UCITS V – ESMA Issues Q&As on Updating Fund Documentation

The Q&As are a handy tool which promote common supervisory approaches across EU Member States. This latest version combines all Q&As previously issued by ESMA on the UCITS regime and can be accessed by clicking here.

We consider the key aspects of the Q&As on UCITS V below.

The changes introduced by UCITS V – in the three areas of depositaries, remuneration and sanctions – enter into force on 18 March, 2016. The MFSA’s consultation period on the transposition of UCITS V closed on 15 January, 2016.

Prospectus and KIID(s)

An updated Prospectus and updated KIID(s) do not need to be issued on 18 March, 2016.

UCITS V requires the Prospectus to include information on the Remuneration Policy, among other matters. KIID(s) will then need to contain a statement in relation to the remuneration information. While the Prospectus must be kept up-to-date at all times, an updated KIID(s) will need to be made available within 35 days of 31 December of each year.

The Q&A clarifies that:

  • the information in the Prospectus may be added on the first occasion the document is updated after 18 March, 2016 and, in any event, by 18 March 2017 at the latest; and
  • the information in the KIID(s) may be added on the first occasion the document(s) is/are updated after 18 March, 2016 (naturally, provided that the remuneration information is available at this point in time) and, in any event, 35 days after 31 December, 2016.

The above is subject to any stricter requirements that may be imposed under the national laws of the UCITS home Member State. In the meantime, ESMA advised UCITS Management Companies to publish information on their remuneration arrangements on a relevant website as soon as this is available.

Depositary Agreements

Depositary Agreements must also be updated to reflect UCITS V, particularly in respect of depositary liability and the new cash monitoring, safekeeping and oversight duties.

The revisions are not required by 18 March, 2016. ESMA declared that Depositary Agreements will need to be amended in line with any transitional arrangements in the UCITS Level 2 Regulations. This should lead us to a deadline of Q3 / Q4 2016 – unless the EU Parliament and Council of the EU oppose the current draft. Until then, provisions in Depositary Agreements which contradict the UCITS V depositary liability rules will be void with effect from 18 March, 2016.

The depositary liability regime is one of the key differences between the AIFMD and UCITS V. While the AIFMD allows parties, under specific conditions, to include an express discharge of liability clause in the Depositary Agreement for the benefit of the depositary when assets are entrusted to a delegate, UCITS V does not allow this possibility.

The pieces seem to be falling into place as the deadlines are fast approaching.