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Unit Trusts

Volume 86: debated on Wednesday 13 November 1985

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asked the Secretary of State for Trade and Industry if he will place in the Library a copy of the newly agreed European Economic Community directive on the liberalisation of rules relating to unit trusts; if he will specify the arrangements included to allow for the presence of exchange controls in Italy and Ireland; and if he will make a statement.

The two draft European Community directives concerning unit trusts have not yet been finally agreed by the Council of Ministers because of a reservation by Denmark. I refer the hon. Member to the reply given by my right hon. Friend the Chancellor of the Exchequer on 30 October 1985, at columns 501–2 to my hon. Friend the Member for Derbyshire, South (Mrs. Currie).I have placed in the Library copies of the latest drafts of the two associated directives. The first will harmonise the regulatory rules applying to unit trusts and other undertakings for collective investment in transferable securities (UCITS). The second will, by amending an existing directive, free transactions in units of UCITS from restrictions on capital movements. However, this liberalisation will be subject to the overriding provisions of the treaty of Rome which enable the Commission, on the application of a member state, to sanction the maintenance or introduction of exchange controls when a member state's economic situation justifies this. France, Ireland and Italy benefit from derogations whilst Greece—which operates under transitional arrangements—has applied for one.I attach considerable importance to the early agreement of these two directives. They would allow a unit trust authorised in one member state to operate throughout the Community without the need for any further authorisation by other member states. This mutual recognition of authorisations would represent a significant step forward in the opening up of the internal market in the financial services sector and allow the United Kingdom unit trust industry to offer its products throughout the Community. I will be urging the industry to respond positively to this challenge. I hope that the reservation by Denmark will be removed and the directives adopted in the near future.