EU: The Undertakings For Collective Investment In Transferable Securities Directives

Question 1

As a result of the UK’s obligations under the Undertakings for Collective Investment In Transferable Securities (UCITS) directive - what is the recognition given by FCA?

Answer 1

1. This is for certain collective investment schemes constituted in a member state other than the UK
2. A collective investment scheme that complies with its conditions and is authorised in any EU member state can be marketed without further authorisation in any other EU member state.
3. It is only subject to local marketing laws.

Question 2

FCA is responsible for recognising a scheme on the UCITS. The original directive (UCITS I) was amended by UCITS III and is split into two parts. What are these?

PART 1

Answer 2

1. Management Directive

A. Increases the scope of management companies activities that can be passported

B. It now includes discretionary management, safekeeping and fund administration.

C. Aims to protect investors by ensuring management companies are suitably capitalised.

D. Ensure management companies have appropriate measures in place for risk management and reporting.

E. Introduced the simplified prospectus - document to provide investors with a shortened version of the current prospectus while introducing additional features like performance figures

F. Simplified prospectus was replaced by the KID in UCITS IV

Question 3

FCA is responsible for recognising a scheme on the UCITS. The original directive (UCITS I) was amended by UCITS III and is split into two parts. What are these?

PART 2

Answer 3

2. Product Directive

A. Expands the range and types of financial instruments that are permitted within UCITS funds.

B. Allows the use of derivatives for both investment and for risk reduction purposes.

C. Increases the investment limits for particular types of financial instruments.

D. Put in place a combined investment limit on all of a fund’s exposure to any one group of companies

Question 4

UCITS IV was introduced in July 2011. What are the six main changes introduced in this?

Answer 4

1. A passport for management companies - subject to Prudential and conduct of business measures
2. Procedure for cross border fund mergers
3. Introduction of master feeder structures to permit asset pooling.
4. Replacement of the simplified prospectus with the Key Investor Information Document. (KIID)
5. Notification procedure for cross border marketing.
6. Strengthening of supervisory coorporation.

Question 5

What did UCITS V specifically enhance?

Answer 5

1. Rules on the responsibilities of depositories
2. Introduced remuneration policy requirements for UCITS fund managers. (Implemented into UK law in March 2016)

Question 6

After the transition period (UK moving out of the EU) - could the UCITS funds authorised in the UK be passported automatically into the EU?

Answer 6

1. No
2. The Collective Investment Schemes (Amendment etc) (EU exit) Regulation 2019 - introduced the designation of a “UK UCITS” for funds authorised in the UK that formally fell under the EU’s UCITS regime