For that purpose, the recast UCITS Directive ("UCITS IV") introduces five key modifications in the UCITS regulatory landscape, three of which offer fund managers the opportunity to undertake a strategic reflection on their product range and management structure, while the other two are compulsory measures to enhance speed-to-market and investor protection.
UCITS IV addresses the proliferation of UCITS of a sub-optimal size and the lack of organisational flexibility to achieve a global decrease of the cost for operating funds in the EU and provides fund promoters with a helpful toolbox.
UCITS IV introduces a framework for amalgamating assets, either through the cross-border merger of UCITS irrespective of their legal form or by allowing master-feeder structures. However, some issues arise which need to be evaluated on a case-by-case basis, in particular regarding tax impacts at UCITS' and investors' levels.
Main challenges:
UCITS IV introduces a framework for amalgamating assets through the cross-border merger of UCITS irrespective of their legal form or by allowing master-feeder structures. However, some issues have arisen which need to be evaluated on a case-by-case basis in particular as regards tax impacts at UCITS' and investors' levels.
Today, the UCITS IV management company passport permits the remote establishment and cross border management of UCITS funds and the centralisation of their asset management, administration and risk management operations.
As from March 2019 because of the Brexit, this passport will no longer be valid in relation to the UK. As such, it will no longer be possible for UK Management Companies to act as management companies for UCITS funds. Similarly, the same consequences could apply to EU based UCITS Management Companies, whom would be unable to act as management company for UK funds equivalent to UCITS.
Main challenges for cross-border promoters of UCITS:
UCITS IV rationalise the notification process and definitely replaces the simplified prospectus since July 2012.
The notification process is now a regulator-to-regulator process. The UCITS’ Home Member State regulator has only 10 working days to review a standardised (in form and content) notification file and transmit it to the Host Member State, thereby triggering the immediate right to start marketing activities in that country.
For UK UCITS funds sold elsewhere in the EU and for EU UCITS funds not in the UK, this modification process is likely to not work anymore as from March 2019 due to Brexit.
Main challenges:
The KIID is a short document containing Key Investor Information, the content, form and presentation which is fully harmonised so as to facilitate its understanding and direct comparisons between UCITS.
Challenges:
UCITS V introduced new requirements for the depository and remuneration policies and is creating a new sanctions regime.
Directive 2014/91/EU of the European Parliament and of the council of 23 July 2014 (UCITS V Directive) amended further Directive 2009/65/EC. The changes adopted are meant to address perceived failings, better protect investors and align UCITS funds with the measures instituted for alternative investment funds under the AIFMD.
UCITS V has brought clarifications with respect to the UCITS Depositary legal framework, in line with the requirements specified for alternative investment funds in the AIFMD. The proposal also harmonises remuneration policies of UCITS or at management company level and sets a common regime for sanctions to ensure that investor protection is enforced in the same way in all Member States.
Depositary UCITS V key elements:
With the help of our UCITS Team composed of highly qualified and experienced professionals in Luxembourg and our UCITS network throughout the Europe, PwC offers:
Xavier Balthazar
Advisory Partner, Asset Management, Regulatory & Compliance, PwC Luxembourg
Tel: +352 49 48 48 3299