1 Legal & Regulatory

1.1 UCITS Update

Ireland

On 1 October 2021, the Central Bank of Ireland ("Central Bank") published the 34th edition of its UCITS Q&A which include new Q&As on the implementation of the European Securities and Markets Authority ("ESMA") guidelines on marketing communications under the Regulation on cross-border distribution of funds. The new UCITS Q&As, ID 1102 and ID 1103, relate to the implementation of paragraph 8 and 47 respectively of those guidelines.

On 29 October 2021, the Central Bank issued the 35th edition of its UCITS Q&A, which includes a new Q&A, ID 1104 setting out its expectations on filing key investor information documents ("KIIDs") for UCITS which implement ESMA's Performance Fee Guidelines with effect from 31 December 2021.

On 20 December 2021, the Central Bank issued the 36th edition of its UCITS Q&A, which includes two new Q&As:

  • ID 1105 sets out the Central Bank's expectations that multi-manager UCITS will comply with ESMA's July 2021 Q&A on performance fees in multi-manager UCITS. It confirms that existing multi-manager UCITS must bring their performance fee methodologies into compliance by 1 January 2023.
  • ID 1106 addresses the establishment of new multi-manager UCITS utilising performance fees and notes that those UCITS must be established in compliance with ESMA's July 2021 Q&A on performance fees in multi-manager UCITS.

Luxembourg

On 3 November 2021, the Commission de Surveillance du Secteur Financier ("CSSF") published an updated FAQ on the law of 17 December 2010 relating to undertakings for collective investment with six new FAQs on the extent to which UCITS are allowed to hold ancillary liquid assets and to clarify the UCITS diversification rules. It clarifies, among others, that:

  • A UCITS must limit ancillary liquid assets (as used in article 41(2) (b) of the law of 17 December 2010 relating to undertakings for collective investment ("2010 Law") to bank deposits at sight, such as cash held in current accounts with a bank and accessible at any time.
  • Ancillary liquid assets that may be held are limited to 20% of the net assets of a UCITS. This limit may be temporarily breached when required due to exceptionally unfavourable market conditions or where a breach is justified having regard to the interests of the investors.
  • Bank deposits, money market instruments and money market funds that meet the criteria of article 41(1) of the 2010 Law cannot be considered 'ancillary liquid assets' under article 41(2) (b) of the 2010 Law.
  • A UCITS is only permitted to invest in bank deposits, money market instruments or other eligible assets listed under article 41(1) of the 2010 Law if this is clearly indicated in its investment policy.
  • Margin accounts do not qualify as bank deposits under article 41(1)(f) of the 2010 Law or as ancillary liquid assets under article 41(2)(b) of the 2010 Law.

To read the full article click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.