The European Federation of Financial Intermediaries and Financial Advisers (FECIF) has called for the scrapping of ‘unnecessarily complicated’ cross-border barriers.
FECIF said that whilst many barriers have been removed by recent or forthcoming Regulation and Directives (for instance, EMIR, CSDR and MiFID II), significant steps must still be taken for the creation of a “truly unified” capital markets industry.
FECIF said that it believes that the European Commission’s effort to create a Capital Markets Union (CMU) within the EU must be backed and supported by all parties involved in the financial services sector.
“We believe that following Brexit, the need and necessity to modernise and clarify this overly regulated and, in some instances, unnecessarily complicated sector is greater than ever,” FECIF board member Kevin Mudd said.
‘Unjustified national barriers’
“Cross-border competition and efficiency must be introduced and the only way to achieve that is by deregulating unjustified national barriers and introducing harmonised rules across all Member States.
“We strongly believe and assert that the underlying purpose of the CMU initiative must specifically be to abolish national barriers, which have proven to prohibit and limit the cross-border distribution of funds for instance,” he added.
FECIF made its views known on what I calls “these shortcomings” in its recent submission to the EU’s Inception Impact Assessment Initiative in relation to “reducing barriers to cross-border distribution of investment funds”.
“The uncertainty of different legislative obstacles, mainly at the national level of the Member States, restricts to a large extend the marketing of funds”, Mudd added.
“Removing barriers mainly at national level and clarifying definitions to have the same interpretation across all Member States are the key elements for the facilitation of the cross-border distribution of funds outside of their domicile member states.”
Mudd points that the Alternative Investment Fund Marketing Directive (AIFMD) was introduced (and/or proposed for implementation) in the 31 EU/EEA Member States and those which have implemented it into national law and national rules have ended up with “significantly different rules and regulations” between them.
“This was the obvious result of the flexibility and elasticity of rules and definitions which were allowed within the wording of the AIFMD,” he said.
FECIF said that it is adamant that future developments must be directed towards the creation of a CMU where all parties involved are clearly defined, with roles and responsibilities adequately, evenly and realistically allocated and barriers that prevent and/or have a material impact on the cross-border distribution of funds, or financial services in general, are reduced or abolished.
“A pivotal element for the efficient and continuous distribution of funds across a CMU is legal certainty,” FECIF secretary general Paul Stanfield, pictured above, added.
”What should have been a simple and cost efficient process – the cross-border distribution of AIFs – has unfortunately proved to be a very expensive and burdensome process. The creation of a CMU presupposes common definitions in relation to marketing and pre-marketing activities.
“Regrettably, the interpretations across the EU actually vary widely, which is the primary source of much uncertainty and confusion.”
“The main question to be asked here is why there is no common definition between all Member States? Why do market players need to adhere to different rules and procedures? Does this lack of legal certainty translate to lack of trust between the regulatory authorities of those States?,” Stanfield concluded.
FECIF’s specific recommendations are:
- The creation of a common/uniform interpretation of terms – a standardised glossary is a necessity.
- The removal of the necessity to inform individual countries of marketing activity – except where funds or products are structured solely on national legislation. Meeting regulatory promotional requirements in one EU country should automatically mean meeting them in any others, where EU criteria have been met.
- The abolition of the need for manufacturers to take responsibility for distribution when dealing through regulated intermediaries.
- The elimination of legal requirements in some countries that require the involvement of local agents.
- The establishment of a uniform agreement across the EU on what constitutes a “well informed, certified, experienced or sophisticated investor” to fit between retail and professional categories. This should include uniform offering document requirements and investor safeguards and abolish local restrictions on the distribution to such a class.
FECIF is a European trade association for independent financial advisors and financial intermediaries and their national associations. Its membership operates across the whole of Europe, representing almost a quarter of a million advisors and intermediaries. The Federation was founded as far back as 1999 and represents over 600,000 individuals in total, when administrative and back-office staff are included.