UCITS V Implementation
- Articles and memoranda
- Posted 09.02.2016
A. The situation
The UCITS V Directive will be implemented shortly in most EU Member States by the deadline of 18 March 2016. The UCITS V Directive (Level 1) is supplemented by:
- various European texts, which are not in final form as of today:
- a Delegated Regulation of the EU Commission (Level 2) which will contain provisions on (i) the depositary agreement, (ii) the insolvency protection of UCITS assets when delegating the safekeeping function, and (iii) the independence requirement between the management company and the depositary of a UCITS. It is currently expected that the Level 2 text will become applicable around September 2016.
- Technical standards on penalties and measures. ESMA published its final report on the draft technical standards on 18 September 2015.
- ESMA Guidelines on remuneration (Level 3).
- a CSSF Circular on depositaries: in anticipation of UCITS V, the CSSF published back in 2014, Circular CSSF 14/587 which will become applicable on 18 March 2016.
B. Impact on UCITS documentation
On 1 February 2016 ESMA published a revised and consolidated Q&A ("ESMA Q&A") relating to the application of the UCITS Directive. A new question 1 relates to the update of the legal documentation of UCITS (i.e. the prospectus, the KIID and the annual report) for remuneration-related disclosure and the update of the depositary agreement.
On 28 January 2016 the CSSF declared during a conference that the CSSF would align the timing in respect of updates to the legal documentation for all UCITS V matters which are not remuneration-related to the timing set out in the ESMA Q&A.
As a result, timelines for the update of the legal documentation and depositary agreement of a Luxembourg UCITS can be summarised as follows:
| Documents | Timing |
| Prospectus update | The prospectus does not need to be updated on 18 March 2016. Updates have to be undertaken on the first occasion the prospectus is updated after 18 March 2016 (but not later than 18 March 2017). |
| KIID update | The KIID does not need to be updated on 18 March 2016. Updates have to be undertaken the first time an element of the KIID is updated (but not later than the next annual update after 18 March 2016, i.e. February 2017). |
| Annual report disclosure | There is no need to include the remuneration-related information in the annual report relating to a financial year that ended before 18 March 2016. For the annual report relating to a financial year that ends on or after 18 March 2016, but before the UCITS management company has completed its first annual performance period in which it has to comply with Articles 14a and 14b of Level 1, the remuneration-related information in the annual report should be inserted on a best efforts basis and to the extent possible, explaining the basis for any omission. |
| UCITS V-compliant depositary agreement | The UCITS V Level 1 provisions and especially the new depositary liability regime are applicable as from 18 March 2016. In Luxembourg, CSSF Circular 14/587 becoming applicable as from 18 March 2016 and preempting most of the Level 2 requirements applicable to depositaries and depositary agreements, precedes the entry into force of Level 2 at European level and depositary agreements should be updated on or as soon as possible after 18 March 2016. |
Final points to note:
UCITS management companies or self-managed SICAV have to implement the remuneration policy principles required by Level 1 and already make available information about their remuneration policy on a website as soon as possible after 18 March 2016.
The CSSF confirmed that it will put in place a fast track procedure for the efficient processing of prospectuses of UCITS which have been amended to deal only with UCITS V updates.
In relation to the foregoing, the CSSF shortly intends to write to all UCITS Management Companies and self-managed UCITS to ask them to communicate their intention regarding the implementation of a remuneration policy and the update of the UCITS'documentation. A CSSF press release on the subject is also expected to be published soon.