The European Commission (EC) must wait for the outcome of the Committee of European Securities Regulators' (CESR) review of UCITS depositaries in Member States before it finalises improvements and clarity on the depositary's role, says the Investment Management Association (IMA).

The EC is striving to bring greater consistency and investor protection across Member States in its reforms on the functions of a UCITS depositary, but the IMA said the findings in the CESR review should be used as a foundation to make improvements.

"Protection of investors' assets is of paramount importance to asset managers," said Jarkko Syyrilä, director of international relations at the IMA. "We welcome the Commission's intention to clarify the tasks of UCITS depositaries.

"However, the Commission proposes to apply the same level of liability for UCITS depositaries as under the proposed Alternative Investment Fund Managers directive (AIFM Directive). This liability standard is unworkable in both cases. It would raise the costs for investors to unprecedented levels. Furthermore, we doubt that any depositary would take on the responsibility for emerging market assets any more. This could deny retail investors the possibility of investing via investment funds into the most important developing economies."

The IMA is urging the Commission only to seek improvements when they can be well-informed and "based on a full cost-benefit analysis".

In a letter to the Commission, the IMA states that it fully agrees with the Commission that the function of the depositary is a key element to "maintaining the high level of confidence investors have always placed in the UCITS label", and welcomes the consultation as an opportunity to strengthen the UCTS brand.

The IMA also recommended that information to investors, which is covered in the proposals, be enhanced to cover a description of the role of the depositary and the nature of responsibilities for the return of assets to the fund.

Earlier this month, the IMA outlined its response to the AIFM Directive, voicing its concern that if implemented in its present form, directive will seriously restrict pension funds' ability to make the most of their global investments.

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