The problem with mixing up the UCITS and MiFID directives
Tue Nov 20, 2012
What is the difference between UCITS and the MiFID
The primary difference is that the former directive looks at
how the investment wrapper is built while MiFID, or Markets in
Financial Instruments Directive, looks at who asset managers
can sell to.
The directives look at very different issues and their
differences are important. But as regulation becomes intrusive
and the scope of financial regulation grows and deepens there
is a danger that the distinction between two could become
A prime example of this is the proposals to divide
UCITS-compliant funds into complex and non-complex –
which comes under the scope of the MiFID Directive.
At the moment all UCITS-compliant funds are defined as
non-complex which means that they can be bought on an
The argument for the division is based on the assets that are
eligible within the UCITS framework. Some in the industry have
argued that retail investors should not be able to access
certain UCITS-compliant funds on an execution-only basis
because the complex financial instruments used make them
But the problem is that drawing a distinct line between complex
and non-complex could result in regulators taking a blunt
instrument to the fundamentals of the UCITS framework.
Also, the scope could impact the perceived safeness of the
long-only asset management world as many use derivatives for
their plain vanilla investment portfolios.
The point of regulation is supposed to protect the end
investor. However, intrusive and opaque regulation may limit
choice and understanding to the end investor – thus
resulting in an alphabet soup that is hard to swallow.
ISSN: 2151-1845 / CDC10004H