On February 27, the European Commission (EC) published a report (Report) on its capital markets union (CMU) initiative addressing national barriers to capital flows. The Report sets out the initial findings of the EC’s group of representatives of member states on national barriers to cross-border capital flows and the steps that the EC expects member states to take to address them.

The Report includes a section on barriers to the cross-border distribution of investment funds. As an illustration of the barriers, the Report states that a third of funds marketed cross-border are sold in only one other member state and another third in no more than four other member states. The Report goes on to highlight the disparities in national rules concerning the marketing of funds (particularly in relation to pre-marketing and reverse solicitation), administrative arrangements imposed on the Undertakings for the Collective Investment of Transferable Securities (UCITS) and alternative investment funds, and regulatory fees for cross-border marketing.

The EC requests that member states review their national rules on marketing and take further steps to map administrative arrangements, such as requiring that paying agent tasks be performed by a local credit institution or requiring a local distributor to be appointed once a fund is marketed to retail investors, with a view to eliminating unnecessary administrative burdens by 2019.

It also calls on member states to ensure that all fund notification-related fees charged by member states are published in a comprehensive and user-friendly manner on a single national public website. The Report states that the EC is assessing whether notification fees are compatible with an efficient notification procedure, the passporting rights provided for in legislation, and how to ensure that fees are proportionate and not excessive. To the extent fees are allowed, the EC will consider the introduction of a single public domain for fee-related information, in the form of a comparative website or a central repository.

The Report is available here.