Shedding Light on Non-Financial Risks – a European Survey

Shedding Light on Non-Financial Risks – a European Survey — January 2012

Executive Summary

responsible for returning all assets that can be returned (financial derivatives cannot be). More than 67% of respondents agree that this would be worth investigating. However, if securities are limited to European financial securities admitted to central securities depositaries, a significant but lower 57% think that this secure subset is worth investigating. For regulators, the main lesson is that even though rule-based regulations are necessary, the principles of responsibility and transparency must not be forgotten. Homogeneity is needed, and regulation will contribute to it largely, as well as to giving adequate incentives. Principle- based regulations are required to ensure that fiduciary duties are taken seriously everywhere, including in countries that have historically had a more administrative approach to regulation. Rule-based regulations are also needed for European regulations to be applicable in civil-law countries as well as to ensure a uniform implementation in common-

role of regulations is to limit non-financial risks and ensure that they are controlled and managed, and not to suppress them. They are also attached to the UCITS brand.

The Attractiveness of Secure UCITS is very much Determined by Legal and Regulatory Traditions UCITS was designed as a simple and unique framework for European investment funds, and it has managed to become a staple. However, it lacked transparency on non-financial risks, to the extent that, in practice, it offered differing degrees of investor protection according to geographies of sub-product specificities. Almost 59% of respondents agree that, on the whole, the existing complexity and internationalisation of UCITS funds may make it impossible to guarantee the restitution of assets at a reasonable cost. In this light, one could envisage creating the aforementioned subset of secure UCITS for which the depositary is — contractually or legally — unconditionally

Figure 11: How much do you agree with the following statments?

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An EDHEC-Risk Institute Publication