EU states back reform of bloc's mutual funds

By Huw Jones

BRUSSELS (Reuters) - Britain, Germany and France on Tuesday backed an EU plan to reform how pan-European mutual funds can operate, a move that could save the industry money while giving investors a wider choice of lower-cost funds.

"The investor will have greater diversity of products and lower cost. It will ensure proper protection of investors thanks to better supervision," Christine Lagarde, finance minister for EU president France, told a meeting of the bloc's finance ministers.

The so-called undertakings for collective investment in transferable securities (UCITS) draft law updates EU rules overseeing cross-border mutual funds sold across the 27-nation bloc.

It would allow funds in the 6 trillion euro (5 trillion pound) retail sector to merge and pool resources more easily and list quickly.

The reform faced opposition from Luxembourg and Ireland after the inclusion of a so-called management company passport.

A passport would allow a fund in one country to manage funds it has dotted across Europe without having to open offices in each of those countries.

Ireland and Luxembourg are major centres for listing funds and home to companies that provide back office services.

The two countries said managing those funds from elsewhere would fragment supervision but others argued the two simply fear losing business to London, Frankfurt and Paris where many large, cross-border funds have their base.  Continued...