(1)

Increasingly, as investors also pursue social goals and are not only seeking financial returns, a social investment market has been emerging in the Union, comprised in part by investment funds targeting social undertakings. Such investment funds provide funding to social undertakings which are acting as drivers of social change by offering innovative solutions to social problems , for example helping to tackle the social consequences of the financial crisis, and making a valuable contribution to meeting the objectives of the Europe 2020 Strategy.

(1a)

This Regulation is part of the Social Business Initiative set out by the Commission in its Communication of 25 October 2011 entitled 'Social Business Initiative - Creating a favourable climate for social enterprises, key stakeholders in the social economy and innovation'.

(2)

It is necessary to lay down a common framework of rules regarding the use of the designation for European Social Entrepreneurship Funds , '(EuSEF)', in particular on the composition of the portfolio of funds that operate under this designation, their eligible investment targets, the investment tools they may employ and the categories of investors that are eligible to invest in such funds by uniform rules in the Union. In the absence of such a common framework, there is a risk that Member States take diverging measures at national level having a direct negative impact on, and creating obstacles to, the good functioning of the internal market, since funds that wish to operate across the Union would be subject to different rules in different Member States. Moreover, diverging quality requirements on portfolio composition, investment targets and eligible investors could lead to different levels of investor protection and generate confusion as to the investment proposition associated with a European Social Entrepreneurship Fund (EuSEF). Investors should, furthermore, be able to compare the investment propositions of different EuSEFs. It is necessary to remove significant obstacles to cross-border fundraising by EuSEFs and to avoid distortions of competition between those funds, and to prevent any further likely obstacles to trade and significant distortions of competition from arising in the future. Consequently, the appropriate legal basis is Article 114 of the Treaty on the Functioning of the European Union, as interpreted in accordance with the consistent case law of the Court of Justice of the European Union.

(3)

It is necessary to adopt a Regulation establishing uniform rules applicable to EuSEFs and imposing corresponding obligations on their managers in all Member States that wish to raise capital across the Union using the designation ' EuSEF '. These requirements should ensure the confidence of investors that wish to invest in such funds.

(3a)

This Regulation does not apply to existing national schemes that allow investment in social businesses and that do not use the designation 'EuSEF'.

(4)

Defining the quality requirements for the use of the designation ' EuSEF ' in the form of a Regulation should ensure that those requirements will be directly applicable to the managers of collective investment undertakings that raise funds using this designation. This would ensure uniform conditions for the use of this designation by preventing diverging national requirements as a result of the transposition of a Directive. This Regulation would entail that managers of collective investment undertakings that use this designation would need to follow the same rules in all of the Union, which would also boost confidence of investors that wish to invest in funds that focus on social undertakings. A Regulation would also reduce regulatory complexity and the manager's cost of compliance with often divergent national rules governing such funds, especially for those managers that want to raise capital on a cross-border basis. A Regulation should also contribute to eliminating competitive distortions.

(4a)

It should be possible for a EuSEF to be either externally or internally managed. Where the EuSEF is internally managed, the EuSEF is also the manager and should therefore comply with all requirements for managers of EuSEFs under this Regulation and be registered as such. A EuSEF which is internally managed should however not be permitted to be the external manager of other collective investment undertakings or UCITS.

(5)

In order to clarify the relationship between this Regulation and other rules on collective investment undertakings and their managers, it is necessary to establish that this Regulation should only apply to managers of collective investment undertakings other than UCITS in accordance with Article 1 of Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations, and administrative provisions, relating to undertakings for collective investment in transferable securities (UCITS) (4) and who are established in the Union and are registered with the competent authority in their home Member State in accordance with Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers (5) , provided that those managers manage portfolios of EuSEFs. However, EuSEF managers who are registered under this Regulation and who are external managers should be allowed to additionally manage UCITS subject to authorisation under Directive 2009/65/EC.

(5a)

Furthermore, this Regulation applies only ▐ to managers of those collective investment undertakings whose assets under management in total do not exceed the threshold referred to in point (b) of Article 3(2)(b) of Directive 2011/61/EU . This means that the calculation of the threshold for the purposes of this Regulation follows the calculation of the threshold of point (b) of Article 3(2) of Directive 2011/61/EU. However, EuSEF managers who are registered under this Regulation and whose assets in total subsequently grow to exceed the threshold referred to in point (b) of Article 3(2) of Directive 2011/61/EU, and who therefore become subject to authorisation with the competent authorities of their home Member State in accordance with Article 6 of that Directive, may continue to use the designation 'EuSEF' in relation to the marketing of EuSEFs in the Union, provided that they comply with the requirements laid down in that Directive and that they continue to comply with certain requirements for the use of the designation 'EuSEF' specified in this Regulation at all times in relation to the EuSEF. This applies to both existing EuSEFs and EuSEFs established after exceeding the threshold.

(6)

Where managers of collective investment undertakings do not wish to use the designation 'EuSEF' then this Regulation does not apply. In those cases, existing national rules and general Union rules should continue to apply.

(7)

This Regulation should establish uniform rules on the nature of EuSEFs, notably on the portfolio undertakings into which the EuSEFs are to be permitted to invest, and the investment instruments to be used. This is necessary so that a clear demarcation line can be drawn between a EuSEF and other alternative investment funds that engage in other, less specialised, investment strategies, for example buyouts, which this Regulation is not seeking to promote.

(7a)

In line with the aim of precisely circumscribing the collective investment undertakings which will be covered by this Regulation and in order to ensure a focus on providing capital to social undertakings, EuSEFs should be deemed to be those funds that intend to invest at least 70 % of their aggregate capital contributions and uncalled committed capital in such undertakings. The EuSEF should not be permitted to invest more than 30 % of its aggregate capital contributions and uncalled committed capital in assets other than qualifying investments. This means that whereas the 30 % should be the maximum limit for non-qualifying investments at all times, the 70 % should be reserved for qualifying investments during the life time of the EuSEF. The above mentioned limits should be calculated on the basis of amounts investible after deduction of all relevant costs and holdings of cash and cash equivalents. This Regulation should set out the details necessary for the calculation of the referred investment limits.

(7b)

In order to ensure the necessary clarity and certainty this Regulation should also lay down uniform criteria to identify social undertakings as eligible qualifying portfolio undertakings. A social undertaking is an operator in the social economy whose main objective is to have a social impact rather than make a profit for their owners or shareholders. It operates by providing goods and services for the market and uses its profits primarily to achieve social objectives. It is managed in an accountable and transparent way and, in particular, by involving employees, consumers and stakeholders affected by its commercial activities.

(7c)

As social undertakings have the achievement of positive social impact as their principle objective rather than maximising their profits ▐, this Regulation should only promote support to qualifying portfolio undertakings that have the achievement of a measurable and positive social impact as their focus. A measurable and positive social impact could include the provision of services to immigrants who are otherwise excluded, or by reintegrating marginalised groups in the labour market by providing employment, support or training. These undertakings use their profits to achieve their primary social objective and are managed in an accountable and transparent way. For the, in general, exceptional cases, in which a qualifying portfolio undertaking wishes to distribute profits to shareholders and owners, the qualifying portfolio undertaking should have predefined procedures and rules on how profits are distributed to shareholders and owners. Those rules should specify that distribution of profits does not undermine the primary social objective.

(8)

Social undertakings include a large range of undertakings, taking various legal forms, that provide social services or goods to vulnerable, marginalised , disadvantaged or excluded persons. Such services include access to housing, healthcare, assistance for elderly or disabled persons, child care, access to employment and training as well as dependency management. Social undertakings also include undertakings that employ a method of production of goods or services that embodies their social objective, but whose activities may be outside the realm of the provision of social goods or services. Those activities include social and professional integration by means of access to employment for people disadvantaged in particular by insufficient qualifications or social or professional problems leading to exclusion and marginalisation. Those activities may also concern environmental protection with a societal impact, such as anti-pollution, recycling and renewable energy .

(8a)

The purpose of this Regulation is to support growth of social undertakings in the Union. Investments in qualifying portfolio undertakings established in third countries can bring more capital to EuSEFs and thereby benefit social undertakings in the Union. However, under no circumstances should investments be made into third country portfolio undertakings that are located in tax havens or uncooperative jurisdictions.

(8b)

A EuSEF should not be established in tax havens or uncooperative jurisdictions, such as third countries characterised in particular by no or nominal taxes, a lack of appropriate cooperation arrangements between the competent authorities of the home Member State of the EuSEF manager and the supervisory authorities of the third country where the social entrepreneurship fund is established, or a lack of effective exchange of information in tax matters. A EuSEF should also not invest in jurisdictions displaying any of the above criteria.

(8c)

EuSEF managers should be able to attract additional capital commitments during the lifetime of a fund. Such additional capital commitments in the lifetime of the EuSEF should be taken into account when the next investment in assets other than qualifying assets is contemplated. Additional capital commitments should be permitted in accordance with the criteria and subject to conditions set out in the EuSEF’s rules or instruments of incorporation.

(9)

Taking into account the specific funding needs of social undertakings, it is necessary to achieve clarity regarding the types of instruments a EuSEF should use for such funding. Therefore, this Regulation lays down uniform rules on the eligible instruments to be used by a EuSEF when making investments, which include equity and quasi equity instruments, debt instruments, such as promissory notes and certificates of deposit , investments into other EuSEFs, secured or unsecured loans , and grants. However, to prevent dilution of the investments into qualifying portfolio undertakings, EuSEFs should only be permitted to invest into other EuSEFs where those other EuSEFs have not themselves invested more than 10 % of their aggregate capital contributions and uncalled committed capital into other EuSEFs.

(9a)

The core activities of EuSEFs are providing finance to social undertakings through primary investments. EuSEFs should not participate in systemically important banking activities outside of the usual prudential regulatory framework (so-called 'shadow banking'). Neither should they follow typical private equity strategies, such as leveraged buyouts.

(10)

To maintain the necessary flexibility in its investment portfolio, EuSEFs may ▐ invest in other assets than qualifying investments to the extent that these investments do not exceed the 30 % limit for non-qualifying investments. Holdings of cash and cash equivalents should not be taken into account for the calculation of this limit as cash and cash equivalents are not to be considered as investments. EuSEFs should engage in investments throughout their portfolio that are consistent with their ethical investment strategy, for instance they should not undertake investments such as in the weapons industry, that risk breaches of human rights or that entail electronic waste-dumping.

(11)

In order to ensure that the designation 'EuSEF' is reliable and easily recognisable for investors across the Union this Regulation should establish that only EuSEF managers which comply with the uniform quality criteria as set out in this Regulation should be eligible to use this designation when marketing EuSEFs across the Union.

(12)

In order to ensure that EuSEFs have a distinct and identifiable profile which is suited to their purpose, there should be uniform rules on the composition of the portfolio and on the investment techniques which are permitted for such funds.

(13)

In order to ensure that EuSEFs do not contribute to the development of systemic risks, and ▐ that such funds concentrate, in their investment activities, on supporting qualifying portfolio undertakings, the use of leverage at the level of the fund should not be permitted. The EuSEF manager should only be permitted to borrow, issue debt obligations or provide guarantees, at the level of the EuSEFs, provided that such borrowings, debt obligations or guarantees are covered by uncalled commitments and thus do not increase the exposure of the fund beyond the level of its committed capital. Under this approach cash advances from investors of the EuSEF that are fully covered by capital commitments from those investors do not increase the exposure of the EuSEF and should therefore be allowed. Also, in order to permit the fund to cover extraordinary liquidity needs that might arise between a call of committed capital from investors and the actual reception of the capital in its accounts, short-term borrowing should be allowed provided that it does not exceed uncalled committed capital.

(14)

In order to ensure that EuSEFs are only marketed to investors who have the ▐ experience , knowledge and expertise to make their own investment decisions and properly assess the risks these funds carry, and in order to maintain investor confidence and trust in EuSEF, certain specific safeguards should be laid down. Therefore, EuSEFs should ▐ only be marketed to investors who are professional clients or who can be treated as professional clients under Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments (6). However, in order to have a sufficiently broad investor base for investments into EuSEFs it is also desirable that certain other investors have access to these funds, including high net worth individuals. For those other investors, specific safeguards should be laid down in order to ensure that EuSEFs are only marketed to investors that have the appropriate profile for making such investments. These safeguards exclude marketing through the use of periodic savings plans. Furthermore, investments made by executives, directors or employees involved in the management of a EuSEF manager should be possible when investing in the EuSEF they manage, as such individuals are knowledgeable enough to participate in such investments.

(15)

To ensure that only EuSEF managers who fulfil uniform quality criteria as regards their behaviour in the market use the designation ' EuSEF ', this Regulation should establish rules on the conduct of business and the relationship of the EuSEF manager to its investors. For the same reason, this Regulation should also lay down uniform conditions concerning the handling of conflicts of interest by such managers. These rules should also require the manager to have the necessary organisational and administrative arrangements in place to ensure a proper handling of conflicts of interest.

(15a)

Where an EuSEF manager intends to delegate functions to third parties, the manager's liability towards the EuSEF and its investors should not be affected by the delegation of functions by the EuSEF manager to a third party. Moreover, the EuSEF manager should not delegate functions to the extent that, in essence, it can no longer be considered to be the EuSEF manager and has become a letter-box entity. The EuSEF manager should remain responsible for the proper performance of delegated functions and compliance with this Regulation at all time. The delegation of functions should not undermine the effectiveness of supervision of the EuSEF manager, and, in particular, should not prevent the EuSEF manager from acting, or the EuSEF from being managed, in the best interests of its investors.

(16)

The creation of positive social impacts in addition to the generation of financial returns for investors is a key characteristic of investment funds targeting social undertakings, one which distinguishes them from other types of investment funds. This Regulation should therefore require that the EuSEF managers put in place procedures for ▐ measuring the positive social impacts which are to be achieved by investment into qualifying portfolio undertakings.

(16a)

Currently funds that are targeting social outcomes or impacts typically assess and collate information on the extent to which social undertakings are achieving the outcomes they are targeting. There are a wide range of different kinds of social outcomes or impacts that a social undertaking might target. Different ways of identifying the social impacts and measuring them have thereby developed. For instance, a firm that is seeking to aid disadvantaged persons may report on the numbers of such persons aided, for instance employed who otherwise would not be employed. Or, a firm that is seeking to improve the rehabilitation into society of prisoners on release may assess its performance in terms of recidivism rates. The funds aid the undertakings in preparing and providing information on their goals and achievements, and gathering it for investors. While information about social impacts is very important for investors, it is difficult to compare between different social undertakings and different funds both because of the differences in social outcomes being targeted and because of the variety of current approaches. In order to encourage the greatest consistency and comparability in the longer term in such information and the greatest efficiency in the procedures for obtaining the information, it is desirable to develop delegated acts in this area. Such delegated acts should also ensure greater clarity for supervisors, EuSEFs and social undertakings.

(17)

In order to ensure the integrity of the designation ' EuSEF ', this Regulation should also contain quality criteria as regards the organisation of a EuSEF manager. Therefore, this Regulation should lay down uniform, proportionate requirements for the need to maintain adequate technical and human resources ▐.

(17a)

In order to ensure the proper management of the EuSEF and the ability of the manager to cover potential risks arising from its activities this Regulation should lay down uniform, proportionate requirements for EuSEF manager to maintain sufficient own funds. The amount of such own funds should be sufficient to ensure the continuity and proper management of the EuSEF.

(18)

It is necessary for the purpose of investor protection to ensure that EuSEFs assets are properly evaluated. Therefore the rules or instruments of incorporation of the EuSEF should contain rules on the valuation of assets. This should ensure the integrity and the transparency of the valuation.

(19)

In order to ensure that EuSEF managers which make use of the designation 'EuSEF' give sufficient account of their activities, uniform rules on annual reports should be established.

(20)

To ensure the integrity of the designation ' EuSEF ' in the eyes of investors, it is necessary that the designation only be used by fund managers who are fully transparent as to their investment policy and their investment targets. This Regulation should therefore set out uniform rules on disclosure requirements that are incumbent on a EuSEF manager in relation to his investors. These requirements include those elements that are specific to investments into social undertakings, so that greater consistency and comparability of such information may be achieved. This includes information about the criteria and the procedures which are used to select particular qualifying portfolio undertakings as investment targets. This also includes information about the positive social impact to be achieved by the investment policy and how this should be monitored and assessed. To ensure the necessary confidence and the trust of investors in such investments, this further includes information about the assets of the EuSEF which are not invested into qualifying portfolio undertakings and how these are selected.

(21)

In order to ensure effective supervision of the uniform requirements contained in this Regulation, the competent authority of the home Member State should supervise compliance of the EuSEF manager with the uniform requirements set out in this Regulation. To this effect, the EuSEF manager who wishes to market his funds under the designation ' EuSEF ' should inform the competent authority of his home Member State of this intention. The competent authority should register the fund manager if all necessary information has been provided and if ▐ suitable arrangements to comply with the requirements of this Regulation are in place. That registration should be valid across the entire Union.

(21a)

In order to facilitate the efficient cross-border marketing of EuSEF, registration of the manager should be as quick as possible.

(21b)

While safeguards are included in this Regulation to ascertain that funds are properly used, supervisory authorities should be vigilant in ensuring that those safeguards are complied with.

(22)

In order to ensure effective supervision of compliance with the uniform criteria set out, this Regulation should contain rules on the circumstances under which information supplied to the competent authority in the home Member State needs to be updated.

(23)

For the effective supervision of the requirements laid down, this Regulation should also establish a process for cross-border notifications between the competent supervisory authorities, to be triggered by the registration of the EuSEF manager in its home Member State.

(24)

In order to maintain transparent conditions for the marketing of EuSEF managers across the Union, the European Supervisory Authority ( European Securities and Markets Authority ) ('ESMA') established by Regulation (EU) No 1095/2010 of the European Parliament and of the Council  (7) should be entrusted with maintaining a central database listing all EuSEF managers and the EuSEFs they manage that are registered in accordance with this Regulation.

(24a)

Where the competent authority of the host Member State has clear and demonstrable grounds for believing that the EuSEF manager acts in breach of this Regulation within its territory, it should promptly inform the competent authority of the home Member State, which should take appropriate measures.

(24b)

If, despite the measures taken by the competent authority of the home Member State or because the competent authority of the home Member State fails to act within a reasonable timeframe, or the EuSEF manager persists in acting in a manner that is clearly in conflict with this Regulation, the competent authority of the host Member State may, after informing the competent authority of the home Member State, take all the appropriate measures needed in order to protect investors, including the possibility of preventing the manager concerned from carrying out any further marketing of its EuSEFs within the territory of the host Member State.

(25)

In order to ensure the effective supervision of the uniform criteria established, this Regulation should contain a list of supervisory powers that competent authorities shall have at their disposal.

(26)

In order to ensure proper enforcement, this Regulation should contain administrative sanctions and measures for the breach of its key provisions, namely the rules on portfolio composition, on safeguards relating to the identity of eligible investors, and on the use of the designation ' EuSEF ' only by registered EuSEF managers. It should be established that a breach of these key provisions entails the prohibition of the use of the designation and the removal of the fund manager from the register.

(27)

Supervisory information should be exchanged between the competent authorities in the home and host Member States and ESMA.

(28)

Effective regulatory cooperation among the entities tasked with supervising compliance with the uniform criteria set out in this Regulation requires that a high level of professional secrecy should apply to all relevant national authorities and to ESMA.

(28a)

The contribution of EuSEFs to the growth of a European market for social investments will depend on take up of the designation by fund managers, the recognition of the designation by investors and the development of a strong eco-system for social enterprises across the Union that aids those enterprises in availing themselves of the financing options provided. To this end, all stakeholders, including market operators, competent authorities in Member States, the Commission and other relevant entities within the Union, should endeavour to ensure a high level of awareness of the possibilities presented by this Regulation.

(29)

Technical standards in financial services should ensure consistent harmonisation and a high level of supervision across the Union. As a body with highly specialised expertise, it would be efficient and appropriate to entrust ESMA with the elaboration of draft implementing technical standards where these do not involve policy choices, for submission to the Commission.

(30)

The Commission should be empowered to adopt implementing technical standards by means of implementing acts pursuant to Article 291 of the Treaty on the Functioning of the European Union and in accordance with Article 15 of Regulation (EU) No 1095/2010. ESMA should be entrusted with drafting implementing technical standards for the format ▐ of the notification referred to in this Regulation .

(31)

In order to specify the requirements set out in this Regulation, the power to adopt acts in accordance with Article 290 of the Treaty on the Functioning of the European Union should be delegated to the Commission in respect of specifying the types of goods and services or methods of production for goods and services embodying a social objective and the circumstances in which profits may be distributed to owners and investors, the types of conflicts of interest EuSEF managers need to avoid and the steps to be taken in that respect, the details of the procedures to measure the social impacts to be achieved by the qualifying portfolio undertakings , and the content and procedure for provision of information for investors . It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level , taking into account self-regulatory initiatives and codes of conduct . The consultations carried out by the Commission during its preparatory work regarding delegated acts on the details of the procedures to measure the social impacts to be achieved by the qualifying portfolio undertakings should involve relevant stakeholders and ESMA. The Commission, when preparing and drawing up delegated acts, should ensure a simultaneous, timely and appropriate transmission of relevant documents to the European Parliament and Council.

▐

(33)

At the latest four years after the date on which this Regulation becomes applicable a review of this Regulation should be carried out in order to take account of the development of the market of EuSEFs. The review should include a general survey of the functioning of the rules in this Regulation and the experience acquired in applying them. On the basis of the review, the Commission should submit a report to the European Parliament and the Council accompanied, if appropriate, by legislative proposals .

(33a)

Furthermore, by 22 July 2017, the Commission should start a review of the interaction between this Regulation and other rules on collective investment undertakings and their managers, especially those of Directive 2011/61/EU. In particular, this review should address the scope of this Regulation assessing whether it is necessary to extend the scope to allow for larger alternative investment funds managers to use the designation EuSEF. On the basis of the review, the Commission should submit a report to the European Parliament and the Council accompanied, if appropriate, by legislative proposals.

(33b)

In the context of this review, the Commission should evaluate any barriers that may have impeded the uptake of the funds by investors, including the impact on institutional investors of other regulation as may apply to them of a prudential nature. In addition, the Commission should gather data for assessing the contribution of EuSEFs to other Union programs such as Horizon 2020 that seek also to support innovation in the Union.

(33c)

In relation to the Commission examination of tax obstacles to cross-border venture capital investments as foreseen in the Commission Communication of 7 December 2011 entitled 'An action plan to improve access to finance for SMEs' and in the context of the review of this Regulation, the Commission should consider undertaking an equivalent examination of possible tax obstacles for social entrepreneurship funds and assess possible tax incentives aimed at encouraging social entrepreneurship in the Union.

(33d)

ESMA should assess its staffing and resources needs arising from the assumption of its powers and duties in accordance with this Regulation and submit a report to the European Parliament, the Council and the Commission.

(34)

This Regulation respects fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights of the European Union, including the right to respect for private and family life and the freedom to conduct a business.

(35)

Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of individuals with regard to the processing of personal data and on the free movement of such data (8) governs the processing of personal data carried out in the Member States in the context of this Regulation and under the supervision of the Member States competent authorities, in particular the public independent authorities designated by the Member States. Regulation (EC) No 45/2001 of the European Parliament and of the Council of 18 December 2000 on the protection of individuals with regard to the processing of personal data (9) by the Union institutions and bodies and on the free movement of such data, governs the processing of personal data carried out by ESMA within the framework of this Regulation and under the supervision of the European Data Protection Supervisor.

(36)

Since the objective of this Regulation, namely to develop an internal market for EuSEFs by laying down a framework for the registration of EuSEF managers facilitating the marketing of EuSEFs throughout the Union, cannot be sufficiently achieved by the Member States and can therefore, by reason of its scale and effects, be better achieved at Union level, the Union may adopt measures in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on the European Union. In accordance with the principle of proportionality, as set out in that Article, this Regulation does not go beyond what is necessary in order to achieve that objective,

(a)

'European Social Entrepreneurship Fund' (EuSEF) means a collective investment undertaking that :

(aa)

'relevant costs' means all fees, charges and expenses which are directly or indirectly borne by investors and which are agreed between the manager of, and the investors in, the EuSEFs;

(b)

'collective investment undertaking' means an AIF as defined in point (a) of Article 4(1) of Directive 2011/61/EU ;

(c)

'qualifying investments' means any of the following instruments:

(d)

'qualifying portfolio undertaking' means an undertaking that, at the time of an investment by the EuSEF, is not admitted to trading on a regulated market or on a multilateral trading facility (MTF) as defined in point (14) and point (15) of Article 4(1) of Directive 2004/39/EC and which :

(e)

'equity' means ownership interest in an undertaking, represented by the shares or other forms of participation in the capital of the qualifying portfolio undertaking issued to its investors;

(ea)

'quasi-equity' means any type of financing instrument which is a combination of equity and debt, where the return on the instrument is linked to the profit or loss of the qualifying portfolio undertaking and where the repayment of the instrument in the event of default is not fully secured;

(f)

'marketing' means a direct or indirect offering or placement at the initiative of the EuSEF manager or on behalf of that manager of units or shares of a EuSEF it manages to or with investors domiciled or with a registered office in the Union;

(g)

'committed capital' means any commitment pursuant to which an investor is obliged, within the time frame laid down in the rules or instruments of incorporation of the EuSEF, to acquire an interest in the EuSEF or make capital contributions to the EuSEF;

(h)

'EuSEF manager' means a legal person whose regular business is managing at least one EuSEF;

(i)

'home Member State' means the Member State where the EuSEF manager is established and is subject to registration with the competent authorities in accordance with point (a) of Article 3(3) of Directive 2011/61/EU ;

(j)

'host Member State' means the Member State, other than the home Member State, where the EuSEF manager markets EuSEFs in accordance with this Regulation;

(k)

'competent authority' means the national authority which the home Member State designates, by law or regulation, to undertake the registration of managers of collective investment undertakings as referred to in Article 2(1);

(ka)

'UCITS' means an undertaking for collective investment in transferable securities authorised in accordance with Article 5 of Directive 2009/65/EC.

(a)

those other investors commit to invest a minimum of EUR 100 000; and

(b)

those other investors state in writing, in a separate document from the contract that is concluded for the commitment to invest, that they are aware of the risks associated with the envisaged commitment.

(a)

act honestly, with due skill, care and diligence and fairly in conducting their activities;

(b)

apply appropriate policies and procedures for preventing malpractices that might be reasonably expected to affect the interests of investors and the qualifying portfolio undertakings;

(c)

conduct their business activities so as to promote the positive social impact of the qualifying portfolio undertakings in which they have invested, the best interests of the EuSEFs they manage, the investors in those EuSEFs and the integrity of the market;

(d)

apply a high level of diligence in the selection and ongoing monitoring of investments in qualifying portfolio undertakings and the positive social impact of those undertakings ;

(e)

possess adequate knowledge and understanding of the qualifying portfolio undertakings they invest in;

(ea)

treat their investors fairly;

(eb)

ensure that no investor obtains preferential treatment, unless such preferential treatment is disclosed in the rules or instruments of incorporation of the EuSEF.

(a)

EuSEF managers, those persons who effectively conduct the business of the EuSEF manager, employees or any person who directly or indirectly controls or is controlled by the EuSEF manager, and the EuSEF managed by the EuSEF manager or the investors in those EuSEFs;

(b)

a EuSEF or the investors in that EuSEF, and another EuSEF managed by that EuSEF manager, or the investors in that other EuSEF;

(ba)

the EuSEF or the investors in that EuSEF, and a collective investment undertaking or UCITS managed by the same EuSEF manager or the investors in that collective investment undertaking or UCITS.

(a)

the types of conflicts of interest as referred to in paragraph 2 of this Article;

(b)

the steps EuSEF managers shall take, in terms of structures and organisational and administrative procedures, in order to identify, prevent, manage, monitor and disclose conflicts of interest.

(a)

employment and labour markets;

(b)

standards and rights related to job quality;

(c)

social inclusion and protection of particular groups; equality of treatment and opportunities, non -discrimination;

(d)

public health and safety;

(e)

access to and effects on social protection, health and educational systems.

(a)

details, as appropriate, of the overall social outcomes achieved by the investment policy and the method used to measure these outcomes;

(b)

a statement of any divestments in relation to qualifying portfolio undertakings that have occurred;

(c)

a description of whether divestments in relation to the other assets of the EuSEF which are not invested into qualifying portfolio undertakings occurred on the basis of the criteria as referred to in point (e) of Article 13(1);

(d)

a summary of the activities the EuSEF manager has undertaken in relation to the qualifying portfolio undertakings as referred to in point (k) of Article 13(1);

(da)

information on the nature and purpose of the investments other than qualifying portfolio investments referred to in Article 4(1).

(a)

the identity of the EuSEF manager and of any other service providers contracted by the EuSEF manager in relation to their management, and a description of their duties;

(aa)

the amount of own funds available to the EuSEF manager, as well as a detailed statement as to why the EuSEF manager deems these own funds sufficient for maintaining the adequate human and technical resources necessary for the proper management of its EuSEFs;

(b)

a description of the investment strategy and objectives of the EuSEF, including:

(c)

the positive social impact being targeted by the investment policy of the EuSEF, including where relevant, projections of such outcomes as may be reasonable, and information on past performance in this area;

(d)

the methodologies to be used to measure social impacts;

(e)

a description of the assets other than qualifying portfolio undertakings and the process and the criteria which are used for selecting these assets unless they are cash or cash equivalents;

(f)

a description of the risk profile of the EuSEF and any risks associated with the assets in which the fund may invest or the investment techniques that may be employed;

(g)

a description of the EuSEF’s valuation procedure and of the pricing methodology for valuing assets, including the methods used for valuing qualifying portfolio undertakings;

(h)

a description of all relevant costs and of the maximum amounts thereof ▐;

(i)

a description of how the remuneration of the EuSEF manager is calculated;

(j)

where available, the historical financial performance of the EuSEF;

(k)

the business support services and the other support activities the EuSEF manager is providing or arranging through third parties in order to facilitate the development, growth or in some other respect the on-going operations of the qualifying portfolio undertakings in which the EuSEF invests, or, where these services or activities are not provided, an explanation of that fact;

(l)

a description of the procedures by which the EuSEF may change its investment strategy or investment policy, or both.

(a)

the content of the information referred to in point (b) to (e) and (k) of paragraph 1 of this Article;

(b)

how the information as referred to in point (b) to (e) and (k) of paragraph 1 of this Article can be presented in a uniform way in order to ensure the highest possible level of comparability.

(a)

the identity of the persons who effectively conduct the business of managing EuSEFs;

(b)

the identity of the EuSEFs whose units or shares shall be marketed and their investment strategies;

(c)

information on the arrangements made for complying with the requirements of Chapter II;

(d)

a list of Member States where the EuSEF manager intends to market each EuSEF;

(da)

a list of Member States and third countries where the EuSEF manager has established, or intends to establish, EuSEFs.

(-a)

the persons who effectively conduct the business of managing the EuSEF are of sufficiently good repute and are sufficiently experienced also in relation to the investment strategies pursued by the EuSEF manager;

(a)

the information required referred to in paragraph 1 is complete;

(b)

the arrangements notified according to in point (c) of paragraph 1 are suitable in order to comply with the requirements of Chapter II;

(ba)

the list notified according to point (da) of paragraph 1 reveals that all of the EuSEFs are established in accordance with Article 3(1)(a)(iii) of this Regulation.

(a)

to market a new EuSEF;

(b)

to market an existing EuSEF in a Member State not mentioned in the list referred to in point (d) of Article 14(1).

(a)

request access to any document in any form, and to receive or take a copy of it thereof;

(b)

require the EuSEF manager to provide information without delay;

(c)

require information from any person related to the activities of the EuSEF manager or the EuSEF;

(d)

carry out on site inspections with or without prior announcements;

(e)

take appropriate measures to ensure that a EuSEF manager continues to comply with the requirements of this Regulation;

(f)

issue an order to ensure that a EuSEF manager complies with the requirements of this Regulation and desists from a repetition of any conduct that may consist of a breach of this Regulation.

(a)

fails to comply with the requirements that apply to the portfolio composition in breach of Article 5;

(b)

markets, in breach of Article 6, the units and shares of a EuSEF to non-eligible investors ▐;

(c)

uses the designation ' EuSEF ' without being registered with the competent authority of their home Member State in accordance with Article 14 ;

(ca)

uses the designation 'EuSEF' for the marketing of funds which are not established in accordance with Article 3(1)(a)(iii) of this Regulation;

(cb)

obtained a registration through false statements or any other irregular means in breach of Article 14;

(cc)

fails to act honestly with due skill, care and diligence and fairly in conducting their business in breach of Article 7(a);

(cd)

fails to apply appropriate policies and procedures for preventing malpractices in breach of Article 7(b);

(ce)

repeatedly fails to comply with the requirements under Article 12 regarding the annual report;

(cf)

repeatedly fails to comply with the obligation to inform investors in accordance with Article 13.

(-a)

take measures to ensure that a EuSEF manager complies with Articles 3(1)(a)(iii), 5, 6, 7(a), 7(b), 12, 13 and 14 of this Regulation;

(a)

prohibit the use of the designation ' EuSEF ' and remove the EuSEF manager from the register.

(a)

the extent to which the designation ' EuSEF ' has been used by EuSEF managers in different Member States, whether domestically or on a cross border basis;

(aa)

the geographical location of EuSEFs and whether additional measures are necessary to ensure that EuSEFS are established in accordance with Article 3(1)(a)(iii);

(ab)

the geographical and sectoral distribution of investments undertaken by EuSEFs;

(b)

the use of the different qualifying investments by EuSEFs and how this has impacted the development of social undertakings across the Union;

(ba)

the appropriateness of establishing a European label for 'social enterprises';

(bb)

he possibility of extending the marketing of EuSEFs to retail investors;

(c)

the practical application of the criteria for identifying qualifying portfolio undertakings, the impact of this on the development of social undertakings across the Union and their positive social impact;

(ca)

an analysis of the procedures implemented by EuSEF managers so as to measure the positive social impact generated by the qualifying portfolio undertakings referred to in Article 9 and an assessment of the feasibility of introducing harmonised standards for measuring the social impact at Union level in a manner consistent with Union social policy;

(cb)

the appropriateness of complementing this Regulation with a depositary regime;

(cd)

the appropriateness of including EuSEFs within eligible assets under Directive 2009/65/EC;

(ce)

the appropriateness of the information requirements under Article 13, in particular whether they are sufficient to enable investors to take an informed investment decision;

(cf)

an examination of possible tax obstacles for social entrepreneurship funds and an assessment of possible tax incentives aimed at encouraging social entrepreneurship in the Union;

(cg)

an evaluation of any barriers that may have impeded the uptake of the funds by investors, including the impact on institutional investors of other Union legislation of a prudential nature.