Foreign Experience in the Legal Governance of Investment Activities

INTRODUCTION. One of the catalysts of the development of the European investment fund industry has been the inception of the undertakings for collective investment in transferable securities (UCITS), the number of which currently exceeds 35,000 funds, who manage assets worth more than 9,5 trillion euros. UCITS are central to the European investment market with their substantive impact on the European economy having been evident for several decades. The identification of the legal factors contributing to the high efficacy level of these undertakings constitutes the primary objective of the research. To achieve this goal, the following tasks shall be addressed: 1) to examine the legal framework governing the activities of UCITS schemes at various stages of its development, so as to estimate the fundamental rules underpinning their operations; 2) to determine the specifics of the functioning of the collective investment vehicles under consideration in terms of modern legislation.

MATERIALS AND METHODS. Apart from general scientific methods (analysis, synthesis, induction, deduction, etc.), the specific methods employed within the research are as follows: historical-legal, formal-legal and technical legal methods, which determined the logical structure, content and scientific integrity of this article. The assessment of legislation, other legal acts of EU institutions, white papers, so as official documents of CESR and ESMA presented below is based on Russian and foreign doctrine, mainly in terms of categorization of various types of UCITS schemes.

RESEARCH RESULTS. The most significant findings of the research are summarized hereinbefore. 1. The European Union has implemented a comprehensive compendium of rules governing the activities of UCITS. 2. Conditions ensuring fair competition among UCITS at the EU level, as well as between these schemes and different types of funds operating in the US have been 3. Effective and uniform protection of investors has been provided. 4. Restrictions imposed on the free movement of UCITS within the EU have been eliminated.

DISCUSSION AND CONCLUSIONS. The legal framework for UCITS funds, which embodies a comprehensive set of rules, is continuously evolving. The high level of maturity of the regulatory framework for UCITS is determined not only by their significance to the European economy, but also because the collective investment schemes, in general, raise capital from retail investors. It requires additional safeguards to protect the latter’s rights and interests.

1. Adema R. UCITS and Taxation: Towards Harmonization of the Taxation of UCITS. Kluwer Law International. 2009. P. 12.

2. Alshaleel M.K. Undertakings for the Collective Investment in Transferable Securities. Directive V: Increased Protection for Investors. – European Company Law. 2016. Vol. 13. Issue 1. P. 17.

3. Amenc N., Sender S. Are Hedge-Fund UCITS the CureAll? – EDHEC Risk Institute Publication. March 2010. P. 40.

4. Anderberg K.L., Bolton L.E. UCITS: A Developing Model for the Future of the European Investment Fund Marketplace. – Euromoney International Investment & Securities Review. 2006. P. 15.

5. Annuziata F. Cross-Border Mergers between Investment Funds in Europe: A complicated Enigma. – Bocconi Legal Studies Research Paper. 2019. № 3470794. P. 7.

6. Buttigieg C., Agius J., Saliba S. Establishing an EU internal market for depositaries. – Journal of Financial Regulation and Compliance. 2020. Vol. 28. Issue 4. P. 597.

7. Chetverikov A.O. Integratsiya i upravlenie na rynkakh kapitala: politiko-pravovye mekhanizmy [Integration and Management in Capital Markets: Political and Legal Mechanisms]. Moscow: RuScience. 2024. P. 228. (In Russ.).

8. De Luca N. Share Classes in Investment Funds and Fair Treatment of All Investors. – European Business Law Review. 2019. Vol. 32. Issue 4. P. 732.

9. Galushko D.V. Problemy pravovogo regulirovaniya finansovykh uslug v kontekste brekzita [Problems of Legal Regulation of Financial Services in the Context of Brexit]. – Rossiiskii zhurnal pravovykh issledovanii [Russian Journal of Legal Studies]. 2022. Vol. 9. Issue 3. P. 35. (In Russ.).

10. Gheorghe С. European Venture Capital Funds (EuVECA). – Challenges of the Knowledge Society. Bucharest: Nicolae Titulescu University Publishing House. 2022. P. 142.

11. Grec A., Marquais O. Investment Management and Corporate Structuring Considerations for Third-Party Litigation Funders in Luxembourg. – ASA Bulletin. 2020. Vol. 38. Issue 2. P. 403.

12. Hazenberg J.J. Independence and focus of Luxembourg UCITS fund boards. – European Journal of Law and Economics. 2013. Vol. 41. P. 121.

13. Kasyanov R.A. Itogi poluvekovoi integratsii finansovykh rynkov v Evrope (1973–2023) [The Outcomes of Semicentenary Integration of Financial Markets in Europe (1973– 2023)]. – Zakony Rossii: opyt, analiz, praktika [Russian Laws: Experience, Analysis, Practice]. 2024. №1. P. 62. (In Russ.)

14. Kasyanov R.A., Kachalyan V.A. Evolution of the Legal Framework for UCITS Funds in the European Union (1985–2023). – Kutafin Law Review. 2024. Vol. 11. Issue 2. P. 346.

15. Krugman P. The Return of Depression Economics and the Crisis of 2008. New York: W.W. Norton & Company. 2008. P. 184.

16. Krupa D. Cross-Border Distribution of Investment Funds. – Organization and Management. 2024. Issue 192. P. 664.

17. Moloney N. Financial Services under the Trade and Cooperation Agreement: Reflections on Unfinished Business for the EU and UK. – Brexit Institute Working Paper Series. 2021. № 3. P. 3.

18. Schmies C. Third Country Relations and the Equivalence Regime: Treatment of Collective Investment Schemes. – European Business Organization Law Review. 2024. Vol. 25. Issue 1. P. 171.

19. Stefanini F. From UCITS Directive to UCITS III Provisions. – Newcits: Investing in UCITS Compliant Hedge Funds. John Wiley & Sons. 2015. P. 25.

20. Zhurbin M.M., Merekina E.V. Skhodstva i razlichiya rossiiskogo i zarubezhnogo rynka investitsionnykh fondov [Similarities and Discrepancies Between Russian and Overseas Investment Fund Market]. – Den'gi i kredit [Money and Credit]. 2017. № 12. P. 78. (In Russ.).