Banks that safeguard investment funds’ assets face tougher European Union rules as part of an EU push to prevent fraud similar to the Ponzi scheme orchestrated by Bernard Madoff.
European Parliament lawmakers and Greece, which holds the rotating presidency of the EU, agreed on the measures as part of a deal on a draft law that also includes rules on pay for staff of EU-regulated funds known as UCITS, or Undertakings for Collective Investment in Transferable Securities.
“Following the financial crisis, more transparency is needed to ensure that UCITS funds remain trustworthy,” said Arlene McCarthy, a legislator who led work on the measures for the parliament’s Socialist group. The legislation will set out “clear and uniform rules” for banks that look after investor assets, she said in an e-mailed statement.
The European Commission, the 28-nation EU’s executive arm, has pushed for measures in order to curtail the risks of Madoff-style fraud. Madoff pleaded guilty in 2009 to orchestrating what prosecutors called the biggest Ponzi scheme in history and is serving a 150-year sentence in U.S. federal prison. The fallout of the fraud included the liquidation of four UCITS funds, a type of retail investment vehicle allowed to operate across the EU.
The new rules are scheduled to take effect in 2016.
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