Collective Investment Undertakings’ (CIUs) are institutions, with or without legal personality, whose purpose is the collective investment of capital raised from investors in accordance with a previously established investment policy. They comprise collective investment companies and investment funds.
CIU’s market is growing in Portugal, facing challenges and representing opportunities both to the market agents and to regulators.
CIUs are essential as corporate financing vehicles, providing a wide range of companies with the resources they need to develop their business plans. They are also central as an investment alternative for private and institutional investors who prefer not to take the risk of investing directly in target companies, but instead wish to invest in a professionally managed CIU that diversifies their risk by investing in a portfolio of companies.
In addition, CIUs are playing an increasingly important role in the transition to a more sustainable economy by implementing green investment strategies that individual investors cannot achieve on their own. All of this has helped to make CIUs an essential part and driver of the capital markets reshaping movement, at international and national level.
In this context, regulators seek to ensure an appropriate level of market and investor protection by regulating the inherent financial intermediation. In Portugal, the Securities and Exchange Commission (CMVM) has recently pushed for a renewed and simplified legal framework on asset management that was finally approved by Decree-Law no. 27/2023, of 28 April (the “Asset Management Regime” or simply AMR).
The AMR not only provides for new categories of CIUs and management companies, thus redefining the capitals market, but also creates new possibilities in terms of authorised investment activities, authorisation procedures, conflicts of interest, the issue of bonds or the marketing of investment units.
Despite their vital importance, CIUs have been overlooked by legal scholarship. The cries of market practitioners for clear guidelines on how to interpret, apply and enforce their legal regime have been ignored. To date there is not a single textbook, research book or monograph that covers this subject from beginning to end. Moreover, in respect to the vast majority of the issues, there is not a single line of text published.
Five years ago, the CIDP took a first step towards changing the status quo on this subject, by bringing together academics and practitioners to reflect on an array of topics, in the Intensive Course on Investment Funds. This course will see its 6th edition in late 2023.
It is now the time to build on what has been achieved so far and promote an in-depth research project on this subject. This research project will bring together national and international academics of different generations and experienced practitioners to produce new knowledge and offer the capital market a cross-sectional, comprehensive and in-depth analysis of the AMR, the relevant sanctioning provisions of the Portuguese Securities Code and the regulation model adopted in Portugal.
Major benefits may be obtained, not only from a theoretical point of view, but from a practical perspective as well.
On the one hand, by enabling financial intermediaries to better understand the applicable legal regime, it will allow them to better assess their compliance risks and reduce their compliance costs. As these costs are always passed on to their clients, the knowledge gained will also reduce the cost of investment for investors in general. In turn, such a reduction has the potential to lower the cost of capital for businesses, thereby stimulating economic growth and job creation.
On the other hand, it can also contribute to improve the efficiency and fairness of public oversight, the enforcement and compliance rules and procedures and implement better regulation policies.
The project team will focus on developing fieldwork to identify the main problems faced by market players (with APFIPP and other institutions), developing research at international level and producing a collective work (textbook) in English.
With regard to the latter, the idea is that each researcher will work with the principal researchers who will co-author each chapter of the collective textbook and ensure a cross-sectional dialogue.
The textbook is thus intended to be the result of collaborative research and intensive dialogue between the researchers, and not simply a compilation of articles written by each researcher individually.
The project will comprise 5 stages:
- An analysis of the law — covering both the law in the books and the law in action — in the markets most relevant to CIUs;
- A comparative law reflection based on step 1;
- An introduction to the pillars of European law that shape much of the legal regime governing CIUs in all Member States;
- A reflection on the fieldwork developed with APFIPP and other partner institutions to identify the main problems faced by market players;
- An in-depth discussion of the Portuguese AMR at three levels:
- The European Law applicable to each topic at stake;
- The Portuguese Law, in transposition/execution and/or beyond the boundaries of European Law;
- The enforcement system, with special focus on criminal law and on the law of administrative offences, within the broader “securities sanctions law” set forth by the Portuguese Securities Code.
International researchers will play a particularly important role in stages 1 to 3 and 5. In stage 4, the dialogue with partner institutions will foster a better interaction between theory and praxis.
The collective work will be publicly presented at an international conference and is expected to help shaping future courses and seminars offered by the CIDP and the FDUL on this subject.