“Last November, Janus Capital Group of Denver started asking European regulators to approve a mutual fund that would invest in U.S. stocks,” writes Silvia Ascarelli in today’s Wall Street Journal.

“By the time it launched the Janus Risk-Managed Core Fund on April 25, 10 national regulators in Europe had signed off on the new fund. Four months later and counting, the U.S. fund company is still waiting to hear from two others.”

“Efforts to create a single market for financial services across the 15-nation European Union remain hampered by national barriers and hidden obstacles. But nowhere do individual investors feel it more than in the massive market for mutual funds. Only 31% of the 24,982 funds sold somewhere in Europe are sold in more than one country, according to research firm Morningstar Inc.”

“Meddling in fund approvals by national regulators is just one of the many obstacles. Local tax rules often favor home-grown funds over those based elsewhere, and country-by-country differences in taxation mean some funds can’t be sold across Europe. France, for instance, exempts investors from capital-gains and income taxes on European stock-market investments worth as much as 90,000 euros ($98,712) — but only on money invested in funds based in France.”

” ‘BMW sells cars across Europe, but they’re all made in Germany,’ said John Ingamells, public-affairs head for Fidelity International, a unit of Fidelity Investments, the fund company based in Boston. ‘We sell funds across Europe, and we’ve had to open funds in four different countries [Ireland, Luxembourg, the U.K. and France]. This idea of a single market is still a long way off.’ “

“The European Commission, the EU’s executive arm that is supposed to enforce single-market rules, has been slow to fix the problems. A commission official in Brussels said it knows regulators in each country interpret the rules differently, but the commission hopes a shortened and common prospectus form, which it plans to introduce this autumn, will help streamline the fund-approval process.”

“Industry officials say the lack of uniform rules wastes time and money. ZEW, a German think tank, estimates that a true single market for funds would save at least 5 billion euros annually, some of which could be passed on to investors. Expenses for the new Janus fund, for example, are 11% higher in Europe than for a U.S. version of the fund called the Janus Risk-Managed Stock Fund. Janus applied in the U.S. for approval of that fund on Dec. 13. It was approved and launched just 11 weeks later, on Feb. 28.”

“Europe may never work as smoothly as the U.S., where one regulator approves mutual funds and the legal sales document is only in English. The EU has a separate regulator in each country and 11 official languages. There is little appetite to create a single financial regulator, and harmonizing the disparate national tax systems for investments would be a Herculean task. There’s also little the European Commission can do to open up sales networks controlled by local banks, a common complaint from U.S. financial-services companies.”

“Despite the problems, Europe remains a growth market for the fund industry, with 1,438 new funds launched last year, according to Morningstar. And there’s still room to grow, industry executives say. Mutual funds account for just 13% of Europeans’ household financial assets, compared with 22% in the U.S., according to Richard Garland, chief executive of Janus International. To match the U.S. investment level, he said, Europeans would have to put an additional $1.6 trillion (1.46 trillion euros) into the European fund industry, which has $4.6 trillion in assets counting all types of funds.”