Alternative Investment Management Association Representing the global hedge fund industry
The UCITS Directive introduces a harmonised framework of investment protection and product regulation that enabled UCITS (Undertakings in Collective Investment in Transferable Securities) funds registered in one Member State to be marketed freely across the European Union.
UCITS are passportable open-ended vehicles with the sole objective of raising capital from the public and collectively investing in various financial instruments.
Significant developments in financial markets have necessitated several alterations to the UCITS regulatory framework. The current iteration of the UCITS Directive, UCITS IV, introduced a number of improvements such as a management company passport, master-feeder structures, mergers and improved investor disclosure.
On 23 July 2014 the European Commission adopted a UCITS V Directive. The UCITS V Directive amends parts of UCITS IV and covers five issues: eligibility to act as a depositary, criteria for delegating custody, liability for the loss of financial instruments held in custody, the remuneration of UCITS managers, and sanctions for breaches of the UCITS Directive. UCITS V also includes amendments to the UCITS IV Directive provisions which relate to access to telephone and data records and will empower the European Commission to adopt Level 2 measures specifying matters such as the circumstances in which financial instruments held in custody should be considered as lost.
The UCITS V Directive will come into force on 17 September 2014. Member States will then have to adopt and publish by 18 March 2016 the laws, regulations and administrative provisions necessary to comply with this directive.
As UCITS V amends portions of UCITS IV without recasting the remainder of the text, it will be necessary to read UCITS IV and UCITS V together to get a whole picture of the relevant requirements.
The publication of the original draft UCITS V Directive in July 2012 was closely followed by the publication of a further consultation document on UCITS issues, on 26 July 2012, which is widely known as ‘UCITS VI’. The consultation paper invites responses to questions which relate to 8 different elements of the UCITS framework: the eligible assets in which a UCITS fund can invest, efficient portfolio management techniques, OTC derivatives, extraordinary liquidity management tools, the possibility of introducing a depositary passport, money market funds, long-term investments and improvements that could be made to the UCITS IV Directive.
Commission Regulation (EU) No 583/2010 (key investor information)
Commission Regulation (EU) No 584/2010 (the standard notification letter, on-the-spot verifications, investigations and the exchange of information between competent authorities)
Commission Directive 2010/42/EU (fund mergers, master-feeder structures and notification procedure)
Commission Directive 2010/43/EU (organisational requirements, conflicts of interest, conduct of business, risk management and content of the agreement between a depositary and a management company)
Commission Directive 2007/16/EC (Eligible Assets Directive)
ESMA opinion on Article 50(2)(a) of the UCITS Directive (November 2012)
ESMA's Q&A: Key Investor Information Document (KIID) for UCITS (September 2012)
UCITS V Position Paper (September 2012)
CESR Guidelines - Risk management principles for UCITS (February 2009)