Ireland: A Guide To UCITS In Ireland

Undertakings for Collective Investment in Transferable Securities, commonly referred to as "UCITS", are collective investment schemes established and authorised under a harmonised European Union (EU) legal framework under which a UCITS established and authorised in one EU Member State can be sold cross border into other EU Member States without a requirement for an additional authorisation. This so-called "European passport" is central to the UCITS product and enables fund promoters to create a single product for the entire EU rather than having to establish an investment fund product on a jurisdiction by jurisdiction basis.

Originally introduced over twenty five years ago, UCITS have become the gold standard EU investment fund product, recognised not only by the European financial services community but also further afield with many non-EU jurisdictions accepting UCITS as suitable for retail sale into their domestic markets. Whilst sold across the full spectrum of investor types, UCITS have been designed principally for the retail market as open-ended diversified, liquid products with their parameters - permitted asset classes and investment and borrowing restrictions - being enshrined in EU law.

UCITS is not a product which has stood still. It has continued to evolve, with a significant broadening of permitted asset classes and more robust governance requirements being introduced in 2002 and clarified in 2007. More recently, a series of additional changes have been implemented under the UCITS IV Directive in order to further simplify the European passport process for UCITS, introduce master/feeder type structures, create a framework for cross-border fund mergers, replace the simplified prospectus and introduce further measures in relation to the UCITS management company passport. Next year we will see the arrival of UCITS V, and a UCITS VI proposal document has already been circulated.

Underpinning UCITS, and the proposed future evolutions of the product, has been a common harmonised approach with involvement from securities regulators and industry participants across the European Union at each stage of the process. Whilst at times the pace of change may be too fast for some and too slow for others, to date UCITS has generally achieved the right balance.

Ireland has become one of the leading EU "exporting" jurisdictions for UCITS having been pro-active in implementing the UCITS regime into domestic legislation in 1989, introducing a sensible investment funds focused fiscal regime and clear but prudential process for the authorisation and supervision of UCITS and relevant service providers.

The result has been that promoters from all across the world have and continue to use Ireland as a domicile of choice for UCITS products seeking to access the European market place and, in many cases, further afield. End 2014 figures from EFAMA indicate that the AuM of Irish domiciled UCITS exceed Euro 1.27 trillion.

Dillon Eustace has been and will continue to be in the vanguard of all these UCITS developments, playing a leadership role in UCITS evolution, domestically and internationally.

At the time of issuing this Guide we await UCITS V implementation, finalisation of the Central Bank‟s response to CP 86, as well as possible conceptual changes to the UCITS Notices. We do expect, therefore, to be updating this Guide both soon and regularly.

We hope that this Guide assists you. It is primarily designed to bring practical and regulatory and legislative provisions together in one document, mainly to make life a little easier.

1. Legislative Basis for UCITS in Ireland

The legislative basis for UCITS in Ireland is European law, implemented domestically and expanded upon by UCITS related notices (the "UCITS Notices") issued by the Central Bank of Ireland (the "Central Bank") and with further clarification provided for in a series of Central Bank guidance notes ("Guidance Notes"). Each element – European and domestic legislation and the UCITS Notices and Guidance Notes – has evolved and been amended over time.

1.1 European Legislation

The original UCITS Directive (Directive 85/611/EC) of 1985 established the UCITS product as a pan-European collective investment scheme which benefited from an EU-wide product passport based on the concept of mutual recognition of Home State authorisation, setting down the legal forms which UCITS could take, their permitted investment and borrowing rules, liquidity requirements, prospectus disclosure rules and rules relating to annual and semi-annual reporting as well as rules relating to the role and duties of UCITS custodians/depositaries and their management companies.

Whilst amended in 1988, 1995 and in 2000, no substantive change to the UCITS product was made until 2002, with the introduction of the UCITS Management Company Directive (Directive 2001/107/EC) and the UCITS Product Directive (Directive 2001/108/EC). The Management Company and Product Directives are referred to collectively as "UCITS III". UCITS III represented a major overhaul of UCITS in terms of what they could invest in, how they could be offered and sold and how they were to be managed.

Given the experience of the original UCITS regime and an often inconsistent, as between EU Member States, application of its terms, the introduction of UCITS III was followed by the creation of CESR, the Committee of European Securities Regulators, (now known as the European Securities and Markets Authority ("ESMA")), which was requested to advise on the interpretation of terms used within UCITS III with the aim of achieving a common agreed position on its interpretation and application. Following a series of consultations, CESR issued its final advices in January, 2006, followed in March, 2007 by a European Commission implementing Directive (Directive 2007/16/EC), referred to as the "Eligible Assets Directive", which was in turn accompanied by CESR guidelines concerning UCITS eligible assets.


 In June 2009, Directive 2009/65/EC (the "UCITS IV Directive") was adopted. The UCITS IV Directive repealed all prior UCITS Directives and successive amendments thereto (with the exception of the Eligible Assets Directive). The UCITS IV Directive and its accompanying Level 2 measures are supplemented by a number of Level 3 measures, (together, "UCITS IV"), which are listed below.

(i) Level 2 measures:

  • Commission Directive 2010/43/EU (organisational requirements, conflicts of interest, conduct of business, risk management and content of the agreement between a depositary and a management company)
  • Commission Directive 2010/44/EU (fund mergers, master-feeder structures and notification procedure)
  • Commission Regulation (EU) No 583/2010 (key investor information and conditions to be met when providing key investor information or the prospectus in a durable medium other than paper or by means of a website)
  • Commission Regulation (EU) No 584/2010 (form and content of the standard notification letter and UCITS attestation, the use of electronic communication between competent authorities for the purpose of notification, and procedures for on-the-spot verifications and investigations and the exchange of information between competent authorities)

(ii) Level 3 measures:

  • ESMA‟s Guidelines on a common definition of European money market funds (ref: CESR/10-049)
  • ESMA‟s Guidelines on the methodology for the calculation of the synthetic risk and reward indicator in the Key Investor Information Document (ref: CESR/10-673)
  • ESMA‟s Guidelines on the methodology for calculation of the ongoing charges figure in the Key Investor Information Document (ref: CESR/10-674)
  • ESMA‟s Guidelines on Risk Measurement and the Calculation of Global Exposure and Counterparty Risk for UCITS (ref: CESR/10-788)
  • Selection and presentation of performance scenarios in the Key Investor Information document (KII) for structured UCITS (ref: CESR/10-1318)
  • Transition from the Simplified Prospectus to the Key Investor Information document (ref: CESR/10-1319)
  • ESMA‟s guide to clear language and layout for the Key Investor Information document (ref: CESR/10-1320)
  • ESMA‟s template for the Key Investor Information document (ref: CESR/10-1321)
  • ESMA‟s Guidelines on ETFs and other UCITS issues (including new requirements in relation to index-tracking UCITS, UCITS ETFs, efficient portfolio management techniques, financial derivative instruments, collateral requirements and financial indices)
  • ESMA "Questions and Answers" paper in relation to its "Guidelines on ETFs and other UCITS issues".


Adopted on September 17, 2014, the most recent piece of UCITS legislation is Directive 2014/91/EU ("UCITS V") which EU Member States are required to transpose into their national laws by March 18, 2016. The principal aim of UCITS V is to increase the level of protection employed by UCITS investors by introducing new requirements in relation to remuneration, regulatory sanctions and depositaries.

Further detail in relation to UCITS V is set out in Chapter 21.

1.4 Irish Legislation

The 1985 UCITS Directive (as amended) was implemented into domestic Irish law by the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations, 1989 (the "1989 UCITS Regulations").

The 1989 UCITS Regulations were amended in 1996, 1999 and in 2003 and were then revoked and replaced, in the context of domestic Irish implementation of UCITS III, by the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations (S.I. No. 212/2003) (as amended by S.I. No. 213 of 2003) (the "2003 UCITS Regulations").

The 2003 Regulations were subsequently amended by S.I. No. 497/2003, by the Central Bank and Financial Services Authority Act, 2004 (introduction of a single regulator for financial services in Ireland), by the Investment Funds, Companies and Miscellaneous Provisions Act, 2005 (introduction of segregated liability for umbrella investment companies) and by S.I. No. 832/2007 (implementation of the Eligible Assets Directive).

On June 29, 2011, the Irish Minister for Finance signed into law the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 (which we refer to in this Guide as the "UCITS Regulations"), which transpose the UCITS IV Directive into Irish law and consolidate all prior UCITS legislation.

New legislation will be required to be adopted in Ireland by March 18, 2016 in order to transpose UCITS V into Irish law.

1.5 UCITS Notices

The Central Bank has issued a specific set of UCITS Notices which explain and clarify various aspects of the UCITS Regulations and which set down conditions not contained within the UCITS Regulations with which Irish UCITS are required to conform. The power to set down such conditions is found in Regulation 123 of the UCITS Regulations.

Revised UCITS Notices and Guidance Notes to reflect UCITS IV were issued in conjunction with the signing of the 2011 UCITS Regulations, completing the regulatory regime for UCITS IV in Ireland, and they have been subsequently updated to reflect various matters, including ESMA‟s "Guidelines on ETFs and other UCITS issues".

The UCITS Notices deal with:

  • Information and document requirements of the Central Bank in support of an application for authorisation as a UCITS – UCITS 1.
  • Supervisory and reporting requirements and conditions for UCITS management companies, UCITS self-managed investment companies and administration companies authorised by the Central Bank – UCITS 2.
  • Trustees – eligibility criteria – UCITS 3.
  • Trustees – duties, supervisory and reporting requirements and conditions – UCITS 4.
  • Supervisory and reporting requirements and conditions for UCITS authorised by the Central Bank of Ireland – UCITS 5.
  • Prospectus – UCITS 6.
  • Information to be included in the monthly returns – UCITS 7.
  • Publication of annual and half-yearly reports – UCITS 8.
  • Eligible assets and investment restrictions – UCITS 9.
  • Financial derivative instruments – UCITS 10.
  • Borrowing powers – UCITS 11.
  • Techniques and instruments including Repurchase/Reverse Repurchase Agreements and Securities Lending, for the purposes of efficient portfolio management – UCITS 12.
  • Umbrella UCITS – UCITS 13.
  • Dealings by promoter, manager, trustee, investment adviser and group companies – UCITS 14.
  • Cross – border notification of UCITS – UCITS 15.
  • Code of conduct in relation to collective portfolio management – UCITS 16.
  • Money Market Funds – UCITS 17.
  • Master-Feed Structures – UCITS 18.
  • Key Investor Information Document – UCITS 19.
  • Exchange Traded Funds – UCITS 20.
  • Financial Indices – UCITS 21.
  • Capital compliance requirement - guidance and regulatory report – Annex I.
  • Requirements on outsourcing of administration activities in relation to CIS – Annex II.

Detail from specific UCITS Notices is provided throughout this Guide.

1.6 Central Bank Guidance Notes, Policy Documents and Q&A

The Central Bank has also issued a series of Guidance Notes to provide further clarification on its approach on particular issues. It has also issued a number of specific policy documents of relevance to UCITS.

Certain Guidance Notes deal with UCITS promoters, permitted markets for retail schemes, multi-adviser schemes, Money Market Funds, valuation rules, etc., while others deal with UCITS investing in other collective investment schemes, UCITS investing in Financial Derivative Instruments, the Key Investor Information Document, UCITS investing in Financial Indices and UCITS prospectus disclosures for Structured Products and Complex Trading Strategies.

Originally certain of those Guidance Notes applied not only to UCITS but also to regulate Irish Non-UCITS schemes. Although the references to Irish Non-UCITS schemes remain in places, those Guidance Notes no longer apply to Non-UCITS as they are now dealt with by the Central Bank‟s AIF Rulebook.

Most recently, the Central Bank has commenced the practice of issuing and updating a UCITS Q&A document, available on its website, dealing with commonly asked queries.

1.7 Central Bank UCITS Regulations

As of the date of issuing this Guide, our understanding is that the Central Bank proposes to replace its current UCITS Notices and Guidance Notes with a set of Central Bank UCITS Regulations to be issued by it pursuant to Section 48(1) of the Central Bank (Supervision and Enforcement) Act, 2013 (the "2013 Act"). Previously, as part of its Consultation Paper 77, it had indicated that it was going to replace the UCITS Notices and Guidance Notes with a UCITS Rulebook, similar in broad design to the AIF Rulebook which it has issued in relation to regulated Irish domiciled alternative investment funds.

We do not have any further update on this proposal and would intend updating this Guide if and when such Regulations issue.

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