EUROPE - The European Parliament has approved the proposed reform of the UCITS (undertakings for collective investment in transferable securities) directive, and inserted provision for a management company passport.

The directive, aimed at making the investment fund market in the EU less fragmented and at improving efficiency, has been hailed as "a new milestone in the creation of an effective single market for investment funds" by the European Fund and Asset Management Association (EFAMA).

MEPs inserted provisions for the much debated "management company passport" and parliament passed the directive on 13 January.

The passport, which at one time looked unlikely to be adopted, had provoked concern in existing cross-border hubs, such as Luxembourg and Ireland, as it was considered a threat to their dominance in fund administration.

The European Parliament said in a statement the text has already been agreed with the council, so the vote effectively completes the legislative procedure.

The resolution was adopted with 589 votes in favour, 28 against and 38 abstentions.   
EFAMA commented: "The plenary vote is the penultimate step in the adoption process of the directive."

The organisation expects EU member states to give the green light in March and the directive could then be implemented into national law by July 2011.

The directive will bring more competition between domiciles and it is anticipated the fund management industry could become more mobile.

Dufas, the Dutch Fund and Asset Management Association, commented: "Selling funds cross-border in Europe will become cheaper, reducing barriers to entry, and cross-border business will therefore no longer be the preserve of large groups; medium-sized and smaller groups will also be able to participate, resulting in greater choice for investors."

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