On October 12th 2016, the European Securities and Markets Authority (“ESMA”) updated its Questions and Answers on the application of the UCITS Directive (“Q&A”).

The updated Q&A now includes four new questions and answers on:

1. Regulated markets in Member States under Directive 2009/65/EC of 13 July 2009 relating to undertakings for collective investment in transferable securities (the “UCITS Directive”).

Any multilateral trading facility (“MTF”) operated in the European Union will be considered as a regulated market within the scope of the UCITS framework as long as the MTF meets the requirements set out in article 50(1)(b) of the UCITS Directive (operates regularly and is recognised and open to the public). Instruments in which a UCITS invests that are traded on such a MTF on behalf of a UCITS must comply with the Directive 2007/16/EC of 19 March 2007 relating to UCITS as regards the clarification of certain definitions (the “Eligible Assets Directive”), in particular with its article 2(1). If a UCITS proposes to invest in such an instrument, it should actively seek and review information regarding the liquidity and negotiability of that instrument in order to be satisfied that the presumptions of liquidity and negotiability in the last sub-paragraph of Article 2(1) are well-founded.

2. Translation requirements in relation to the remuneration disclosure.

The information on the remuneration policy which has to be made available on a website needs not to be translated into the language of the country where the UCITS is being distributed. It should be translated into one of the following:

  • the official language, or one of the official languages, of the UCITS host Member State;
  • a language approved by the competent authorities of that Member State; or
  • a language customary in the sphere of international finance.

3. Reinvestment of cash collateral.

Reinvestment of cash collateral in short-term money market funds should be included in the 10% limit of investment in units of other funds.

4. Commencement of periodical reporting pursuant to article 13 of the Regulation 2015/2365 on transparency of securities financing transactions and of reuse (the “SFTs Regulation”). The first reporting pursuant to article 13 and annex A of the SFTs Regulation should be the first annual or half yearly report published after January 13th 2017.