L 41/20 Official Journal of the European Communities 13.2.2002 DIRECTIVE 2001/107/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 21 January 2002 amending Council Directive 85/611/EEC on the coordination of laws, regulations and adminis- trative provisions relating to undertakings for collective investment in transferable securities (UCITS) with a view to regulating management companies and simplified prospectuses THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION, Having regard to the Treaty establishing the European Community, and in particular Article 47(2) thereof, Having regard to the proposal from the Commission ('), Having regard to the opinion of the Economic and Social Committee (%), Acting in accordance with the procedure laid down in Article 251 of the Treaty (%), Whereas: (1)  Council Directive 85/611/EEC of 20 December 1985 on undertakings for collective investment in transferable securities (UCITS) (¥, has already contributed signifi- cantly to the achievement of the Single Market in this field, laying down — for the first time in the financial services sector — the principle of mutual recognition of authorisation and other provisions which facilitate the free circulation within the European Union of the units of the collective investment undertakings (unit trusts| common funds or as investment companies) covered by that Directive. (2)  However, Directive 85/611/EEC does not regulate to a great extent the companies which manage collective investment undertakings (so-called ‘management compa- nies). In particular, Directive 85/611/EEC does not lay down provisions ensuring in all Member States equiva- lent market access rules and operating conditions for such companies. Directive 85/611/EEC does not lay down provisions regulating the establishment of branches and the free provision of services by such companies in Member States other than their home Member State. (3)  Authorisation granted in the management company's home Member State should ensure investor protection and the solvency of management companies, with a view to contributing to the stability of the financial system. The approach adopted is to ensure the essential harmonisation necessary and sufficient to secure the () O] C 272, 1.9.1998, p. 7 and OJ C 311 E, 31.10.2000, p. 273. () O] C 116, 28.4.1999, p. 1. (*) Opinion of the European Parliament of 17 February 2000 (O] C 339, 29.11.2000, p. 228), Council Common Position of 5 June 2001 (O] C 297, 23.10.2001, p. 10) and Decision of the European Parliament of 23 October 2001. Council Decision of 4 December 2001. () OJ L 375, 31.12.1985, p. 3. Directive as last amended by Directive 2000/64/EC of the European Parliament and the Council (O] L 290, 17.11.2000, p. 27). mutual recognition of authorisation and of prudential supervision systems, making possible the grant of a single authorisation valid throughout the European Union and the application of the home Member State supervision. It is necessary, for the protection of investors, to guar- antee the internal overview of every management company in particular by means of a two-man manage- ment and by adequate internal control mechanisms. In order to ensure that the management company will be able to fulfil the obligations arising from its activities and thus to ensure its stability, initial capital and an additional amount of own funds are required. To take account of developments, particularly those pertaining to capital charges on operational risk within the Euro- pean Union and other international fora, these require- ments, including the use of guarantees, will have to be reviewed within three years. By virtue of mutual recognition, management companies authorised in their home Member States should be permitted to carry on the services for which they have received authorisation throughout the European Union by establishing branches or under the freedom to provide services. The approval of the fund rules of common fundsfunit trusts falls within the competence of the management company's home Member State. With regard to collective portfolio management (management of unit trusts/common funds and invest- ment companies), the authorisation granted to a management company authorised in its home Member State should permit the company to carry on in host Member States the following activities: to distribute the units of the harmonised unit trusts/common funds managed by the company in its home Member State; to distribute the shares of the harmonised investment companies, managed by such a company; to perform all the other functions and tasks included in the activity of collective portfolio management; to manage the assets of investment companies incorporated in Member States other than its home Member State; to perform, on the basis of mandates, on behalf of management companies incorporated in Member States other than its home Member State, the functions included in the activity of collective portfolio management.