The European Commission (“Commission”) has published the long-awaited implementing measures under the EU directive amending the UCITS Directive (known as “UCITS V”), providing further detail on the rules applicable to UCITS’ depositaries.

The implementing measures, which take the form of a regulation (the “Regulation”), set out detailed rules relating to the contractual provisions to be included in depositary agreements; depositaries' duties with regard to oversight, monitoring of cash flows and safekeeping of custody assets; potential discharge of liability; initial and ongoing due diligence requirements regarding the selection of sub-depositaries and segregation of assets; insolvency protection of UCITS assets when delegating custody functions; and requirements in relation to the independence of management companies from the depositaries of their UCITS under management.

The Regulation is now subject to a three month scrutiny period by the European Parliament and the Council of the EU (“Council”).  Following this review, the Regulation will be published in the Official Journal of the EU, which will set out the date upon which the Regulation will enter into force.  It will apply in all EU member states six months after its entry into force without the need for transposing legislation.  Provided the European Parliament or Council do not exercise their prerogative to extend the scrutiny period by a further three months, it is anticipated that the Regulation will apply from September 2016.

Industry bodies have asked the Commission, possibly in coordination with the European Securities and Markets Authority (“ESMA”) and national regulators, to issue guidance as to the transitional measures to be put in place by the industry during the period between 18 March 2016 and the application date of the Regulation.