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European Commission planning Ucits V to apply ‘Madoff lessons’

The European Commission is to begin working next year on a Ucits directive aimed at increasing investor protection and creating a level playing field for Ucits investors in Europe.

Michel Barnier, the commissioner for internal market and services, has designated Ucits V as a priority for 2011, “taking on the lessons learned from the Madoff fraud”.

Ucits V will not compromise the Ucits IV directive, which aims to simplify the European fund industry, cut costs and encourage cross-border mergers. This is expected to be implemented next year.

IMA director of international relations Jarkko Syyrilä says the Ucits V directive is expected to deal mainly with depositary liability.

There is concern in the industry that the proposed Alternative Investment Funds directive is a serious threat to the Ucits directive in its proposal to impose a “strict” liability on Ucits funds’ depositaries.

Syyrilä says: “We all agree clarifications to depositaries’ tasks are welcome, but imposing a strict liability on Ucits would be the end of the road for many emerging market Ucits and would deny European retail investors the opportunity to invest in the world’s fastest-growing economies in a risk-diversified way, through investment funds.”

Martin Currie head of product development Toby Hogbin says: “Ucits V is an inevitable consequence of the current global appetite for regulation.”

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