§ Mr. CarringtonTo ask the Chancellor of the Exchequer what progress has been made with the Treasury's plans for legislation to enable the formation of open-ended investment companies in the United Kingdom. [22401]
§ Mr. NelsonThe Treasury has today published a consultation document containing draft regulations to be made, subject to the approval of both Houses, under the European Communities Act 1972. I have arranged for copies to be placed in the Library.
124WThe regulations will permit a new investment vehicle which will be a type of collective investment scheme, like the familiar authorised unit trust, but constituted as a corporate body. Its shareholders will pool their investment funds and thus gain the advantage of access to expert investment management with the ability to spread their investment risks. The open-ended investment company has been formulated deliberately to offer the same standard of investor protection as the unit trust but using a more modern and flexible approach.
The draft ECA regulations will establish a special purpose corporate code which delineates the basic structure of the open ended investment company. Each company will have a board, including a designated corporate director charged with day-to-day responsibility for managing the invested assets of the company, which will be held in trust by a depositary. The company will have annual general meetings at which the directors will account to the company's shareholders for their stewardship of the company and its assets.
To complete the regulatory framework for the open ended investment company, the Securities and Investments Board will issue product regulations, about which it will also consult shortly. These regulations will specify that shares in open-ended investment companies are to be bought and sold at a single price on each trading day, in contrast to the spread between the prices at which units in unit trusts are bought and sold now. SIB will also regulate the different classes of shares which open-ended investment companies may have. These regulations will allow umbrella companies with a number of subfunds each allotted to a different category of investments.
In due course there will also be regulations made under the Finance Act 1995 to define the tax treatment of open ended investment companies. The new regime will be equivalent to the taxation arrangements for authorised unit trusts.
Because the proposed regulations are to be made under the ECA, they will permit only open ended investment companies which satisfy the UCITS—undertakings for collective investment in transferable securities—directive. Subject to further consultation, the Treasury is also exploring the scope for widening the investment and borrowing powers available to open ended investment companies by means of an order made under the Deregulation and Contracting Out Act 1994.