The EU Council issued a press release announcing that its Permanent Representatives Committee (Coreper) has agreed its position on the draft UCITS V directive (which is still liable to change). The UCITS V proposal will have particular impact on depositary functions, remuneration policies and sanctions and will progress the consistent application of UCITS rules in EU member states. 

It will revise the UCITS regime by:

  • introducing specific provisions on the depositary's safekeeping and oversight duties (Article 1 (3));
  • defining the conditions in which safekeeping duties can be delegated to a sub-custodian (Article 1 (3a));
  • setting out a limited list of entities that are eligible to act as UCITS depositaries (and transitional provisions for UCITS whose current depositary would not be eligible) (Article 1 (4));
  • clarifying the depositary's liability in the event of the loss of a financial instrument held in custody. Unlike AIFMD, this liability cannot be contracted out of (Article 1 (5));
  • setting out provisions on direct redress for investors (Article 1 (5) 5);
  • introducing a requirement for the UCITS management company to implement a remuneration policy that is consistent with sound risk management and complies with minimum principles (Article 1 (1));
  • introducing a whistle blowing regime (Article 1 (14)); and
  • setting out the administrative sanctions and measures that regulators should be empowered to apply (Article 1 (13)).

Negotiations on the draft UCITS V directive will now begin with the European Parliament, with the aim of adopting the directive at first reading. When adopted and published, member states will have two years to transpose the directive into national law.