EUROPEAN INVESTMENT FUNDS: THE UCITS DIRECTIVE OF 1985 AND THE OBJECTIVES OF THE PROPOSAL FOR A UCITS II DIRECTIVE

The European single market, as laid down in the Treaty of Rome of 1958, aims at the suppression of the concept of national residence as far as economic relationships are concerned. In the field of financial services, the creation of the single market is based on the fundamental principles of mutual recognition and minimum harmonisation. The setting up of such a market allows all financial institutions to operate under the freedom of establishment and to provide services cross‐border, benefiting from the ‘European passport’. The responsibility of the supervision of the institution is attributed to the home country authorities. Directive 611/85/EEC covers the market of professional management of investment funds (UCITS), which collect savings from a multitude of investors and invest in transferable securities. The directive allows the marketing of units of UCITS, as long as a wide set of prudential restrictions is fulfilled. At the end of 1994, UCITS in Europe were 6,818, of which around 32 per cent has been commercialised cross‐border. In 1994, the European Commission presented a new proposal to amend the UCITS directive, widening its scope and introducing several important modifications.