As voting across the 28 member states of the European Union has now taken place, 751 national representatives from across Europe are ready to take up their new mandate. Time will tell how this re-calibration will play out and impact on the direction of developments in European financial services legislation, as negotiations on matters such as the shape of proposals on EU regulation of money markets funds are picked up afresh by the new Parliament. Post-election, the re-constitution of the Parliament’s Committee on Economic and Monetary Affairs (ECON) - the influential concentration of Parliamentary members whose remit includes financial supervision and regulation including asset management and funds regulation - will be watched very closely. Reports in the financial press suggest that some MEPs are already seeking support for their nomination to ECON.
Before the May elections, the outgoing Parliament voted to pass a legislative text on UCITS V. The new Parliament is unlikely to spend much more time on UCITS V as we understand that the European Council is likely to adopt the text and that UCITS V will be published in the Official Journal of the European Union towards the end of the third quarter or at the beginning of the fourth quarter of this year. UCITS V will enter into force 20 days after the date of publication in the Official Journal and the provisional legal text states that member states will have 18 months from that date to transpose it into their domestic laws. Based on these timelines, our estimate is that it is possible that UCITS V may be transposed into local laws at the earliest by the second quarter 2016.
It is worth noting that guidelines from the pan-European securities and markets authority, ESMA, are expected towards the end of this year, and it is anticipated that these will offer interpretive guidance on aspects of the remuneration provisions within UCITS V in particular.
The three main areas of reform which UCITS V seeks to address relate to the role of the depositary, manager remuneration and regulatory sanctions. The intention behind these developments is to enhance investor protection and ensure standardised conditions for UCITS across the EU. UCITS V also seeks to align the UCITS regulatory framework with certain aspects of the Alternative Investment Fund Managers Directive. However there are a number of differences between the requirements specified in UCITS V and those applicable under AIFMD.