Undertakings for Collective Investment in Transferable Securities Directives

The Undertakings for Collective Investment in Transferable Securities Directive 2009/65/EC is a consolidated EU Directive, that allows collective investment schemes to operate freely throughout the EU on the basis of a single authorisation from one member state. EU member states are entitled to have additional regulatory requirements for the benefit of investors.

The objective of the original UCITS Directive 85/611/EEC, adopted in 1985, was to allow for open-ended funds investing in transferable securities to be subject to the same regulation in every Member State. It was hoped that once such legislative uniformity was established throughout Europe, funds authorised in one Member State could be sold to the public in each Member State without further authorisation, thereby furthering the EU’s goal of a single market for financial services in Europe.

The reality differed somewhat from the expectation due primarily to individual marketing rules in each Member State that created obstacles to cross-border marketing of UCITS. In addition, the limited definition of permitted investments for UCITS weakened the marketing possibilities of a UCITS. Accordingly, in the early 1990s proposals were developed to amend the 1985 Directive and more successfully harmonise laws throughout Europe. These discussions, although leading to a draft UCITS II directive, were subsequently abandoned as being too ambitious when the Council of Ministers could not reach a common position.

In July 1998 the EU Commission published a new proposal which was drafted in two parts (a product proposal and a service provider proposal), which sought to amend the 1985 Directive. These proposals were finally adopted in December 2001, and are known as "UCITS III", which are now in force. Interestingly, LuxAlpha, an alleged "feeder fund" to Bernard Madoff's firm, was a UCITS-regulated fund.

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