On February 1st 2016, the European Securities and Markets Authority (“ESMA”) published an amended updated Questions and Answers on the application of Directive 2009/65/EC (“UCITS Directive”) as amended by Directive 2014/91/EU (“UCITS V Directive”) (“Q&A”).
The purpose of the Q&A is (i) to promote common supervisory approaches and practices in the application of the UCITS Directive and its implementing measures and (ii) to clarify the content of the rules provided under the UCITS Directive.
The Q&A introduces the following new clarifications on the updates which UCITS shall perform to some of their documents in order to meet the requirements under the UCITS V Directive:
- Remuneration disclosures in KIIDs and prospectuses: UCITS are requested to update their KIIDs in order to include remuneration-related information at the first occasion after March 18th 2016 or at the next annual update after this date. Similarly, UCITS shall update their prospectuses in order to add such information at the next occasion they are revised for another purpose and in any event by March 18th 2017 at the latest. In the meantime, UCITS (or their management companies, if relevant) should make available on a relevant website the additional information about their remuneration arrangements as soon as ready and at any event by March 18th 2017 at the latest.
- Remuneration disclosures in annual reports: it is not necessary to include remuneration-related information in annual reports for periods ending before March 18th 2016. For annual reports relating to periods ending on or after March 18th 2016, but before the UCITS has completed its first annual performance period in which it has to comply with the provisions on remuneration policies under the UCITS V Directive, the remuneration-related information shall be included in the report on a best efforts basis and to the extent possible, explaining the basis for any omission.
- Deadlines for updates of depositary contracts: UCITS depositary contracts should be revised promptly in accordance with the transitional arrangements outlined in the Delegated Regulation (EU) 2016/438 with regard to the obligations of depositaries (the “Regulation”). According to ESMA, any provisions in existing depositary agreements relating to the liability of depositaries which are not consistent with the liability provisions of depositaries under the UCITS V Directive will be void with effect from March 18th 2016 and shall be supplemented by the liability provisions of depositaries under the UCITS V Directive. Therefore, the liability provisions in existing depositary contracts should be amended to comply with the UCITS V Directive when such depositary contracts are revised to comply with the Regulation.
The Q&A further repeals and replaces the following four existing ESMA Q&As on UCITS funds:
- Key Investor Information Document (KIID) for UCITS;
- guidelines on ETFs and other UCITS issues;
- notification of UCITS and exchange of information between competent authorities; and
- risk measurement and calculation of global exposure and counterparty risk for UCITS.