ESMA published a new Q&A document on 1 February 2016 on the application of the UCITS Directive, which has most recently been revised by UCITS V [2016/ESMA/181]. The new Q&A consolidates into a single document all Q&As relating to the UCITS Directive previously issued by ESMA, namely: 

  1. the key investor information document (KIID) for UCITS (2015/ESMA/631);

  2. Q&A on ESMA's guidelines on exchange traded funds (ETFs) and other UCITS issues (ESMA/2015/12);

  3. notification of UCITS and exchange of information between competent authorities (ESMA/2012/428); and

  4. risk measurement and calculation of global exposure and counterparty risk for UCITS (ESMA/2013/1950). 

The Q&A are intended to be continually edited and updated and, as well as replacing the previous four Q&As, the new Q&A includes new questions on additional documents funds need to provide to satisfy the remuneration and depositary requirements of UCITS V, which comes into effect on 18 March 2016. The new questions can be summarised as follows: 

  1. UCITS V requires the KIID to include a prescribed statement in relation to remuneration policy and the prospectus to include some remuneration-related information. An updated KIID must be made available within 35 days of 31 December on an annual basis, while the essential elements of the prospectus must be kept up to date at all times. The question arises therefore as to whether the KIID and prospectus require updating by 18 March 2016 to reflect the new UCITS V requirement. ESMA confirms in its response that it is not necessary to separately update the KIID and prospectus for this reason, but that each can be updated with this information at the next annual KIID update or the next time the prospectus is revised respectively;

  2. similarly, UCITS V requires the annual report to include some remuneration-related information and ESMA confirms that it is not necessary to include this information in any annual report relating to a period ending before 18 March 2016. ESMA also clarifies that in respect of those annual reports relating to periods ending on or after 18 March, but before the manager has completed its first annual performance period, the manager should include the remuneration-related information in the report on a best efforts basis and, to the extent possible, explain the basis for any omission; and

  3. the third question relates to the updating of depositary contracts to conform with UCITS V, which contains provisions which prescribe in law the liability of depositaries. ESMA confirms that, although there is currently no requirement to include liability provisions in depositary contracts, in practice existing contracts will contain liability provisions which will not be consistent with the depositary liability provisions set out in UCITS V with the result that any such liability provisions which conflict with the UCITS V provisions will be void with effect from 18 March 2016. The UCITS V depositary liability provisions will apply instead. The delegated acts required under Article 26b of UCITS V will set out the particulars that need to be included in a depositary contract and UCITS depositary contracts should therefore be amended promptly, in accordance with, and when required by, any transitional arrangements outlined in the delegated acts, to  reflect the liability provisions under UCITS V. 

The Q&A mechanism is a practical convergence tool used to promote common supervisory approaches and practices in the application of UCITS and its implementing measures. ESMA commits to review its Q&As on a regular basis to identify if, in a certain area, there is a need to convert some of the material into ESMA guidelines. The Q&As are aimed at competent authorities, but are also intended to help UCITS managers by providing clarity as to the content of the UCITS rules, rather than creating an extra layer of requirements.