Commission Directive 2007/16/ECShow full title

Article 2 Article 1(8) of Directive 85/611/EECTransferable securities

1. The reference in Article 1(8) of Directive 85/611/EEC to transferable securities shall be understood as a reference to financial instruments which fulfil the following criteria:

(a) the potential loss which the UCITS may incur with respect to holding those instruments is limited to the amount paid for them;

(b) their liquidity does not compromise the ability of the UCITS to comply with Article 37 of Directive 85/611/EEC;

(c) reliable valuation is available for them as follows:

(i)

in the case of securities admitted to or dealt in on a regulated market as referred to in points (a) to (d) of Article 19(1) of Directive 85/611/EEC, in the form of accurate, reliable and regular prices which are either market prices or prices made available by valuation systems independent from issuers;

(ii)

in the case of other securities as referred to in Article 19(2) of Directive 85/611/EEC, in the form of a valuation on a periodic basis which is derived from information from the issuer of the security or from competent investment research;

(d) appropriate information is available for them as follows:

(i)

in the case of securities admitted to or dealt in on a regulated market as referred to in points (a) to (d) of Article 19(1) of Directive 85/611/EEC, in the form of regular, accurate and comprehensive information to the market on the security or, where relevant, on the portfolio of the security;

(ii)

in the case of other securities as referred to in Article 19(2) of Directive 85/611/EEC, in the form of regular and accurate information to the UCITS on the security or, where relevant, on the portfolio of the security;

(e) they are negotiable;

(f) their acquisition is consistent with the investment objectives or the investment policy, or both, of the UCITS pursuant to Directive 85/611/EEC;

(g) their risks are adequately captured by the risk management process of the UCITS.

For the purposes of points (b) and (e) of the first subparagraph, and unless there is information available to the UCITS that would lead to a different determination, financial instruments which are admitted or dealt in on a regulated market in accordance with points (a), (b) or (c) of Article 19(1) of Directive 85/611/EEC shall be presumed not to compromise the ability of the UCITS to comply with Article 37 of Directive 85/611/EEC and shall also be presumed to be negotiable.

2. Transferable securities as referred to in Article 1(8) of Directive 85/611/EEC shall be taken to include the following:

(a) units in closed end funds constituted as investment companies or as unit trusts which fulfil the following criteria:

(i)

they fulfil the criteria set out in paragraph 1;

(ii)

they are subject to corporate governance mechanisms applied to companies;

(iii)

where asset management activity is carried out by another entity on behalf of the closed end fund, that entity is subject to national regulation for the purpose of investor protection;

(b) units in closed end funds constituted under the law of contract which fulfil the following criteria:

(i)

they fulfil the criteria set out in paragraph 1;

(ii)

they are subject to corporate governance mechanisms equivalent to those applied to companies as referred to in point (a)(ii);

(iii)

they are managed by an entity which is subject to national regulation for the purpose of investor protection;

(c) financial instruments which fulfil the following criteria:

(i)

they fulfil the criteria set out in paragraph 1;

(ii)

they are backed by, or linked to the performance of, other assets, which may differ from those referred to in Article 19(1) of Directive 85/611/EEC.

3. Where a financial instrument covered by point (c) of paragraph 2 contains an embedded derivative component as referred to in Article 10 of this Directive, the requirements of Article 21 of Directive 85/611/EEC shall apply to that component.