The European Commission has today published its much anticipated draft Level 2 Regulation for UCITS V. Whilst an unofficial version has been quite widely available in the industry for some time, the official version has been delayed. This has caused considerable concern in the industry given that Member States need to implement the UCITS V Directive by 18 March 2018 and the detail provided by Level 2 is key to ensuring effective compliance.

Level 2 regulation timeline

The Level 2 Regulation will now be reviewed by the European Parliament and once agreed will come into force 20 days after being published in the Official Journal. Following the publication there will be a further six month period before Level 2 comes into force. Based on this timeline, Level 2 may not be implemented until Q3 next year.

Next steps

As expected, Level 2 is similar in approach to the AIFMD Level 2 but there are some important differences. The extent to which the official Level 2 differs from the unofficial version will need to be worked through over the coming weeks, particularly to establish what impact, if any, Level 2 will have on depositary agreement templates which are already the subject of negotiations between managers and depositaries.