UCITS V: requirements for managers and depositaries

Undertakings for collective investment in transferable securities (UCITS) are regulated investment funds that can be sold to the general public throughout the EU, so it is important for them to have common standards of investor protection.

UCITS V aims to increase the level of protection already offered to investors in UCITS and to improve investor confidence in UCITS. It aims to do so by enhancing the rules on the responsibilities of depositaries and by introducing remuneration policy requirements for UCITS fund managers.

UCITS V also aims to ensure that all EU regulators responsible for the supervision of UCITS funds and their managers have a common minimum set of powers available to investigate infringements of national laws transposing the UCITS Directives and to sanction any breaches.

The changes introduced by UCITS V included:

  • A requirement to appoint a single depositary for each UCITS, disallowing the appointment of multiple depositaries.
  • An exhaustive list of entities eligible to act as a depositary of a UCITS.
  • the harmonisation of the duties of a depositary to keep the assets of the UCITS safe, monitor cash movements to and from the fund, and oversee the fund manager’s performance of its key functions.
  • Specific safe-keeping requirements that a depositary needs to comply with in respect of financial instruments that may be held in custody as well as for other assets, including segregation requirements for assets that are held in custody.
  • A requirement to ensure that assets held in custody by a depositary or its delegate are protected in the event of the depositary or its delegate becoming insolvent.
  • A strict liability regime making the depositary liable for the avoidable loss of a financial instrument held in custody.
  • A requirement for UCITS management companies to have remuneration policies, complying with certain remuneration principles, covering their key staff and a requirement to make those policies transparent.
  • The harmonisation of the administrative sanctions that must be available to regulators for breaches of the UCITS Directive.

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