On 23 October 2015, HM Treasury published a Consultation on amendments to the UCITS Directive (UCITS V) (the “Consultation”). UCITS V will introduce a number of targeted reforms to the UCITS Directive with the objective of updating the legislative framework in order to ensure the safeguarding of UCITS fund operations across the EU, to lower risk surrounding the management of UCITS funds, and to build consumer protection and trust in the market. Three main areas of UCITS fund legislation will be affected as a result of UCITS V, which are namely: (i) depositaries, (ii) remuneration principles, and (iii) national sanction regimes. The purpose of the Consultation is to consult on the legislative changes in the above mentioned areas. The Consultation will be accepting stakeholders’ views on these by midnight on 17 December 2015.

The proposals in the Consultation apply particularly to fund managers who currently operate UCITS funds or may do so in future. This includes both UK-authorised firms and those authorised and regulated in other member states.

The Consultation discusses a number of changes and additions to the Financial Services and Markets Act (“FSMA”) and relevant secondary legislation, which HM Treasury will be responsible for. Specifically, HM Treasury will be implementing the following provisions of the Directive:

  • on UCITS depositaries, HM Treasury will implement: provisions relating to liability in the case of losses of financial instruments in custody, or other losses caused by a depositary’s negligent or intentional failure to fulfil its obligations;
  • on sanctions, HM Treasury will implement: provisions in relation to the reporting and sharing of information between competent authorities, which will establish specific procedures for the reporting of infringements of the Directive, and will provide information regarding the imposition of sanctions to the European Securities and Markets Authority (“ESMA”);
  • setting out the limited circumstances in which the FCA may refuse to act on a request for information from the competent authority of another EEA State concerning criminal investigations or proceeding;
  • the amendments and modifications to existing legislation to ensure that reporting of sanctions is carried out in a way which handles information appropriately and protects employees of management companies and depositaries;
  • amendments to the FSMA to ensure that the FCA’s existing administrative sanctions can be applied in relation to infringements of domestic legislation transposing the Directive; and
  • provision is also made for the reporting and publication of sanctions measures for infringements of the Directive.

To view the full Consultation from 23 October 2015 please follow this link.

The Government is welcoming views from all stakeholders on the issues raised in the Consultation. Firms should respond by midnight on 17 December 2015. Responses to the Consultation should be sent to:

UCITS V Directive consultation
Assets, Savings and Consumers
HM Treasury
1 Horse Guards Road

Tel: 0207 270 1983

Email: UCITSV.Consultation@HMTreasury.gsi.gov.uk

Should you require any assistance or advice in relation to UCITS V implementation, Cleveland & Co, your external in-house counsel, has extensive expertise in the area and can help guide you through a seamless process. For more information, get in touch with us at: lfair@cleveland-co.com.