UCITS V Directive

European Commission Adopts Delegated Regulation on Obligations of Depositaries Required by UCITS V

The European Commission has adopted a Delegated Regulation (C(2015) 9160) supplementing the UCITS IV Directive (2009/65/EC) on the obligations of depositaries.

The Delegated Regulation sets out provisions relating to issues including:

  1. Minimum requirements for the contract between the management company or the investment company and the depositary (Article 2);
  2. Obligations on the depositary relating to oversight, due diligence, segregation and insolvency protection (Articles 3 to 17);
  3. The conditions and circumstances in which financial instruments held in custody are considered to be lost (Articles 18 and 19); and
  4. Independence requirements for management companies, investment companies, depositaries and third parties to whom the safekeeping function has been delegated (Articles 20 to 24).

The next step is for the Council of the EU and the European Parliament to consider the Delegated Regulation. If neither the Council nor the Parliament object to the Regulation, it will be published in the Official Journal of the EU and enter into force on the 20th day following its publication.

ESMA’s New Q and A Responses on the Application of AIFMD and Consultation on New Guidelines

The European Securities and Markets Authority (ESMA) has published updated questions and answers on the application of the Alternative Investment Fund Managers Directive (AIFMD), which includes updated and new questions and answers on reporting to national authorities and the calculation of the total value of assets under management (AUM). In the same week, it has launched a consultation on proposed guidelines on sound remuneration policies under AIFMD and the UCITS V Directive (the latest changes to the Undertakings for Collective Investments in Transferable Securities Directive).

UCITS V includes rules that UCITS must comply with when establishing and applying a remuneration policy for certain staff categories and the proposed UCITS Remuneration Guidelines further clarify the Directive’s provisions. The proposed Guidelines aim to ensure a convergent application of the remuneration provisions and will provide guidance on issues such as proportionality, governance of remunerations, requirements on risk alignment and disclosure. The consultation paper also proposes a revision of the AIFMD Remuneration Guidelines by clarifying that, in a group context, non-AIFM sectoral prudential supervisors of group entities may deem certain staff of an AIFM in that group to be identified staff for the purpose of their sectoral remuneration rules.

ESMA will consider the feedback received to the consultation and is aiming to finalize and publish the UCITS Remuneration Guidelines and a final report by Q1 2016, ahead of the transposition deadline for the UCITS V Directive (March 18, 2016). It is expected that the final report will also include the revision of the AFIMD Remuneration Guidelines.

UCITS 5 Political Agreement Reached

On February 25, the European Parliament published a press release announcing that political agreement has been reached with the Council of the EU on the proposed UCITS V Directive.

The press release notes the following areas of agreement:

  • Payment of fund managers.
  • The appointment of a depository by UCITS or UCITS management companies.
  • Provision of penalties by EU member states for funds failing to comply with national UCITS authorization and reporting rules.   Press Release.