AI Summary of Article 1
This Directive governs the operation of Undertakings for Collective Investment in Transferable Securities (UCITS) within Member States, establishing that UCITS must primarily engage in collective investment, focusing on risk diversification. The units of these undertakings can be repurchased or redeemed, ensuring their market value aligns closely with net asset value.
Moreover, Member States retain the authority to enforce stricter regulations on UCITS, provided these do not conflict with this Directive. Importantly, UCITS cannot convert into non-UCITS entities and must operate within the framework of applicable Community laws regarding capital movements.
Article 1
1. This Directive applies to undertakings for collective investment in transferable securities (UCITS) established within the territories of the Member States.
2. For the purposes of this Directive, and subject to Article 3, UCITS means an undertaking:
(a) with the sole object of collective investment in transferable securities or in other liquid financial assets referred to in Article 50(1) of capital raised from the public and which operate on the principle of risk-spreading; and
(b) with units which are, at the request of holders, repurchased or redeemed, directly or indirectly, out of those undertakings' assets. Action taken by a UCITS to ensure that the stock exchange value of its units does not significantly vary from their net asset value shall be regarded as equivalent to such repurchase or redemption.
Member States may allow UCITS to consist of several investment compartments.
3. The undertakings referred to in paragraph 2 may be constituted in accordance with contract law (as common funds managed by management companies), trust law (as unit trusts), or statute (as investment companies).
For the purposes of this Directive:
(a) 'common funds' shall also include unit trusts;