(i) ESMA publishes updated Questions and Answers on the application and implementation of UCITS V

On 1 February 2016, ESMA published an updated Q&A to address certain questions regarding the implementation and application of UCITS V (the "Q&A"). The Q&A consolidates into a single document all previous questions and answers documents issued by ESMA relating to UCITS V. The purpose of the Q&A is to promote common supervisory approaches and practices in the application of UCITS V and its implementing measures.

This is a welcome development as it sheds light on a number of issues around documentation updates and, subject to any local transposing regulations and guidance issued by the Central Bank, will provide more time for UCITS to address the implementation of UCITS V.

The Q&A includes three new questions and answers relating to fund documentation namely Depositary Agreements, Prospectus, KIIDS and the Annual Report. The key observations are set out below.

Depositary Agreements

One of the challenges of updating existing depositary agreements to reflect the new duties and liability of the depositary under UCITS V has been the delay in the implementation of the UCITS V delegated acts, which will set out the minimum particulars that need to be included in the written contract with the depositary. These particulars are outlined in Delegated Regulation 2016/438, which was published in the Official Journal of the EU on 24 March 2016 and shall be effective as of 13 October 2016. For further information relating to Delegated Regulation 2016/438, please see item (vi) below.

UCITS V contains provisions which prescribe the liability of depositaries, to include a strict liability standard in the context of a loss of financial instrument held in custody. If, after 18 March 2016, a depositary agreement contains liability provisions inconsistent with the liability provisions under UCITS V, ESMA notes that these provisions will be void and the UCITS V liability provisions will apply instead. The ESMA Q&A goes on to state that the liability provisions in existing depositary agreements should be amended to reflect the UCITS V depositary liability provisions when those depositary contracts are revised to comply with the UCITS V delegated acts.

Accordingly, there wasn't a requirement to have an updated depositary agreement in place by 18 March, 2016. Nonetheless, in order to provide for contractual certainty, relevant parties may still consider updating depositary agreements as soon as practicable to reflect the liability provisions of UCITS V. Consequently, certain depositaries strived for the 18 March 2016 deadline.

Noting ESMA's advices as outlined in the recent Q&A, the Central Bank has clarified its requirements for updating existing depositary agreements. The Central Bank will not carry out a detailed review of any amendments to depositary agreements to reflect UCITS V and will facilitate a fast track procedure whereby amendments can be filed, subject to receipt of a written certification from the depositary in a format prescribed by the Central Bank.


UCITS V requires the prospectus of a UCITS to include either details of its up-to-date remuneration policy or a summary of the remuneration policy and a statement to the effect that the details of the policy are available by means of a website. Certain disclosures are also required in relation to the depositary.

ESMA has confirmed that, subject to national law requirements, there wasn't a requirement to issue a revised prospectus by 18 March 2016, to take into account the UCITS V amendments. A UCITS may update its prospectus at the next occasion it is revised for another purpose or in any event by 18 March 2017, at the latest. It should be noted that the European Union (Undertakings for Collective Investment in Transferable Securities) (Amendment) Regulations 2016, transposing the UCITS V Directive into Irish law, were made on 21 March 2016 and became effective on that date – please see item (iii) below for further details.

In the meantime, stakeholders will also need to consider the prospectus disclosures required under Irish domestic legislation, such as the Investor Money Regulations and the Central Bank UCITS Regulations 2015. It may be that prospectus updates required to address the foregoing could automatically trigger a UCITS V update, which would have the unintended consequence of removing the flexibility offered by ESMA. The Central Bank has advised that it is a matter for the parties to the UCITS to consider if and when the prospectus should be updated. An updated depositary agreement may be submitted for noting independently of such a prospectus update. Technical amendments to the prospectus arising from the Central Bank UCITS Regulations can be incorporated when the prospectus is next updated.


UCITS are required to complete an annual update of its existing KIIDs. The deadline for the 2016 annual update was 19 February, 2016. UCITS V requires the KIID to include an additional statement in relation to the UCITS' remuneration policy.

ESMA clarified that, subject to national law requirements, there wasn't a requirement to carry out a further KIID update by 18 March, 2016 to take into account the UCITS V amendments. A UCITS is permitted to update the KIID with the remuneration disclosure at the next annual update after 18 March 2016, or on the first occasion after 18 March 2016, on which the KIID is revised or replaced for another purpose (if the information is available at that point in time).

However, in the meantime, UCITS should make the remuneration arrangements available on a "relevant website" as soon as it becomes available.

Annual Report

UCITS V requires the UCITS annual report to include certain remuneration-related information, to include the following:

  1. the total amount of remuneration for the financial year, split into fixed and variable remuneration paid by the management company and by the investment company to its staff, and the number of beneficiaries, and where relevant, any amount paid directly by the UCITS itself, including any performance fee;
  1. the aggregate amount of remuneration broken down by categories of employees or other members of staff; and
  1. a description of how the remuneration and the benefits have been calculated;

ESMA has clarified that there is no requirement to include the remunerated-related information in any annual report relating to a period that ended before 18 March 2016. For annual reports relating to periods that end on or after 18 March 2016, but before the UCITS has completed its first annual performance period in which it has to comply with the UCITS V remuneration rules, the UCITS should include the remuneration-related information in the report on a "best efforts" basis and, to the extent possible, explain the basis for any omission.

A copy of the Q&A is available at the following link:

(ii) Central Bank Letter to the IFIA on UCITS V

Following on from a letter issued by the Central Bank to depositaries on 8 February 2016 in relation to a proposed fast track filing procedure for documentation updates on foot of UCITS V, the IFIA wrote to the Central Bank on 2 March 2016 seeking additional clarification in respect of those depositaries who could not avail of the proposed procedure as outlined by the Central Bank. On 4 March 2016, the Central Bank responded and confirmed the following position regarding the update of documentation to reflect UCITS V:

Depositary Agreement Update

Until Level 2 measures become effective (i.e. 13 October 2016), the Central Bank will facilitate a fast-track procedure for updates to depositary agreements subject to depositary certification being received as outlined in the Central Bank letter to depositaries issued on 8 February 2016. The Central Bank does not consider it appropriate to apply the QIAIF style self-certification regime to UCITS.

Again until 13 October 2016, the Central Bank will facilitate a 'hybrid' certification in circumstances where some amendments to a depositary agreement do not fall within the depositary certification, however, the depositary agreement being submitted should clearly highlight those amendments requiring review. The depositary certification will be required in relation to all other amendments.

The Central Bank noted comments relating to the six month limit on depositary certification being overly restrictive and the alternative proposal of using text approved in the context of RIAIF filings. In such circumstances, depositaries should contact the Central Bank in advance to confirm if the particular wording in question is appropriate in the context of a UCITS, and if so, could fall within the depositary certification.

Prospectus Update

Regulation 92 of the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 (the "Regulations") provides that the essential elements of a prospectus shall be kept up to date. It is a matter for the parties to the UCITS to consider if, and when, the prospectus should be updated. An updated depositary agreement may be submitted for noting independently of such prospectus update. Any update to the prospectus will trigger an update to include amendments required by the Regulations.

(iii) UCITS V Transposed into Irish law

On 21 March 2016 the European Union (Undertakings for Collective Investment in Transferable Securities) (Amendment) Regulations 2016 (the "Regulations") were made, transposing the UCITS V Directive into Irish law and became effective on that date.

Following on from ESMA issuing its updated UCITS Q&A (see (i) above), this is a welcome development which provides further clarity and certainty in relation to the UCITS V regime in Ireland.

The publication of the Regulations also facilitates the Central Bank noting fund documentation which has been updated for the purposes of UCITS V.

The publication of the Regulations adds to Ireland's strong record in the timely transposition of EU financial services legislation and in contributing to the development of EU financial services policy which has helped underpin the development of Ireland's international financial services sector.

A copy of the Regulations is available at the following link:

(iv) Central Bank update UCITS application forms

In January and February 2016 the Central Bank updated certain forms relating to UCITS applications, namely the sections dealing with Information, Prospectus and Memorandum and Articles of Association.

Following the transposition of UCITS V into Irish law (see (iii) above), the Central Bank again updated the forms relating to UCITS applications on 24 March 2016, specifically the Section 1,2,3 (Memorandum and Articles of Association, Instrument of Incorporation and Deed of Constitution), 4, 5 and 10 forms.

A full set of the updated forms relating to UCITS applications are available at the link below:

(v) The Central Bank updates its Q&A on UCITS

On 24 March 2016 the Central Bank published the twelfth edition of its UCITS Questions and Answers document (the "Q&A"). 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 latest edition of the Q&A builds upon the previous edition, as follows:

  • Questions ID1060 and ID1061 have been added in relation to the Central Bank's updated guidance entitled "Umbrella funds - cash accounts holding subscription, redemption and dividend monies". Question ID1060 sets out the circumstances where it may not be possible to attribute monies in the umbrella cash account to individual sub-funds and Question ID1061 provides that monies cannot be paid out of the umbrella cash accounts to pay parties other than investors and sub-funds.
  • Question ID1062 in relation to the Securities Financing Transactions Regulation ("SFTR") has also been added, addressing the transitional arrangement available under Article 33(2)(c) of Regulation (EU) 2015/2365 and whether this transitional arrangement can apply to sub-funds established after 12 January 2016. The Central Bank strongly recommends that any new sub-fund include in its prospectus the SFTR required disclosure on the use of securities financing transactions ("SFTs") and total return swaps. SFTs and total return swaps are used at sub-fund level rather than umbrella level. Accordingly, the SFTR disclosures are required at sub-fund level. Should the European Commission (the "Commission") suggest a different approach, this position will be revisited by the Central Bank and, if necessary, revised to align it with that approach.

The latest Q&A can be found at the following location:

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