On 22 March 2017, the European Commission’s proposal to amend and develop Regulation (EU) No 346/2013 on European Social Entrepreneurship Funds (known as the ‘EuSEF’ Regulation) was adopted by the European Parliament’s ECON committee by 44 votes to 4.
The EuSEF regulation was originally published in 2013 to help support the spread of funds which invest in social businesses. It created a ‘European Social Entrepreneurship Fund’ label and set uniform requirements for managers of collective investment undertakings that wished to use the designation ‘EuSEF’ in relation to the marketing of qualifying social entrepreneurship funds in and across the European Union (‘EU’). The idea was to support and enable cross-border fundraising.
Today, there are a handful of EuSEF funds, mostly concentrated in one or two member states, but not as many as had been hoped. Several obstacles to their development have been identified by the European Commission, including: limitations imposed on managers, product rules, and the application of regulatory fees in Member States with regards to funds, marketing and management.
The European Commission consequently decided to advance the review of the regulation that was initially scheduled for July 2017. On 14 July 2016, the European Commission published an amendment proposal. In September 2016, the European Central Bank declared that it supported the aim of the proposal. The European Parliament’s ECON committee then adopted the amended regulation on 22 March 2017. The European Commission announced on 30 May 2017 that it had reached an agreement with the Council of the EU and the European Parliament.
To support social investment throughout the EU, the amendment removes the limitations regarding managers managing EuSEF funds to allow all managers authorised under the AIFM Directive (2011/61/EU) to use the EuSEF designation when marketing those funds in the EU (before March, it was only for managers not managing a portfolio in excess of EUR 500 million). The amended regulation, in order to decrease costs, prohibits host Member States (where no supervisory activity is performed) from imposing fees or charges relating to cross-border marketing of EuSEF funds.
It remains to be seen whether these changes will increase take up of the EuSEF label or whether more fundamental review of the nature of the EuSEF regime, such as by reviewing the nature of the underlying investments and asset classes or the advantages of the EuSEF label, may be needed.