UCITS V is now live. Ireland transposed UCITS V into national law by virtue of The European Union (Undertakings for Collective Investment in Transferable Securities) (Amendment) Regulations 2016.
The Delegated Level 2 Regulation supplementing UCITS V on the obligations of depositaries was adopted on 17 December 2015 and is expected to apply from October 2016.
The European Securities and Markets Authority (ESMA) Guidelines on sound remuneration policies under the UCITS Directive and AIFMD have not yet issued and so we look to the ESMA consultation paper on the ESMA Guidelines for insight. See our detailed analysis of the UCITS Remuneration Provisions here.
The implementing technical standards (ITS) included in ESMA's final report setting out the procedures and forms which National Competent Authorities (NCAs) must use when submitting information to ESMA on penalties and measures under Article 99e(3) of the UCITS Directive await endorsement by the Commission and are of less immediate interest to practitioners as they concern reporting by NCAs to ESMA of penalties and measures imposed for UCITS infringements.
On 1 February 2016, ESMA published a new Q&A document on the application of the UCITS Directive, as most recently revised by UCITS V. This gives some insight on the timing of documentation updates for the remuneration and depositary requirements of UCITS V. See our newsalert here.
By 18 March 2016, UCITS were to have in place UCITS V compliant depositary agreements, remuneration policies and procedures, whistleblowing policies and procedures, as well as prospectus and KIID updates. The ESMA UCITS Q&A has been of assistance in terms of the transition and the deadlines for updating fund documentation to reflect the new requirements (particularly because of the different dates for the application of the UCITS V Directive and the Level 2 measures). Notwithstanding that Q&A, many UCITS and UCITS depositaries were anxious to ensure that depositary agreements correctly reflect the legal position as of 18 March and any necessary disclosures are correctly reflected in prospectus and other documentation (particularly any additional depositary fees). Some updated depositary agreements were not in place by 18 March, particularly where Central Bank of Ireland review is required. While whistleblowing policies can be adopted, the correct approach to the adoption and implementation of remuneration policies and procedures is not yet clear. In the absence of final Guidelines, our view is that UCITS should have adopted remuneration policies and procedures (if practicable) by 18 March even though these may need to be updated. In our view, it would be unlikely that enforcement action would be taken if a policy had not been adopted, given the absence of the Guidelines.