Directive 2014/91 ("UCITS V") is required to be transposed into the national laws of each EU member state by 18 March 2016. As outlined in previous legislative updates, UCITS V focuses on three main areas namely, (i) depositary eligibility, functions and liability (ii) rules governing remuneration policies which UCITS will be obliged to introduce (these are expected to be similar to the remuneration rules which already apply under AIFMD) and (iii) the harmonisation of minimum administrative sanction across EU member states. There have been delays in the accompanying Level 2 legislation which will provide further detail in relation to these amendments.

As a consequence of the changes being introduced pursuant to UCITS V, UCITS funds will be required to update their documentation, notably their prospectus and depositary agreements/trust deed. In addition, they should arrange for other relevant documents (such as their constitutional documents and KIIDs) to be reviewed in case they contain any provisions which may need to be updated.

(ii) Publication of UCITS Regulations and Feedback Statements

On October 5, 2015 the Central Bank of Ireland ("Central Bank") issued a new set of regulations relating to Irish domiciled UCITS, their management companies and depositaries, titled Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Undertakings for Collective Investment in Transferable Securities) Regulations 2015 ("CBI UCITS Regulations"). The CBI UCITS Regulations will replace the UCITS Notices with effect from November 1, 2015, and consolidate into one location all of the requirements which the Central Bank imposes on UCITS, UCITS management companies and depositaries of UCITS. The CBI UCITS Regulations supplement existing legislative requirements, in particular the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011.

The Central Bank UCITS Guidance Notes are also being replaced with website guidance which "will retain all of the guidance currently located in the Guidance Notes and UCITS Notices". That website guidance is now accessible on the Central Bank's website. New UCITS Application Forms will also shortly be available on the website.

Simultaneously, the Central Bank has also published its Feedback Statements to 2014's CP77 (Consultation on publication of UCITS Rulebook) and CP84 (Consultation on the adoption of ESMA's revised guidelines on ETFs and other UCITS issues). In its Feedback Statement on CP77, the Central Bank says "As stated in CP77, the Central Bank is issuing the final UCITS Rulebook on a statutory basis. Having considered the options available to the Central Bank to achieve this, the Central Bank has decided to publish the final UCITS Rulebook in the form of Central Bank regulations".

Dillon Eustace has published an article on this topic, which will provide further detail, as well as commentary, which can be accessed using this link:

New Central Bank UCITS Regulations.pdf

(iii) Central Bank updates its Q&A on UCITS

The Central Bank published the 6th and 7th edition of its UCITS Questions and Answers ("Q&A") document on 15 July and 5 October 2015 respectively.

The aim of the UCITS Q&A is to outline answers to queries likely to arise in relation to UCITS. It is published in order to assist in limiting uncertainty, but is not relevant to assessing compliance with regulatory requirements.

The 6th edition sees the addition of two new questions;

  • Question ID 1014 which clarifies the position in relation to the object of a ICAV, and
  • Question ID 1015 which details the regulatory considerations around Irish funds seeking to acquire Chinese shares through the Shanghai-Hong Kong Stock Connect infrastructure. (see Central Bank section below for further details)

The 7th edition has taken account of the introduction of the CBI UCITS Regulations, and accordingly the following changes have been made:

  • Questions ID 1007 and 1008 have been deleted as they are no longer relevant;
  • Question ID 1008 has been updated to reference the CBI UCITS Regulations; And
  • Questions ID 1016 onwards are new.

The updated Q&A's is available via the following links:

Central bank update Documents FINAL FULL UCITS QA DOC.pdf

Central bank regulation industry sectors UCITS QA FINAL.pdf

(iv) The European Fund and Asset Management Association ("EFAMA") industry fact sheet on net sales of UCITS

On 21 September 2015, the EFAMA published its latest investment funds industry fact sheet, which provides net sales of UCITS and non UCITS for July 2015.

The main developments for July 2015 are as follows:

  • UCITS experienced a sharp increase in net sales of UCITS which totaled €63 billion compared with net outflows of €17 billion in June;
  • long term UCITS registered net inflows of €39 billion, up from €18 billion in June;
  • money market funds recorded net inflows of €24 billion, compared to €35 billion in June;
  • total non UCITS net sales amounted to €8 billion in July, down from €19 billion in June. This was mainly due to a drop in sales of special funds (these are reserved for institutions investors of €10 billion);
  • net assets of UCITS equated to €9,070 billion at the end of July, representing an increase of 1.8% during the month. Net assets of non UCITS increased by 0.8% to stand at €3,594 billion at the end of July.

The industry fact sheet is available via the following link:


(v) ESMA consults on UCITS Remuneration Guidelines and Directive on Investment AIFMD

On 23 July 2015, ESMA issued a consultation paper (the "Consultation Paper") with respect to the proposed Guidelines on Sound Remuneration Policies under the UCITS V Directive and AIFMD (the "Guidelines").

This Consultation Paper is designed to assist in the development of the Guidelines and details ESMA's formal proposals in this respect. ESMA intends taking its Guidelines on Sound Remuneration Policies under AIFMD (ESMA/2013/232) ("AIFMD Remuneration Guidelines") as the starting point for developing the UCITS V Remuneration Guidelines. In addition, it proposes a specific and focused revision of the AIFMD Remuneration Guidelines which were published on 3 July 2013. The purpose of the revision is to clarify that, in a group context, non-AIFM sectoral prudential supervisors of entities may be permitted to deem certain staff of an AIFM in that group to be identified staff for the purpose of their sectoral remuneration rules.

The Guidelines are designed to ensure the coordinated and consistent application of the remuneration provisions within the EU and provide guidance on issues such as proportionality, governance of remuneration, requirements on risk alignment and disclosure. Once the Guidelines are approved, they will apply to UCITS management companies and national competent authorities.

The key elements outlined in the Guidelines and the Consultation Paper include:

  • Proportionality
  • management companies as part of a group
  • definition of performance fees
  • application of different sectoral rules
  • application of the rules to delegates
  • payment in instruments

The period for feedback on the Consultation Paper and the Guidelines will close on 23 October, 2015. ESMA has indicated that it will aim to finalise and publish the UCITS Remuneration Guidelines and a final report by Q1 2016 ahead of the transposition deadline for UCITS V, being 18 March 2016.

The final report is expected to also include the revision of the AIFMD Remuneration Guidelines as proposed in the consultation paper.

Dillon Eustace has published an article on the above which is available via the following link:

ESMA Consults UCITS Remuneration Guidelines and AIFMDv2.pdf

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