The UCITS (Undertakings for Collective Investment in Transferable Securities) Directive takes up most of the current legislative framework of UCITS IV & AIFM Directives. The new provisions focus on the fund depositary, the remuneration policy and the applicable regime for sanctions.
The UCITS Directive aims at strengthening asset protection, transparency and information to investors.
The European Commission has adopted two regulations dated 12 July 2018, directly applicable from 1st April 2020. These regulations, published in the OJEU of 30th October 2018, amend the obligations of depositaries on the safekeeping of financial instruments held by alternative investment funds and UCITS:
- delegated regulation 2018/1618 amending delegated regulation 231/2013 (AIF),
- delegated regulation 2018/1619 amending delegated regulation 2016/438 (UCITS).
In particular, the following are specified:
- the regime for the segregation of assets in the sub-custody chain,
- the protection of assets in the event of the insolvency of the depositary or sub-custodian.
- Eligibility of depositaries is limited to Credit institutions and MiFID regulated companies. The depositary has to be located in the fund domicile (no depositary passport).
- Strong liability regime for the depositary, which is liable to the UCITS and its unit holders for the loss related to the assets held in custody, unless the depositary can prove that the loss has arisen as a result of an external event beyond its reasonable control.
- Increased cash monitoring obligations, similar to AIFMD provisions.
- Reinforced obligations for the selection of the depositary.
- Transparent management companies remuneration policies (to be provided in the KIID, the prospectus and in the annual reports).
- Harmonised European regulation for sanctions.