Find out about changes to the UCITS Directive, which are often called ‘UCITS V’ as they are set out in the UCITS V Directive. Further detail will also be set out in a number of delegated measures.
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 include:
- 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 on Member States 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 EU regulators for breaches of the UCITS Directive.
The Directive setting out the UCITS V changes was published in the Official Journal of the EU on 18 August 2014. Member States will have to implement it into national law by 18 March 2016. Unlike the UCITS IV Directive, the UCITS V Directive does not recast the UCITS Directive. Instead, it amends and stands alongside the UCITS IV Directive.
We are working with HM Treasury on the implementation of UCITS V in the UK. In CP15/27, published on 3 September 2015, we consulted on the relevant proposed changes to the Handbook. In PS16/2, which we published on 2 February 2016, we have set out our final rules and guidance. These will take effect on 18 March 2016. HM Treasury has also consulted on its draft statutory instrument, setting out the proposed changes to primary and secondary legislation, and intends to lay the final version before Parliament in time for it to become law by 18 March 2016.
The Directive provides for many of the detailed measures to be implemented through further delegated EU legislation (delegated acts, also referred to as level II measures). The European Securities and Markets Authority (ESMA) provided technical advice to the European Commission on 28 November 2014 on the content of two of the delegated acts required in respect of the depositary regime under the Directive. The EU Commission has adopted a draft Level II Regulation in December 2015. If both the European Parliament and European Council agree to the proposed Regulation, it will come into force during 2016. ESMA is also expected to publish Guidelines on the application of the remuneration rules in 2016.
Find out more about:
- PS16/2: Implementation of the UCITS V Directive
- CP15/27: UCITS V implementation and other changes to the Handbook affecting investment funds
- UCITS V Directive
- UCITS IV (consolidated version)
- UCITS page on the Commission's website
- Commission's adopted draft Level II Regulation
- ESMA's technical advice to the European Commission on delegated acts required by the UCITS Directive
- ESMA consultation on Guidelines on sound remuneration policies under the UCITS Directive and AIFMD