Investment Services and Investment Funds

Investment services and activities, on the one side, and collective investment management, on the other, are two of the main silos in which capital markets legislation is currently articulated. They have different origins and originally stem from different needs: investment funds were first regulated in 1985, by the first UCITS Directive, which was mainly concerned with the creation of a single market for open-ended, retail-oriented investment funds, and basically provided a system of passporting for the UCITS product, coupled with a first system of rules aimed at providing investor protection. Most of the latter were, essentially, rules concerning separation and segregation of assets, and rules on risk diversification and liquidity. Investment services regulation saw the wake, under EU Law, in 1993, and covered a large area of activities, that had been left outside the scope of EU harmonization. Trading venues underwent a first, significant transformation. The focus of investment services has traditionally been on retail-investor protection, coupled with different forms of prudential supervision. Overtime, the framework for investment services regulation in the EU has become more and more articulated, and investment fund rules have been extended to all CIUs falling under the definition of the 2011 AIFM Directive. Several elements, typical of investment services approach (in particular, the one stemming from MiFID I and more recently MiFID II) have then been incorporated into the UCITS and AIFMD Directives, and the MiFID approach is now contaminating several other areas of EU Financial Services regulation. A sort of common, trans-sectorial standard for investor protection is beginning to emerge, and may be the basis for future developments and integration of EU legislation.