13.2.2002 Official Journal of the European Communities L 41/35 DIRECTIVE 2001/108/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 regard to investments of UCITS 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)  The scope of Council Directive 85/611/EEC (¥) was confined initially to collective investment undertakings of the open-ended type which promote the sale of their units to the public in the Community and the sole object of which is investment in transferable securities (UCITS). It was envisaged in the preamble to Directive 85/ 611/EEC that collective investment undertakings falling outside its scope would be the subject of coordination at a later stage. (2)  Taking into account market developments, it is desirable that the investment objective of UCITS be widened in order to permit them to invest in financial instruments, other than transferable securities, which are sufficiently liquid. The financial instruments which are eligible to be investment assets of the portfolio of the UCITS are listed in this Directive. The selection of investments for a portfolio by means of an index is a management tech- nique. (3)  The definition of transferable securities included in this Directive is valid only for this Directive and in no way affects the various definitions used in national legislation for other purposes such as taxation. Consequently, shares and other securities equivalent to shares issued by bodies such as building societies and industrial and provident societies, the ownership of which cannot in practice be transferred except by the issuing body buying them back, are not covered by this definition. (4)  Money market instruments cover those transferable instruments which are normally not traded on regulated markets but dealt in on the money market, for example () O] C 280, 9.9.1998, p. 6 and O] C 311 E, 31.10.2000, p. 302. () O] C 116, 28.4.1999, p. 44. (’) Opinion of the European Parliament of 17 February 2000 (O] C 339, 29.11.2000, p. 220), Council Common Position of 5 June 2001 (O] C 297, 23.10.2001, p. 35) and Decision of the European Parliament of 23 October 2001. Council Decision of 4 December 2001. O] L 375, 31.12.1985, p. 3. Directive as last amended by Directive 2000/64/EC of the European Parliament and of the Council (O] L 290, 17.11.2000, p. 27). <= treasury and local authority bills, certificates of deposit, commercial paper, medium-term notes and bankers' acceptances. (5) It is useful to ensure that the concept of regulated market in this Directive corresponds to that in Council Directive 93/22/EEC of 10 May 1993 on investment services in the securities field (°). (6) It is desirable to permit a UCITS to invest its assets in units of UCITS and/or other collective investment under- takings of the open-ended type which also invest in liquid financial assets mentioned in this Directive and which operate on the principle of risk spreading. It is necessary that UCITS or other collective investment undertakings in which a UCITS invests be subject to effective supervision. (7)  The development of opportunities for a UCITS to invest in UCITS and in other collective investment undertak- ings should be facilitated. It is therefore essential to ensure that such investment activity does not diminish investor protection. Owing to the enhanced possibilities for UCITS to invest in the units of other UCITS and|or collective investment undertakings, it is necessary to lay down certain rules on quantitative limits, the disclosure of information and prevention of the cascade phenom- enon. (8) To take market developments into account and in consideration of the completion of economic and monetary union it is desirable to permit UCITS to invest in bank deposits. To ensure adequate liquidity of invest- ments in deposits, these deposits are to be repayable on demand or have the right to be withdrawn. If the deposits are made with a credit institution the registered office of which is located in a non-Member State, the credit institution should be subject to prudential rules equivalent to those laid down in Community legislation. (9)  In addition to the case in which a UCITS invests in bank deposits according to its fund rules or instruments of incorporation, it may be necessary to allow all UCITS to hold ancillary liquid assets, such as bank deposits at sight. The holding of such ancillary liquid assets may be justified, for example, in the following cases: in order to cover current or exceptional payments; in the case of sales, for the time necessary to reinvest in transferable () OJ L 141, 11.6.1993, p. 27. Directive as last amended by Directive 2000/64/EC.