joint annual work programmes since 2006 to deal with priority subjects such as financial conglomerates and common reporting standards.

As regards crisis management, rapid information procedures must be provided for to ensure efficient, collective action in the case of a major market disturbance or financial crisis.

The Commission considers that some financial assistance from the EU budget may be appropriate in response to the calls made on the committees of regulators arising from their Community obligations.

Undertakings for collective investment in transferable securities : applicable rules

Undertakings for collective investment in transferable securities : applicable rules

Outline of the Community (European Union) legislation about Undertakings for collective investment in transferable securities : applicable rules

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Financial services: transactions in securities

Undertakings for collective investment in transferable securities (UCITS): applicable rules

Document or Iniciative

Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (Text with EEA relevance) [See amending acts].

Summary

This Directive lays down rules applying to undertakings for collective investment in transferable securities (UCITS).

What sort of undertaking does the Directive apply to?

UCITS include undertakings:

  • with the sole object of collective investment in transferable securities or in other liquid financial assets, capital raised from the public and which operate on the principle of risk-spreading;
  • the units of which are repurchased or redeemed out of these undertakings’ assets.

These undertakings may be constituted under the following laws:

  • contractual law (as common funds managed by management companies *);
  • trust law (as unit trusts);
  • statute (as investment companies).

However, this Directive does not apply to:

  • collective investment undertakings of the closed-ended type;
  • collective investment undertakings which raise capital without promoting the sale of their units to the public in the European Union;
  • collective investment undertakings the units of which may be sold only to the public in third countries;
  • categories of collective investment undertakings prescribed by regulations.

What are the conditions for the authorisation of a UCITS?

A UCITS must be authorised by the competent authorities of its home Member State in order to be able to pursue activities. The competent authorities may not authorise a UCITS under the following circumstances:

  • if the investment company does not comply with the preconditions;
  • if the management company is not authorised for the management of UCITS in its home Member State.

The European Securities and Markets Authority (ESMA) can elaborate technical regulatory standards in order to specify the information to be provided to the competent authorities as part of a request for approval. ESMA publishes the list of approved management companies on its website.

The Commission has a delegation of power concerning the elaboration of draft technical standards.

Obligations regarding management companies

The activity of management of UCITS comprises portfolio management, marketing and administration including inter alia legal and fund management accounting services, valuation and pricing or issues and redemptions.

The competent authorities are to grant the authorisation of a management company under the following conditions:

  • it has a capital of EUR 125 000;
  • it complies with the organisational requirements laid down by this Directive;
  • the organisational structure of the management company is set out.

Relations with third countries are covered by the Markets in Financial Instruments Directive (MiFID). If difficulties are encountered in the marketing of units in a third country, Member States inform ESMA and the Commission.

Management companies may delegate to third parties one or more of their own functions.

Management company passport

A management company established in a Member State is authorised to pursue its activities in another Member State by establishing a branch or under the freedom to provide services.

In cases where a management company established in a third country refuses to provide information or infringes the provisions of the host Member State, the competent authorities of the host Member State have the option of taking certain measures, such as preventing the management company from carrying out any new operations on the territory.

Obligations regarding investment companies

Investment companies are undertakings:

  • with the sole object of collective investment in transferable securities or in other liquid financial assets, capital raised from the public and which operate on the principle of risk-spreading;
  • the units of which are repurchased or redeemed out of these undertakings’ assets.

Member States shall grant authorisation to establish an investment company that has not designated a management company if the investment company has an initial capital of at least EUR 300 000.

Investment firms which have not designated a management company must, however, enclose a programme of operations with the application for authorisation.

Investment companies shall manage only assets of their own portfolio and shall not manage assets on behalf of a third party.

Each investment company’s home Member State shall draw up prudential rules for investment companies that have not designated a management company.

Obligations regarding depositaries

The assets of a UCITS shall be entrusted to a depositary for safe-keeping. They must:

  • ensure that the sale, issue, repurchase, redemption and cancellation of units effected on behalf of a common fund or by a management company are carried out in accordance with the applicable national law and the fund rules;
  • ensure that the value of units is calculated in accordance with the applicable national law and the fund rules (common funds);
  • carry out the instructions of the management company, unless they conflict with the applicable national law or the fund rules (common funds);
  • ensure that in transactions involving a common fund’s assets any consideration is remitted to it within the usual time limits;
  • ensure that a common fund’s income is applied in accordance with the applicable national law and the fund rules.

The depositary must be established in the same Member State as the UCITS.

However, certain investment firms may decide not to have a depositary. In this case, the Member States shall inform ESMA and the Commission of the identity of those companies which benefit from this derogation.

Mergers of UCITS

Member States may allow UCITS to perform cross-border * and domestic * mergers. The techniques used must be provided for under the laws of the Member State.

When a merger takes place, the merging UCITS must communicate information concerning the proposed merger, the common draft terms of merger, and a statement by each of the depositaries of the UCITS concerned.

Member States shall require that the common draft terms of merger include the following particulars:

  • the background to and the rationale for the proposed merger;
  • the expected impact of the proposed merger;
  • the calculation method of the exchange ratio;
  • the planned date.

Obligations concerning the investment policies of UCITS

The investments of a UCITS shall mainly comprise:

  • transferable securities and money market instruments admitted to or dealt on a regulated market;
  • transferable securities and money market instruments admitted to or dealt on another market in a Member State;
  • recently issued transferable securities;
  • units of authorised UCITS or other collective investment undertakings;
  • deposits with credit institutions;
  • financial derivative instruments.

UCITS may not acquire precious metals.

The Directive also establishes requirements to be met by the initiator in order for a UCITS to be permitted to invest in securities and other financial instruments of this type, as well as the qualitative requirements to be met by the UCITS that invest in these securities or other financial instruments.

The UCITS Directive gives investment limits for each category of asset. ESMA can elaborate technical regulatory standards which aim, in particular, at clarifying the provisions relating to the categories of assets.

ESMA must have access to all the information in a consolidated format in order to ensure the surveillance of systematic risks at EU level.

Master-feeder structures

A feeder UCITS is a UCITS which is authorised to invest at least 85 % of its assets in units of another UCITS or an investment compartment thereof.

A feeder UCITS may hold up to 15 % of its assets in the following:

  • ancillary liquid assets;
  • financial derivative instruments;
  • movable or immovable property.

The competent authorities of the home Member State of a feeder UCITS must give their approval if it invests in a master UCITS.

Obligations concerning information to be provided to investors

Investment firms and management companies must publish a prospectus, a half-yearly report and an annual report for each of the common funds which they manage. Furthermore, Member States shall require that an investment company and, for each of the common funds it manages, a management company, draw up a short document containing key information for investors (“key investor information”).

UCITS which market their units in Member States other than those in which they are established

UCITS may market their units in another Member State subject to a notification procedure.

Member States shall appoint the competent authorities in order to carry out the functions provided for by this Directive. The competent authorities are required to cooperate with ESMA.

Key terms of the Act

  • Management company: a company, the regular business of which is the management of UCITS in the form of common funds or of investment companies (collective portfolio management of UCITS);
  • Cross-border merger: the merger of UCITS at least two of which are established in different Member States, or established in the same Member State into a newly constituted UCITS established in another Member State;
  • Domestic merger: a merger between UCITS established in the same Member State where at least one of the involved UCITS has been notified.

Reference

Act Entry into force Deadline for transposition in the Member States Official Journal

Directive 2009/65/EC

7.12.2009

30.6.2011

OJ L 302 of 17.11.2009

Amending act(s) Entry into force Deadline for transposition in the Member States Official Journal

Directive 2010/78/EU

4.1.2011

31.12.2011

OJ L 331 of 15.12.2010

Directive 2011/61/EU

21.7.2011

22.7.2013

OJ L 174 of 1.7.2011

Successive amendments and corrections to Directive 2009/65/EC have been incorporated in the basic text. This consolidated version is for reference purpose only.

Related Acts

Regulations

Commission Regulation (EU) No 583/2010 of 1 July 2010 implementing Directive 2009/65/EC of the European Parliament and of the Council as regards key investor information and conditions to be met when providing key investor information or the prospectus in a durable medium other than paper or by means of a website [Official Journal L 176 of 10.7.2010].

This Regulation is aimed at harmonising key investor information.
It specifies the information to be provided concerning the investment policy objectives of UCITS and lays down detailed rules on the presentation of the risk and reward profile of the investment by requiring use of a synthetic indicator.
It also specifies the format for the presentation and explanation of charges incurred by investors.
It also applies to particular UCITS structures consisting of two or more investment compartments.

Commission Regulation (EU) No 584/2010 of 1 July 2010 implementing Directive 2009/65/EC of the European Parliament and of the Council as regards the form and content of the standard notification letter and UCITS attestation, the use of electronic communication between competent authorities for the purpose of notification, and procedures for on-the-spot verifications and investigations and the exchange of information between competent authorities [Official Journal L 176 of 10.7.2010].

This Regulation aims at harmonising the procedure for notification of marketing of units of UCITS in another Member State.
It specifies on the one hand the form and content of the standard notification letter to be used by UCITS. It defines on the other hand the form and content of the attestation to be used by the competent authorities of Member States to confirm that the UCITS fulfils the conditions laid down by Directive 2009/65/EC. The Regulation also sets out a detailed procedure for the electronic transmission of the notification file between competent authorities.
It also lays down procedures for the supervision of fund managers’ frontier activities.

Directives

Commission Directive 2010/43/EU of 1 July 2010 implementing Directive 2009/65/EC of the European Parliament and of the Council as regards organisational requirements, conflicts of interest, conduct of business, risk management and content of the agreement between a depositary and a management company [Official Journal L 176 of 10.7.2010].

Commission Directive 2010/44/EU of 1 July 2010 implementing Directive 2009/65/EC of the European Parliament and of the Council as regards certain provisions concerning fund mergers, master-feeder structures and notification procedure [Official Journal L 176 of 10.7.2010].

Money laundering: prevention of the use of the financial system

Money laundering: prevention of the use of the financial system

Outline of the Community (European Union) legislation about Money laundering: prevention of the use of the financial system

Topics

These categories group together and put in context the legislative and non-legislative initiatives which deal with the same topic.

Internal market > Single market for capital

Money laundering: prevention of the use of the financial system

Document or Iniciative

Directive 2005/60/EC of the European Parliament and of the Council of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing [See amending act(s)].

Summary

This directive sets out to prevent the financial system from being used for money laundering and terrorist financing, and repeals Directive 91/308/EEC.

European Union (EU) countries must prohibit money laundering and the financing of terrorism. To this end, they may adopt or retain in force stricter provisions than provided for in this directive.

Definition of money laundering and the financing of terrorism

The directive describes money laundering as the following conduct, when committed intentionally:

  • the conversion or transfer of property derived from criminal activity to conceal or disguise its illicit origin;
  • the concealment or disguise of the true nature, source, location, disposition, movement or ownership of property known to have been derived from criminal activity;
  • the acquisition, possession or use of property known to have been derived from criminal activity;
  • the participation, or assistance, in the commission of any of the activities above.

Money laundering must be regarded as such even if the activities that generated the laundered property were carried out in another EU or non-EU country.

By “terrorist financing” the directive means the provision or collection of funds to carry out any of the offences defined in Council Framework Decision 2002/475/JHA on combating terrorism, such as hostage taking, the drawing-up of false administrative documents and the leadership of a terrorist group.

Obligations of covered entities and persons vis-à-vis their customers

The directive applies to credit and financial institutions, independent legal professions, notaries, accountants, auditors, tax advisors, real estate agents, casinos, trust and company service providers, and all providers of goods (when payments are made in cash in excess of 15 000 EUR). The entities and persons covered by the directive are required to apply customer due diligence measures when establishing a business relationship and when carrying out occasional transactions amounting to EUR 15 000 or more. Furthermore, they must file a suspicious transaction report when there is suspicion of money laundering or terrorist financing, regardless of any exemption or threshold.

These diligence measures involve identifying the customer and verifying his/her identity, obtaining information on the purpose and intended nature of the business relationship and, where appropriate, identifying and verifying the identity of the natural person owning or controlling the customer or on whose behalf the activity is carried out. The extent of such measures may be determined on a risk-based approach depending, for example, on the type of customer or business relationship. EU countries may allow the entities and persons covered by the directive to call on third parties to execute the customer due diligence measures. The directive also lists cases in which simplified customer due diligence measures may be used, such as in relation to national public authorities, customers with life insurance policies with an annual premium of no more than EUR 1 000 or electronic money holders.

Where there is a high risk of money laundering or terrorist financing, the entities and persons covered by the directive are required to apply enhanced customer due diligence. Enhanced customer due diligence involves supplementary measures to verify or certify the documents supplied when the customer has not been physically present for identification purposes.

Finally, credit and other financial institutions may not keep anonymous accounts or anonymous passbooks.

European countries are required to inform each other and the European Supervisory Authorities (ESA), namely the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA) where they believe that a third country meets the equivalence conditions concerning the assessment of situations which represent a low risk of money laundering and terrorist financing.

Establishment of a financial intelligence unit (FIU) in the EU countries

Each EU country must set up a financial intelligence unit (FIU) in the form of a central national unit. These units are responsible for receiving, requesting, analysing and disseminating to the competent authorities information concerning potential money laundering or terrorist financing. EU countries must provide their FIU with adequate resources to fulfil its tasks and ensure that it has access to any necessary financial, administrative and law enforcement information.

The entities and persons covered by the directive must file a suspicious transaction report without delay to the FIU when they know or suspect that money laundering or terrorist financing is being or has been committed or attempted. In the meantime, they must refrain from carrying out transactions. At the FIU’s request, these entities and persons must furnish all necessary information in accordance with the applicable legislation.

EU countries may decide whether they require independent legal professions, notaries, auditors, external accountants and tax advisers to inform the FIU of information they receive from or obtain on their clients when ascertaining the legal position of their client or when defending or representing that client in judicial proceedings.

The entities and persons covered by this directive may not reveal to the customer or to other third persons that information has been transmitted to the FIU, except in the case of law enforcement. They must keep documents and supporting or other evidence for at least five years from the end of the business relationship or the carrying-out of the transaction. The Commission promotes coordination between the EU countries’ FIUs.

Member States are required to inform each other and the EAS where they believe that a third country meets the equivalence conditions concerning the prohibition of disclosure, professional secrecy and personal data protection.

The credit institutions and other financial institutions covered by this Directive shall apply in their branches and majority-owned subsidiaries located in third countries measures at least equivalent to those laid down in this Directive with regard to customer due diligence and record keeping. Member States, the EAS and the Commission are required to inform each other where the legislation of a third country does not permit the application of these measures and coordinated action could be taken to find a solution. In this case, the EAS have the option of drawing up draft regulatory technical standards to specify the type of additional measures and minimum action to be taken by credit and financial institutions.

Enforcement of the directive and imposition of sanctions

The entities and persons covered by the directive must establish appropriate measures and procedures for customer due diligence, reporting of information, record keeping, risk management and communication. They must ensure that the relevant employees are aware of the provisions in force.

EU countries must monitor compliance with the directive. The entities and persons concerned must be held liable for any failure to comply with the national provisions adopted pursuant to the directive. The penalties must be effective, proportionate and dissuasive.

References

Act Entry into force Deadline for transposition in the Member States Official Journal

Directive 2005/60/EC

15.12.2005

15.12.2007

OJ L 309, 25.11.2005

Amending act(s) Entry into force Deadline for transposition in the Member States Official Journal

Directive 2007/64/EC

25.12.2007

1.11.2009

OJ L 319, 5.12.2007

Directive 2008/20/EC

20.3.2008

OJ L 76, 19.3.2007

Directive 2009/110/EC

30.10.2009

30.4.2011

OJ L 267, 10.10.2009

Directive 2010/78/EU

4.1.2011

31.12.2011

OJ L 331, 15.12.2010

The successive amendments and corrections to Directive 2005/60/EC have been incorporated into the original text. This consolidated versionis of documentary value only.

Related Acts

Commission Directive 2006/70/EC of 1 August 2006 laying down implementing measures for Directive 2005/60/EC of the European Parliament and of the Council as regards the definition of “politically exposed person” and the technical criteria for simplified customer due diligence procedures and for exemption on grounds of a financial activity conducted on an occasional or very limited basis [Official Journal L 214 of 4.8.2006].
This directive contains the technical aspects of the definitions given in Directive 2005/60/EC, including that of “politically exposed person” (heads of state, heads of government, ministers, members of parliament, etc.).