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Audiovisual Media Services Directive

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Audiovisual Media Services Directive

Outline of the Community (European Union) legislation about Audiovisual Media Services Directive

Topics

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

Audiovisual and media

Audiovisual Media Services (AMS) Directive

Document or Iniciative

Directive 2010/13/EU of the European Parliament and of the Council of 10 March 2010 on the coordination of certain provisions laid down by law, regulation or administrative action in Member States concerning the provision of audiovisual media services (Audiovisual Media Services Directive) (Text with EEA relevance).

Summary

This Directive establishes legal, regulatory and administrative provisions related to the provision and distribution of audiovisual media services.

Which media service providers * does the Directive apply to?

This Directive applies to media service providers when:

  • the head office of the provider and the editorial decisions taken about the audiovisual media services are located in the same Member State;
  • the head office and audiovisual media services are located in different Member States;
  • the service provider has its head office in a Member State, whereas decisions on the audiovisual media services are taken in a third country;
  • the service provider uses a satellite up-link situated in a Member State;
  • the service provider uses satellite capacity appertaining to a Member State.

To what extent does freedom of retransmission apply?

Member States shall not restrict retransmissions on their territory of audiovisual media services from other Member States, as long as the programmes broadcast are not of a violent or pornographic nature which could offend the sensibilities of minors.

They may also limit retransmissions if they believe public policy, health and security or consumer protection to be at risk.

What are the obligations of media service providers?

Media service providers shall make the following information available to consumers:

  • their name;
  • their geographical address;
  • their contact details;
  • the competent regulatory or supervisory bodies.

Protection of minors

In order to protect minors against the negative effects of pornographic or violent programmes, such programmes, when broadcast, must be preceded by an acoustic warning or identified by the presence of a visual symbol throughout the broadcast.

Incitement to hatred

Audiovisual media services may not contain any incitement to hatred based on race, sex, religion or nationality.

Accessibility of audiovisual media services

Providers are obliged to improve the accessibility of their services for people with a visual or hearing disability.

The right to information

Member States may take measures aimed at ensuring that certain events, which it considers are of major importance for society, cannot be broadcast exclusively in such a way as to deprive a substantial proportion of the public in that Member State. Each Member State may draw up a list of events and implementation procedures.

For the purpose of short news reports, any broadcaster established in a Member State has the right to access short extracts of events of high interest to the public which are broadcast on an exclusive basis.

Promotion of European and independent works

Broadcasters must devote at least 10% of their transmission time, or 10% of their programming budget, to European works created by producers who are independent of broadcasters, excluding time allocated to:

  • news;
  • sports events;
  • games;
  • advertising;
  • teletext services;
  • teleshopping.

With regard to on-demand audiovisual media services, Member States shall ensure that audiovisual media service providers promote the production of and access to European works. To this end, audiovisual service providers can contribute financially to the production of European works, or they can reserve a share and/or prominence for European works in their catalogue of programmes.

Audiovisual commercial communication

Media service providers provide audiovisual commercial communications *. These must comply with certain conditions:

  • they must be readily recognisable. Surreptitious audiovisual commercial communication shall be prohibited;
  • they shall not use subliminal techniques;
  • they shall not prejudice respect for human dignity;
  • they shall not be discriminatory;
  • they shall not encourage behaviour harmful to the environment;
  • they shall not contain messages relating to alcoholic beverages specifically aimed at minors;
  • they shall not promote tobacco products;
  • they shall restrict the promotion of medicinal products and medical treatments to those available on prescription only;
  • they shall not cause moral or physical detriment to minors.

Certain programmes or audiovisual media services may be sponsored *. In this case, they must meet other types of requirements:

  • they shall not affect the editorial independence of the media service provider;
  • they shall not directly encourage the purchase or rental of goods;
  • viewers shall be informed of the sponsorship agreement.

Product placement is authorised in certain circumstances and in certain types of programmes.

Television advertising and teleshopping

Television advertising and teleshopping shall be distinguishable from editorial content through optical, acoustic or spatial means.

The transmission of films made for television (excluding series, serials and documentaries), cinematographic works and news programmes may be interrupted by television advertising or teleshopping on the condition that the interruption only takes place once for each programme period of 30 minutes.

This Directive repeals Directive 89/552/EC.

Key terms of the Act
  • Media service provider: the natural or legal person who has editorial responsibility for the choice of the audiovisual content of the audiovisual media service and determines the manner in which it is organised;
  • Audiovisual commercial communication: images with or without sound which are designed to promote, directly or indirectly, the goods, services or image of a natural or legal entity pursuing an economic activity;
  • Sponsorship: any contribution made by public or private undertakings or natural persons not engaged in providing audiovisual media services or in the production of audiovisual works, to the financing of audiovisual media services or programmes with a view to promoting their name, trade mark, image, activities or products;
  • Product placement: the inclusion of a product, a service or a trade mark in a programme in return for payment or for similar consideration.

References

Act Entry into force Deadline for transposition in the Member States Official Journal
Directive 2010/13/EU

5.5.2010

–

OJ L 95 of 15.4.2010

System for the recognition of professional qualifications

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System for the recognition of professional qualifications

Outline of the Community (European Union) legislation about System for the recognition of professional qualifications

Topics

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

Education training youth sport > Vocational training

System for the recognition of professional qualifications

Document or Iniciative

Directive 2005/36/EC of the European Parliament and of the Council of 7 September 2005 on the recognition of professional qualifications [See amending act(s)].

Summary

This directive applies to all European Union (EU) Member State nationals wishing to practise a regulated profession *, on either a self-employed or employed basis, in a Member State other than that in which they obtained their professional qualifications.

The directive makes a distinction between “freedom to provide services” and “freedom of establishment” on the basis of criteria identified by the Court of Justice: duration, frequency, regularity and continuity of the provision of services.

FREEDOM TO PROVIDE SERVICES

Any EU national who is legally established in a Member State may provide services on a temporary and occasional basis in another Member State under his/her original professional title without having to apply for recognition of his/her qualifications. However, if the profession in question is not regulated in that Member State, the service provider must provide evidence of two years’ professional experience.

The host Member State may require the service provider to make a declaration prior to providing any services on its territory (to be renewed annually), including details of insurance cover or other documents such as proof of nationality, legal establishment and professional qualifications.

If the host Member State requires pro forma registration with the competent professional association, this must be automatic. The competent authority must forward the applicant’s file to the professional organisation or body on receipt of the prior declaration. For professions that have public health or safety implications and do not benefit from automatic recognition, the host Member State may carry out a prior check of the service provider’s professional qualifications within the limits of the principle of proportionality.

In cases where the service is provided under the professional title of the Member State of establishment or under the formal qualifications * of the service provider, the competent authorities of the host Member State may require the latter to furnish recipients of the service with certain information, in particular concerning insurance cover against financial risks arising from professional liability.

With regard to both the temporary provision of services and permanent establishment in another Member State, the authorities concerned are to ensure a proactive exchange of information relating to any serious circumstances arising from an individual’s establishment on their territory that are liable to have consequences for the pursuit of the professional activities concerned. This exchange of information must be carried out in compliance with existing data protection legislation.

FREEDOM OF ESTABLISHEMENT

“Freedom of establishment” applies when a professional enjoys the effective freedom to become established in another Member State in order to conduct a professional activity there on a stable basis.

General system for the recognition of qualifications

The general system applies to professions not covered by specific rules of recognition and to certain situations where the professional does not meet the conditions set out in other recognition schemes. This system is based on the principle of mutual recognition, without prejudice to the application of compensatory measures if there are substantial differences between the training * acquired by the person concerned and the training required in the host Member State. The compensatory measure may take the form of an adaptation period * or an aptitude test *. The choice is left to the person concerned, unless specific derogations exist.

When access to or pursuit of a profession is regulated in the host Member State, i.e. it is subject to possession of specific professional qualifications, the competent authority in said Member State is to allow access to the profession in question and pursuit thereof under the same conditions as for its nationals. However, the applicant must hold a training qualification obtained in another Member State that attests to a level of training at least equivalent to the level immediately below that required in the host Member State.

On the other hand, when access to a profession is not subject to possession of specific professional qualifications in the applicant’s Member State, access to that profession in a host Member State where it is regulated requires proof of two years’ full-time professional experience over the preceding ten years in addition to the qualification.

The directive distinguishes five levels of professional qualifications:

  • attestation of competence issued by a competent authority in the home Member State, attesting either that the holder has acquired general knowledge corresponding to primary or secondary education, or has undergone training not forming part of a certificate or diploma, or has taken a specific examination without previous training or has three years’ professional experience;
  • certificate corresponding to training at secondary level of a technical or professional nature or general in character, supplemented by a professional course;
  • diploma certifying successful completion of training at post-secondary level of a duration of at least one year or professional training that is comparable in terms of responsibilities and functions;
  • diploma certifying successful completion of training at higher or university level of a duration of at least three years and not exceeding four years;
  • diploma certifying successful completion of training at higher or university level of a duration of at least four years.

The host Member State can make recognition of qualifications subject to the applicant completing a compensation measure (aptitude test or adaptation period of a maximum of three years) in the following three cases:

  • the training was at least one year shorter than that required by the host Member State;
  • the training covered substantially different matters from those covered by the evidence of formal training required in the host Member State;
  • the profession as defined in the host Member State comprises one or more regulated professional activities that do not exist in the corresponding profession in the applicant’s home Member State and requires specific training that covers substantially different matters from those covered by the applicant’s training.

The directive allows representative professional associations at both national and European level to propose common platforms to compensate for the substantial differences identified between Member States’ training requirements. The platform is a way of ensuring that additional measures are not imposed on those concerned, while guaranteeing an appropriate qualification level. The platform is a kind of predefined compensatory measure. The Commission will report to the European Parliament and the Council on the common platforms at the end of 2010.

System of automatic recognition of qualifications attested by professional experience in certain industrial, craft and commercial activities

The industrial, craft and commercial activities listed in the directive (Chapter II) are subject, under the conditions stated, to the automatic recognition of qualifications attested by professional experience.

The elements taken into consideration for the recognition of professional experience are its duration and form (in a self-employed or employed capacity). Previous training is also taken into consideration and may reduce the amount of professional experience required. However, evidence of all previous training must be provided by means of a certificate recognised by the Member State or judged as fully valid by a competent professional body.

The pursuit of all these professional activities is subject to the conditions shown in:

  • list I of Annex IV, referring to various sectors such as the textile, chemical and oil industries, printing, manufacturing, construction, etc.;
  • list II of Annex IV, referring to sectors such as the manufacture of transport equipment, activities related to transport, postal services, telecommunications, photographic studios, etc.;
  • list III of Annex IV, referring to sectors such as restaurants and hotels, personal, community and recreation services, etc.

System of automatic recognition of qualifications for the professions of doctor, nurse, dentist, veterinary surgeon, midwife, pharmacist and architect

The automatic recognition of training qualifications based on the coordination of minimum training conditions covers the following professions: doctors, nurses responsible for general care, dental practitioners, veterinary surgeons, midwives, pharmacists and architects (Chapter III of the directive).

For recognition purposes, the directive lays down minimum training conditions for each of these professions, including the minimum duration of studies. The formal qualifications conforming to the directive issued by Member States are listed in Annex V. These qualifications enable holders to practise their profession in any Member State.

The directive allows Member States to authorise part-time training for all of these professions, provided that the overall duration, level and quality of such training is not lower than that of continuous full-time training.

Without prejudice to the specific acquired rights of the professions concerned, and particularly of architects (Annex VI), even if the formal qualifications for these professional activities held by nationals of Member States do not satisfy all the training requirements described, each Member State has to recognise them as sufficient proof. However, these qualifications must attest to the successful completion of training that began before the reference dates laid down in Annex V and be accompanied by evidence of the holder having devoted at least three consecutive years to the activities in question over the preceding five-year period.

Procedure for the mutual recognition of professional qualifications

An individual application must be submitted to the competent authority in the host Member State, accompanied by certain documents and certificates. The competent authority has one month to acknowledge receipt of an application and to draw attention to any missing documents. In principle, a decision has to be taken within three months of the date on which the application was received in full. However, this deadline may be extended by one month in cases falling under the general system for the recognition of qualifications. Reasons have to be given for any rejection. A rejection or a failure to take a decision by the deadline can be contested in national courts.

Member State nationals must be able to use the title conferred on them, and possibly an abbreviated form thereof, as well as the corresponding professional title of the host Member State. If a profession is regulated in the host Member State by an association or organisation (see Annex I), Member State nationals have to become members of that organisation or association in order to be able to use the title.

Member States may require applicants to have the language knowledge necessary for practising the profession. This provision must be applied proportionately, which rules out the systematic imposition of language tests before a professional activity can be practised.

In order to facilitate the application of the above provisions, the directive calls for close collaboration between the competent authorities in the host and the home Member States. In addition, it calls for the introduction of the following provisions:

  • each Member State has to designate a coordinator to facilitate the uniform application of the directive;
  • Member States have to designate contact points tasked with providing citizens with any relevant information about the recognition of professional qualifications and helping them in asserting their rights, particularly through contact with the authorities ruling on requests for recognition;
  • Member States have to appoint representatives to the committee on the recognition of professional qualifications;
  • the Commission is required to consult experts from the professional groups concerned as appropriate.

Member States are required to report to the Commission on the application of the system every two years. If applying one of the provisions of the directive presents major difficulties in a particular area, the Commission has to examine those difficulties in collaboration with the Member State concerned.

As of 20 October 2007, the Commission will draw up a report on the implementation of the directive every five years.

Background

This directive is a response to the 2001 Stockholm European Council’s recommendations calling on the Commission to design a more uniform, transparent and flexible system with the aim of achieving the Lisbon strategy objectives.

The directive brings together in a single text the three directives on the general system for the recognition of professional qualifications (recognition of diplomas, certificates and other evidence of higher education of long duration; recognition of other diplomas, certificates and other evidence of other professional education and training; and the mechanism for the recognition of qualifications for crafts, trades and certain services).

It also consolidates twelve sectoral directives covering the professions of doctor, nurse (Directive 77/452/EEC), dental practitioner (Directive 78/686/EEC), veterinary surgeon (Directive 78/1026/EEC), midwife (Directive 80/154/EEC), architect and pharmacist (mutual recognition of diplomas in pharmacy and qualifications in pharmacy).

The specific directives on the provision of services by lawyers (Directive 77/249/EEC) and the establishment of lawyers are not covered by this exercise, since they concern the recognition not of professional qualifications but of the authorisation to practice.

Key terms used in the act
  • Regulated profession: a professional activity or group of professional activities, access to which, the pursuit of which, or one of the modes of pursuit of which is subject, directly or indirectly, by virtue of legislative, regulatory or administrative provisions, to the possession of specific professional qualifications; in particular, the use of a professional title limited by legislative, regulatory or administrative provisions to holders of a given professional qualification constitutes a mode of pursuit.
  • Formal qualification: diplomas, certificates and other evidence issued by an authority in a Member State designated pursuant to legislative, regulatory or administrative provisions of that Member State and certifying successful completion of professional training obtained mainly in the Community.
  • Regulated training: any training that is specifically geared to the pursuit of a given profession and that comprises a course or courses complemented, where appropriate, by professional training, or probationary or professional practice. The structure and level of the professional training, probationary or professional practice is laid down in the legislative, regulatory or administrative provisions of the Member State in question or subject to supervision or approval by the authority designated for that purpose.
  • Adaptation period: the pursuit of a regulated profession in the host Member State under the responsibility of a qualified member of that profession, such period of supervised practice possibly being accompanied by further training. This period of supervised practice is the subject of an assessment.
  • Aptitude test: a test limited to the professional knowledge of the applicant, carried out by the competent authorities of the host Member State with the aim of assessing the ability of the applicant to pursue a regulated profession in that Member State. For such tests to be allowed, the competent authorities have to draw up a list of subjects not covered by the evidence of formal qualifications possessed by the applicant.

References

Act Entry into force Deadline for transposition in the Member States Official Journal
Directive 2005/36/EC

20.10.2005

20.10.2007

OJ L 255 of 30.9.2005
Amending act(s) Entry into force Deadline for transposition in the Member States Official Journal
Directive 2006/100/EC

1.1.2007

1.1.2007

OJ L 363 of 20.12.2006
Regulation (EC) No 1137/2008

11.12.2008

–

OJ L 311 of 21.11.2008

Successive amendments and corrections to Directive 2005/36/EC have been incorporated in the basic text. This consolidated versionis for reference purposes only.

AMENDMENT OF ANNEXES

Annex II – List of courses having a special structure referred to in Article 11 point (c) subparagraph (ii):
Directive 2006/100/EC [Official Journal L 363 of 20.12.2006];
Regulation (EC) No 1430/2007 [Official Journal L 320 of 6.12.2007];
Regulation (EC) No 755/2008 [Official Journal L 205 of 1.8.2008];
Regulation (EC) No 279/2009 [Official Journal L 93 of 7.4.2009].

Annex III – List of regulated education and training referred to in the third subparagraph of Article 13(2):
Regulation (EC) No 1430/2007 [Official Journal L 320 of 6.12.2007].

Annex V – Recognition on the basis of coordination of the minimum training conditions:
Council Directive 2006/100/EC [Official Journal L 363 of 20.12.2006].

Annex VI – Acquired rights applicable to the professions subject to recognition on the basis of coordination of the minimum training conditions:
Council Directive 2006/100/EC [Official Journal L 363 of 20.12.2006].

Related Acts

Commission Decision 2007/172/EC of 19 March 2007 setting up the group of coordinators for the recognition of professional qualifications [Official Journal L 79 of 20.3.2007].
The role of this expert group is to facilitate the implementation of the directive and develop an internal market for regulated professions as regards qualifications. The Commission consults this group, which is made up of national coordinators, alternate members and of a Commission representative.

 

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

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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

UCITS: organisational requirements and rules of conduct

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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

Life assurance: freedom to provide services

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Life assurance: freedom to provide services

Outline of the Community (European Union) legislation about Life assurance: freedom to provide services

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 services > Financial services: insurance

Life assurance: freedom to provide services (until November 2012)

Document or Iniciative

Directive 2002/83/EC of the European Parliament and of the Council of 5 November 2002 concerning life assurance (recast) [See amending acts].

Summary

Scope

This Directive governs the taking-up and pursuit of the self-employed activity of direct insurance by undertakings established, or wish to become established, in a Member State. It particularly concerns life assurance based on a contract and certain savings operations based on a contract.

Conditions for obtaining authorisation

The taking-up and pursuit of direct insurance is subject to prior authorisation. Authorisation is sought from the authorities of the home Member State, is valid for the entire European Union (EU) and allows the insurance company to carry on business there, under either the right of establishment or the freedom to provide services.

In order to apply for and obtain authorisation, an insurance company must meet certain criteria: it must adopt the required legal form, possess the minimum guarantee fund, and provide the information required by the monitoring authorities. Any refusal of an authorisation must be explained and notified to the company concerned. If this is the case, the competent authority in the home Member State must inform the competent authorities in the other Member States, who must take appropriate action.

Agencies or branches established in the EU but belonging to companies whose head offices are outside the EU will be authorised subject to meeting certain conditions: they must be authorised under their national legislation, establish an agency or branch in the territory of the Member State, and designate a general representative who must be approved by the competent authority.

Financial supervision

Financial supervision is the responsibility of the home Member State’s authorities, which must monitor the insurance company’s entire business and its state of solvency. They must also ensure the existence of technical provisions, sound administrative and accounting procedures and adequate internal control mechanisms.

Prudential valuation

  • The Directive lays down precise criteria for the prudential valuation of shareholders and management in connection with a planned acquisition, together with clear rules for their application. This valuation procedure is undertaken by the competent authorities working together.

The Directive requires the competent authorities to appraise the suitability of the proposed acquirer and the financial soundness of the proposed acquisition against the following criteria:

  • the reputation and financial soundness of the proposed acquirer;
  • the reputation and experience of any person who will direct the business of the insurance company as a result of the proposed acquisition;
  • the ability of the insurance undertaking to comply, and continue to comply, with the prudential requirements;
  • the existence of reasonable grounds to suspect an operation or attempt to launder money or finance terrorism.

Professional secrecy

The Directive lays down strict conditions for the use of confidential information: the competent authorities may use such information only in the course of their duties, and persons working for them are bound by professional secrecy.

Technical provisions and investment diversification

Insurance companies must constitute technical provisions, the amount of which is calculated according to actuarial assumptions, and the interest rate for which is fixed by the competent authority in the home Member State. Insurance companies must make available to the public the bases and methods used to calculate technical provisions.

The Directive requires insurance companies to diversify their investments. In this connection it defines the thresholds which insurance companies must respect when investing the assets covering technical provisions.

Solvency margins and guarantee funds

Every insurance company must have an adequate solvency margin. This may consist of its assets — paid-up share capital, reserves and profit or loss brought forward — or other financial assets belonging to the insurance company.

One third of the solvency margin constitutes the guarantee fund, which must amount to a minimum of €3 million. The guarantee fund is reviewed each year.

Contract law and insurance conditions

The contracts referred to by this Directive are subject to the law of the ‘Member State of the commitment’. However, certain provisions offer the freedom to opt for a different contract law. An insured person who enters into an individual life assurance contract on his or her own initiative has a period of between 14 and 30 days to cancel the contract.

Right of establishment and freedom to provide services

Any insurance company that proposes to establish a branch within the territory of another Member State or which intends to carry out its business in one or more Member States under the freedom to provide services must notify the competent authority in its home Member State and provide it with the necessary information. It is the task of the Member State concerned to take the necessary measures to rectify any irregular situation in which an insurance company in its territory finds itself.

Cooperation between Member States and the Commission

The competent authorities in the Member States must work closely together with the Commission, assisted by the Insurance Committee, in order to facilitate the monitoring of insurance companies.

This Directive is repealed by Directive on the taking-up and pursuit of the business Insurance and Reinsurance from 1 November 2012.

References

Act Date of entry into force Deadline for transposition in the Member States Official Journal

Directive 2002/83/EC

19.12.2002

Depending on the Article:
19.6.2004
17.11.2002
20.9.2003

OJ L 345, 19.12.2002
Amending act(s) Date of entry into force Deadline for transposition in the Member States Official Journal

Directive 2004/66/EC

1.5.2004

1.5.2004

OJ L 168, 1.5.2004

Directive 2005/1/EC

13.4.2005

13.5.2005

OJ L 79, 24.3.2005

Directive 2005/68/EC

10.12.2005

10.12.2007

OJ L 323, 9.12.2005

Directive 2006/101/EC

1.1.2007

1.1.2007

OJ L 363, 20.12.2006

Directive 2007/44/EC

21.9.2007

20.3.2009

OJ L 247, 21.9.2007

Directive 2008/19/EC

20.3.2008

–

OJ L 76, 19.3.2008

The successive amendments and corrections to Directive 2002/83/EC have been incorporated in the original text. This consolidated version is for reference only.

Non-life insurance: third Directive

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Non-life insurance: third Directive

Outline of the Community (European Union) legislation about Non-life insurance: third Directive

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 services > Financial services: insurance

Non-life insurance: third Directive

Document or Iniciative

Directive 92/49/EEC of 18 June 1992 on the coordination of laws, regulations and administrative provisions relating to direct insurance other than life insurance and amending Directives 73/239/EEC and 88/357/EEC (Third non-life insurance Directive) [See amending acts].

Summary

This Directive applies to insurance and to the taking up of the independent business of direct non-life insurance by insurance undertakings established or proposing to become established in a Member State.

The taking up of the business of insurance

Undertakings wishing to take up the business of direct insurance must seek official authorisation from the authorities of the home Member State. Such authorisation permits an undertaking to carry on business under the right of establishment or the freedom to provide services.

Insurance undertakings taking up the business of direct insurance must adopt the form provided for.

Such undertakings must:

  • limit their objects to the business of insurance and operations arising therefrom;
  • submit a scheme of operations which must include information concerning the nature of the risks which the undertaking proposes to cover, the items constituting the minimum guarantee fund, and the guiding principles as to reinsurance;
  • possess the minimum guarantee fund required.

Undertakings must also communicate the identities of the shareholders and members to the competent authorities.

Harmonisation of the conditions governing the business of insurance

The financial supervision of insurance undertakings is the sole responsibility of the Member States. They are responsible for verifying the insurance undertaking’s entire business, its state of solvency and the establishment of technical provisions and of the assets covering them. For their part, insurance undertakings must provide Member States with the documents necessary for the purposes of supervision, together with statistical documents.

Every insurance undertaking must establish adequate technical provisions in order to carry out its operations. These technical provisions and equalisation reserves are established by investments and debts and claims, or even by other assets.

The competent authorities have the power to withdraw the authorisation granted to an undertaking if it:

  • does not make use of that authorisation within 12 months;
  • no longer fulfils the conditions for admission;
  • fails in its obligations.

Provisions relating to the right of establishment and the freedom to provide services

Insurance undertakings may open a branch within the territory of another Member State, provided they notify the competent authority of the home Member State and provide it with certain information, especially concerning business carried on under the right of establishment or the freedom to provide services.

The policy-holder must always be informed of the name of the Member State in which the undertaking has its head office, and of the branch with which the contract is to be concluded.

Key terms of the act
  • Reinsurance: the business of accepting risks transferred by an insurance undertaking or another reinsurance undertaking.

References

Act Entry into force Deadline for transposition in the Member States Official Journal
Directive 92/49/EEC

2.7.1992

31.12.1993

OJ L 228 of 11.8.1992
Amending act(s) Entry into force Deadline for transposition in the Member States Official Journal
Directive 95/26/EC

7.8.1995

18.7.1996

OJ L 168 of 18.7.1995

Directive 2000/64/EC

17.11.2000

17.11.2002

OJ L 290 of 17.11.2000

Directive 2002/87/EC

11.2.2003

10.8.2004

OJ L 35 of 11.2.2003

Directive 2005/1/EC

13.4.2005

13.5.2005

OJ L 79 of 24.3.2005

Directive 2005/68/EC

10.12.2005

10.12.2007

OJ L 323 of 9.12.2005

Directive 2007/44/EC

21.9.2007

20.3.2009

OJ L 247 of 21.9.2007

Directive 2008/36/EC

21.3.2008

–

OJ L 81 of 20.3.2008

Successive amendments and corrections to Directive 92/49/EEC have been incorporated into the basic text. This consolidated version is for information only.

RELATED ACTS

Directive 2000/26/EC of the European Parliament and of the Council of the 16 May on the approximation of the laws of the Member States relating to insurance against civil liability in respect of the use of motor vehicles and amending Council Directives 73/239/EEC and 88/357/EEC (Fourth motor insurance Directive).
This text aims to improve the protection of residents of any Member State who, while temporarily abroad (in a Member State other than that of residence or in a non-member country whose national insurers’ bureau has joined the Green Card system), are victims of a traffic accident. It provides for simplification of the compensation procedure and requires insurance companies to appoint a claims representative in each Member State responsible for handling and settling any claims arising from an accident, and to set up information structures for identifying the insurer to which they have to address their claims. The proposal further provides for the possibility of introducing a direct right of action throughout the European Union in favour of the victim, enabling the claim for compensation to be addressed directly to the insurer of the person responsible for the accident.

Insurance brokerage

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Insurance brokerage

Outline of the Community (European Union) legislation about Insurance brokerage

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 services > Financial services: insurance

Insurance brokerage

Document or Iniciative

Directive 2002/92/EC of the European Parliament and of the Council of 9 December 2002 on insurance mediation [OJ L 9 of 15.1.2003].

Summary

Insurance intermediaries * are considered as the vital links in the selling of insurance products in the European Union (EU).

This Directive aims to make it easier for insurance intermediaries to avail themselves of the right to freedom of establishment and freedom to provide services and to guarantee a high level of protection for their customers. It also aims to increase the supply of insurance products to consumers.

Registration conditions

Insurance or reinsurance intermediaries are registered by a competent authority in their Member State of origin (where the insurance firm’s registered office is located). They can carry out business in other Member States by way of freedom to provide services or by opening a branch.

Professional requirements

Registration is subject to strict requirements as regards professionalism and competence since intermediaries must have the necessary general, commercial and professional knowledge and ability.

Intermediaries must be covered by professional indemnity insurance for professional negligence. Insurance intermediaries who handle customers’ money are furthermore required to have sufficient financial capacity.

Exchange of information between Member States

The Directive provides rules on the information which intermediaries are required to send to potential customers. It requires that insurance intermediaries provide customers with clear explanations of the reasons underlying their advice when selling a specific insurance product. They must set out in writing in a manner comprehensible to customers why they recommend a particular product, bearing in mind the needs of the interested parties. For instance, the latter need to know whether they are negotiating with an intermediary appointed by one or more firms or whether they are dealing with an intermediary who is advising them on the whole range of products available on the market.

Settlement of disputes

The Directive encourages the Member States to put in place adequate and efficient procedures with a view to out-of-court settlements by using, in particular, the FIN-NET cross-border network.

Information provided by the insurance intermediary

Insurance intermediaries are required to provide certain information upon signature or renewal of the insurance contract:

  • his identity and address;
  • his registration number;
  • whether he has a holding, whether direct or indirect, representing more than 10 % of the voting rights or of the capital in a given insurance undertaking;
  • whether an insurance undertaking has a holding, whether direct or indirect, representing more than 10 % of the voting rights or of the capital of the insurance undertaking.
Key terms of the Act
  • Insurance intermediary: any natural or legal person who, for remuneration, takes up or pursues insurance mediation, which consists of introducing, proposing or carrying out other work preparatory to the conclusion of contracts of insurance, or of concluding such contracts, or of assisting in the administration and performance of such contracts, in particular in the event of a claim.

References

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

Directive 2002/92/EC

15.1.2003

15.1.2005

OJ L 9 of 15.1.2003

Insurance and reinsurance

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Insurance and reinsurance

Outline of the Community (European Union) legislation about Insurance and reinsurance

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 services > Financial services: insurance

Insurance and reinsurance

Document or Iniciative

Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (Text with EEA relevance).

Summary

This Directive aims at introducing a legal framework enabling insurance * and reinsurance * undertakings to provide services throughout the internal market.

General rules

Which sectors are covered?

This Directive lays down rules concerning:

  • the taking-up of the self-employed activities of direct insurance and reinsurance;
  • the supervision of insurance and reinsurance groups;
  • the reorganisation and winding-up of direct insurance undertakings.

Which entities are concerned?

The scope of this Directive covers:

  • non-life insurance undertakings: these include in particular health, accident, motor, civil liability, house or fire insurance;
  • life insurance undertakings including in particular:

    1. activities on a contractual basis such as assurance on death only, assurance on survival to a stipulated age or on earlier death, life assurance with return of premiums, marriage assurance, birth assurance, annuities or supplementary insurance;
    2. operations on a contractual basis such as operations whereby associations are set up, capital redemption operations or management of group pension funds;
    3. operations relating to the length of human life.
  • reinsurance undertakings.

How can authorisation to pursue the business of insurance be obtained?

An undertaking can conduct insurance or reinsurance activities after having obtained prior authorisation from the supervisory authorities * of its home Member State. This authorisation is valid throughout the Union. It covers the right of establishment and freedom to provide services. If authorisation is refused, each Member State may appeal.

Insurance undertakings must however preclude any commercial business, and reinsurance undertakings must pursue reinsurance activities as well as related operations.

How are these undertakings monitored?

The supervisory authorities shall ensure the protection of insurance policy holders and beneficiaries. They shall apply a risk-based method which includes the verification on a continuous basis of the operation of the undertaking, namely through off-site activities and on-site inspections.

Can an undertaking simultaneously pursue life and non-life insurance activities?

Insurance undertakings are not authorised to pursue life and non-life insurance activities simultaneously. However, undertakings pursuing insurance activities may obtain authorisation to carry out restricted non-life insurance activities (accident and sickness). Conversely, undertakings authorised for accident and sickness risks may obtain authorisation to carry out life insurance activities.

What are the rules relating to the valuation of assets and liabilities, technical provisions, own funds, the Solvency Capital Requirement, the Minimum Capital Requirement and investment rules?

The value of assets shall correspond to the amount for which they could be exchanged in a transaction, whilst liabilities shall be valued at the amount for which they could be transferred in a transaction.

Technical provisions have been established with respect to all of insurance and reinsurance obligations towards policy holders and beneficiaries of insurance or reinsurance contracts. The value of technical provisions shall correspond to the amount insurance and reinsurance undertakings would have to pay if they were to transfer their insurance and reinsurance obligations immediately to another undertaking. This value shall be equal to the sum of a best estimate and a risk margin.

Own funds shall consist of:

  • basic own funds consisting of the excess of assets over liabilities and subordinated liabilities;
  • ancillary own funds consisting of items other than basic own funds which can be called up to absorb losses.

The Solvency Capital Requirement shall be covered by the eligible own funds required by Member States for insurance and reinsurance undertakings. It shall cover the following risks:

  • non-life underwriting risk;
  • life underwriting risk;
  • health underwriting risk;
  • market risk;
  • credit risk;
  • operational risk.

Eligible basic funds must cover the Minimum Capital Requirement. This minimum corresponds to an amount of eligible basic own funds below which policy holders and beneficiaries would be exposed to a high level of risk. The Minimum Capital Requirement shall have an absolute floor of:

  • EUR 2.2 million for non-life insurance undertakings;
  • EUR 3.2 million for life insurance undertakings;
  • EUR 3.2 million for reinsurance undertakings.

As regards investments, insurance and reinsurance undertakings must invest only in assets and instruments whose risks can easily be identified. Undertakings have a certain freedom of investment notwithstanding.

How can insurance and reinsurance undertakings in difficulty be detected?

If the value of technical provisions does not correspond to the amount insurance and reinsurance undertakings would have to pay if they were to transfer their insurance and reinsurance obligations immediately to another undertaking, the supervisory authorities of the undertaking’s home Member State may prohibit the free disposal of assets.

If the Solvency Capital Requirement for an undertaking is no longer complied with, it must inform the supervisory authority rapidly. The undertaking must then submit a recovery plan once the non-compliance of the solvency capital has been recorded. Furthermore, if the Solvency Capital Requirement is no longer complied with, the undertaking must submit a short-term finance scheme.

How is the right of establishment and freedom to provide services to be exercised?

If an insurance undertaking wishes to establish a branch, it must notify the supervisory authorities of its home Member State. A branch is a permanent representative of the undertaking and may consist merely of an office managed by the staff of the undertaking or an independent person with authority to act.

What are the rules framing branches established in the Union with head offices situated outside the Union?

A Member State may authorise the branch of a third-country undertaking on its own territory if it fulfils the following conditions inter alia:

  • it is entitled to pursue insurance business under its national law;
  • it undertakes to cover the Solvency Capital Requirement and the Minimum Capital Requirement;
  • it fulfils the applicable governance requirements;
  • it submits a scheme of operations.

The branch of a third-country undertaking may transfer its portfolio of contracts to an accepting undertaking established in the same Member State.

Monitoring of insurance and reinsurance undertakings belonging to a group

The term “group” means a group of undertakings that:

  • is composed of a participating undertaking, its subsidiaries and entities in which it holds a participation;
  • is based on the establishment on a contractual basis of financial relationships between these undertakings.

Member States shall require the participating insurance or reinsurance undertakings to ensure that eligible own funds are available in the group which are always at least equal to the group Solvency Capital Requirement.

Member States shall provide for means of exercising control over groups. A single supervisor is to be designated from among the supervisory authorities of the Member States concerned. The supervisor shall be responsible in particular for:

  • coordinating the gathering and dissemination of information;
  • supervisory review and assessment of the financial situation of the group;
  • assessment of compliance with the rules on solvency and on risk concentration and intra-group transactions;
  • assessing the system of governance of the group.

If a parent undertaking has its head office outside the European Union, the undertaking shall be subject to supervision carried out by an authority of a third country.

Reorganisation and winding-up of insurance undertakings

Reorganisation measures correspond to intervention by the competent authorities. They are intended to preserve or restore the financial situation of an insurance undertaking. Only the competent authorities of the home Member State shall be entitled to decide on reorganisation measures with respect to an insurance undertaking. These measures shall be governed by the law of the home Member State.

Winding-up proceedings shall involve the realisation of the assets of an insurance undertaking and the distribution of the proceeds among the creditors, shareholders or members. As for reorganisation measures, only the competent authorities of the home Member State shall be entitled to decide on winding-up proceedings with respect to an insurance undertaking.

Assistance

The Commission shall be assisted by the European Insurance and Occupational Pensions Committee (EIOPC).

Repeal

This Directive repeals Directives 64/225/EEC, 73/239/EEC, 73/240/EEC, 76/580/EEC, 78/473/EEC, 84/641/EEC, 87/344/EEC, 88/357/EEC, 92/49/EEC, 98/78/EC, 2001/17/EC, 2002/83/EC and 2005/68/EC.

Key terms of the Act
  • Insurance undertaking: a direct life or non-life insurance undertaking which has received authorisation;
  • Reinsurance: the activity consisting in accepting risks ceded by an insurance undertaking or third-country insurance undertaking, or by another reinsurance undertaking or third-country reinsurance undertaking;
  • Supervisory authority: the national authority or the national authorities empowered by law or regulation to supervise insurance or reinsurance undertakings.

References

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

Directive 2009/138/EC

6.1.2010

31.10.2012

OJ L 335 of 17.12.2009
Amending act(s) Entry into force Deadline for transposition in the Member States Official Journal

Directive 2011/89/EU

9.12.2011

10.6.2013

OJ L 326 of 8.12.2011

Directive 2012/23/EU

15.9.2012

30.6.2013

OJ L 249 of 14.9.2012

Successive amendments and corrections to Directive 2009/138/EC have been incorporated in the basic text. This consolidated version is for reference purpose only.

The taking-up and pursuit of the business of credit institutions

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The taking-up and pursuit of the business of credit institutions

Outline of the Community (European Union) legislation about The taking-up and pursuit of the business of credit institutions

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 services > Financial services: banking

The taking-up and pursuit of the business of credit institutions

Document or Iniciative

Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (recast) [See amending acts].

Summary

Like Directive 2006/49/EC on the capital adequacy of investment firms and credit institutions *, this Directive deals with the risks run by credit institutions as a result of their activities. Directives 2006/48/EC and 2006/49/EC have transposed into Community law the Basel II rules on measuring own funds and capital requirements agreed by the G-10.

Directive 2006/48/EC lays down the rules on the taking-up and pursuit of the business of credit institutions and on the prudential supervision of such institutions. It constitutes an important instrument for achieving the single market from the point of view of both the freedom of establishment and the freedom to provide services in the field of credit institutions. The central banks of the Member States, post office giro institutions and other bodies specific to certain Member States are excluded from the scope of the Directive.

Requirements for access to the taking up and pursuit of the business of credit institutions

The essential requirements for authorisation to take up and pursue the business of credit institutions are:

  • existence of separate own funds;
  • existence of initial capital of at least 5 million euros;
  • presence of at least two persons who effectively direct the business of the credit institution (and who are of sufficiently good repute and have sufficient experience to perform such duties);
  • notification to the competent authorities of the identities of the shareholders or members, whether direct or indirect, natural or legal persons, that have qualifying holdings, and of the amounts of those holdings.

Member States can adopt additional conditions, which must the Commission must be informed of.

All authorisations must be notified to the European Banking Authority (EBA) which is responsible for drawing up a register of authorised credit institutions and making it accessible on its website. Applicants must be notified whenever an authorisation is refused and the reasons for refusal must be given. The competent authorities may withdraw an authorisation subject to the conditions set out in the Directive, in particular when the above conditions are no longer fulfilled. The parties concerned, the Commission and the EBA must be notified when authorisation is withdrawn and the reasons for withdrawal must be given.

Credit institutions exercising their activities in a Member State other than the one in which their head office is situated may use their original name on condition that it does not give rise to any doubt as to the national law to which the parent undertaking is subject. However, the host Member State may, for the purposes of clarification, require that the name be accompanied by certain explanatory particulars. The division of responsibilities must be clearly defined.

The competent authorities must also collect information relating to the number of persons per credit firm in the income bracket of at least one million euros, comprising:

  • the main salary elements;
  • premiums;
  • long-term allowances;
  • pension premiums.

Prudential assessment of the acquisition of qualifying holdings

The Directive establishes detailed criteria for the prudential assessment of shareholders and management in the event of the planned acquisition of a qualifying holding and also a clear procedure for applying them. Competent authorities are to work together to assess the potential acquirers. The assessment applies in particular to:

  • credit institutions, insurance companies, reinsurance companies and investment firms;
  • parent undertakings of credit institutions, insurance companies, reinsurance companies and investment firms;
  • natural or legal persons in charge of credit institutions, insurance companies or reinsurance companies.

The competent authorities are to make a judgment as to the character of the proposed acquirer and the financial soundness of the proposed acquisition, on the basis of various criteria:

  • the reputation of the proposed acquirer;
  • the reputation and experience of any person who will direct the business of the credit institution as a result of the proposed acquisition;
  • the financial soundness of the proposed acquirer;
  • whether the credit institution will be able to comply, and continue to comply, with the prudential requirements;
  • whether there are reasonable grounds to suspect that attempted or actual money laundering or terrorism financing are taking place.

Freedom of establishment and freedom to provide services

A credit institution wishing to establish a branch in another Member State must notify the authorities of its home Member State, indicating the Member State in which it plans to establish a branch, a programme of operations, the address in the host Member State from which documents may be obtained and the names of those responsible for the management of the branch. The home Member State must provide this information to the host Member State within three months except if there is a reason to doubt the capacity of the administrative structure or the financial situation of the credit institution. If they refuse to provide the required information, the home Member State must justify their decision within three months of receiving all the information. That refusal shall be subject to a right to apply to the courts in the home Member State.

A credit institution wishing to exercise the freedom to provide services on the territory of another Member State must notify the authorities of its home Member State. Such notification must be forwarded to the host Member State.

Relations with third countries

The competent authorities shall notify the Commission and the EBA of all authorisations for branches granted to credit institutions having their head office outside the European Union (EU). The EU may, through agreements concluded with one or more third countries, agree to apply provisions which accord to branches of a credit institution having its head office outside the Community identical treatment throughout the territory of the EU.

Member States may not apply to branches of credit institutions which have their head office outside the EU provisions resulting in more favourable treatment than that accorded to branches of credit institutions which have their head office in the EU.

Principles of prudential supervision

In principle, supervision is carried out by the home Member State with limited exceptions (such as supervisions of liquidity). The competent authorities of the Member States concerned are to cooperate closely. In particular, they are to supply each other with any information necessary for effective supervision. Such exchanges are protected by professional secrecy. When the competent authorities encounter refusals of requests for cooperation and information, they shall notify the EBA.

A competent authority has the option to communicate the information required for accomplishing its mission to the following authorities:

  • central banks;
  • public authorities responsible for monitoring payment systems;
  • the European Systemic Risk Board (ESRB).

The competent authorities are authorised to impose or implement penalties and other financial or non-financial measures.

Should a branch breach a Member State’s prudential rules, the host Member State shall request the home Member State to take the necessary measures. If the measures taken are insufficient then the host Member State has the power to take appropriate measures to prevent or punish the breach committed by the branch. The home Member State must be informed before such measures are taken. In urgent cases, the competent authorities of the host Member State may take any precautionary measures necessary to protect interests. In these cases, they must inform the Commission, the EBA and the competent authorities of the other Member States.

Technical instruments of prudential supervision

Own funds

The Directive puts forward a definition of own funds comprising two elements (original own funds and additional own funds). The amount of additional own funds added to own funds must not exceed the original own funds. In addition, the commitments of members of credit institutions (cooperative societies) and subordinated loans may not exceed one half of the original own funds. The Directive also lists the elements to be deducted from own funds and indicates the formula for calculating own funds on a consolidated basis.

Solvency ratio

The own funds of each credit institution are defined as a proportion of the weighted risks of its assets and off-balance-sheet activities. The minimum prescribed ratio is 8 %. This mainly concerns credit risk incurred by possible non-payment by a borrower and establishes a distinction between the levels of risk associated with specific assets and off-balance-sheet elements, and with certain specific categories of borrowers.

Large exposures

A credit institution’s exposure is deemed large where its value exceeds 10 % of its own funds. Credit institutions must report every large exposure to the competent authorities and the EBA in the manner provided for in the Directive. Limits are set on the exposures that a credit institution may incur.

Supervision on a consolidated basis of credit institutions

Every credit institution which has a credit institution or a financial institution as a subsidiary, or which holds a participation in such institutions, and all credit institutions the parent undertaking of which is a financial holding company, are subject to supervision on a consolidated basis. The arrangements attempt to identify clearly elements whereby the competent authorities responsible for exercising supervision on a consolidated basis can be determined in the various possible scenarios.

The competent authorities can take measures against establishments which do not meet the requirements of this Directive, in particular to:

  • require credit institutions to apply a specific policy of assets in terms of own funds;
  • limit the activities of the establishment;
  • require credit institutions to limit variable income where this income is not compatible with maintaining a sound financial basis;
  • require credit institutions to use the gains achieved to strengthen their financial basis.

If the establishment does not cooperate in a satisfactory manner, the competent authorities shall refer it to the EBA.

Emergency situations

In emergencies or adverse market situations which threaten market liquidity and the stability of the financial system, the supervisor shall alert the EBA, the ESRB and the competent authorities.

European Banking Authority

The EBA assists the Commission in ensuring the proper implementation of this Directive under Regulation (EU) 1093/2010.

Key terms of the Act
  • Credit institution: an undertaking whose business is to receive deposits or other repayable funds from the public and to grant credits for its own account.

References

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

Directive 2006/48/EC

20.7.2006

31.12.2006

OJ L 177, 30.6.2006
Amending act Entry into force Deadline for transposition in the Member States Official Journal

Directive 2007/18/EC

17.4.2007

30.9.2007

OJ L 87, 28.3.2007

Directive 2007/44/EC

21.9.2007

20.3.2009

OJ L 247, 21.9.2007

Directive 2007/64/EC

25.12.2007

1.11.2009

OJ L 319, 5.12.2007

Directive 2008/24/EC

21.3.2008

–

OJ L 81, 20.3.2008

Directive 2009/110/EC

30.10.2009

30.4.2011

OJ L267, 10.10.2009

Directive 2009/111/EC

7.12.2009

31.12.2010

OJ L 302, 17.11.2009

Directive 2010/76/EU

15.12.2010

31.12.2011

OJ L 329, 14.12.2010

Directive 2010/78/EU

4.1.2011

31.12.2011

OJ L 331, 15.12.2010

The successive amendments and corrigenda to the current guidelines by the ECB have been incorporated into the original text. This consolidated version is of documentary value only.

Related Acts

Directive 2009/111/EC of the European Parliament and of the Council of 16 September 2009 amending Directives 2006/48/EC, 2006/49/EC and 2007/64/EC as regards banks affiliated to central institutions, certain own funds items, large exposures, supervisory arrangements, and crisis management (Text with EEA relevance).

This Directive concerns the revision of rules applicable to capital in the banking sector with regard to:

  • the role of hybrid products (securities that contain features of both equity and debt). The challenge is to be able to classify these products as capital in order to be able to better assess the amount of loans a bank can grant;
  • liquidity risk management principles, which are a determining element concerning the soundness of banks. Supervision of liquidity risk should be facilitated by a College of supervisory authorities;
  • cross-border banking groups, which should also be supervised by Colleges of Supervisors;
  • a limit on interbank exposures in order to reduce risk;
  • improving risk management of securitised products.

Directive 2006/49/EC of the European Parliament and of the Council of 14 June 2006 on the capital adequacy of investment firms and credit institutions (recast) [Official Journal L 177 of 30.6.2006].

By laying down new capital requirements for banks and investment companies, this Directive aims to ensure the coherent application of the new international framework on capital requirements adopted by the Basel Committee on Banking Supervision (Basel II). The new framework lays down lower capital requirements for SME financing and provides for preferential treatment of specific types of risk capital. In addition, it introduces reduced capital requirements for retail loans to individuals who are less risk than the latter.

Directive 2002/87/EC of the European Parliament and of the Council of 16 December 2002 on the supplementary supervision of credit institutions, insurance undertakings and investment firms in a financial conglomerate and amending Council Directives 73/239/EEC, 79/267/EEC, 92/49/EEC, 92/96/EEC, 93/6/EEC and 93/22/EEC, and Directives 98/78/EC and 2000/12/EC of the European Parliament and of the Council.

This Directive states the rules which aim to organise the supplementary supervision of regulated bodies belonging to a financial conglomerate. A group is categorised as a financial conglomerate if the ratio between the balance sheet total of the financial sector entities and the balance sheet total of the group as a whole exceeds 40 %, and when the average of the ratio between the balance sheet total of that financial sector and the balance sheet total of the group and the ratio of the solvency requirements of the same financial sector and the total solvency requirements of the financial sector entities exceeds 10 %.
Where a financial conglomerate has been identified, decisions shall be taken on the basis of a proposal made by the coordinator of that financial conglomerate.

Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001 on the reorganisation and winding up of credit institutions [Official Journal L 125 of 5.5.2001].

This Directive relates to the reorganisation and winding-up of credit institutions and forms part of the Community legislative framework relating to the taking-up and pursuit of the business of credit institutions. It ensures that, where a credit institution with branches in other Member States fails, a single winding-up procedure is applied to all creditors and investors.

Undertakings for collective investment in transferable securities : applicable rules

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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].