UCITS managers will be interested to note that the FCA has today published its final rules and guidance implementing UCITS V, PS16/2 on the Implementation of the UCITS V Directive. Interestingly some of the changes set out in the PS are also relevant for managers of NURS.
Following an initial review some of the key points appear to be as follows:
FCA approval of changes to UCITS scheme documents
The FCA indicates that consequential changes to the prospectus to include the additional remuneration and depositary information required under UCITS V will not normally require its prior approval.
Interestingly the FCA also suggests that changes to the instrument constituting a UCITS fund (i.e. the trust deed in the case of an AUT and instrument of incorporation of an OEIC) are “unlikely” to be needed to ensure compliance with UCITS V – although it is for firms to determine whether this is the case by reference to the relevant instruments. Furthermore, to the extent that changes are required (e.g. to align any provisions that limit the depositary’s liability with the UCITS V depositary liability regime) the FCA’s view is that where the UCITS is an authorised unit trust such changes would not need prior approval from the FCA under section 251 of FSMA 2000. However, where the UCITS is an OEIC, equivalent changes to the instrument of incorporation (to the extent required) would require notification to the FCA as the wording in regulation 21 of the OEIC Regulations is more prescriptive in this regard.
Remuneration
Despite some resistance from the industry, management companies of UCITS will be subject to a new remuneration code at SYSC 19E. Whilst this new code will be broadly similar to that applicable to AIFMs in SYSC 19B, the FCA considers the differences between the two regimes to be sufficient to require the introduction of the new requirements for UCITS management companies. Managers will be subject to the requirements in the SYSC 19E Code in respect of their first full performance period beginning after 18 March. Furthermore, the FCA has confirmed that there will be no extension to the transitional period for implementing the remuneration requirements.
Disclosure of depositary sub-delegates
The FCA has acknowledged that there is not a strong case for requiring managers of NURS to provide a list of the depositary’s sub-delegates (as distinct from delegates) in the prospectus. It also agrees that the managers of NURS should not be required to maintain a separate statement in the prospectus that up-to-date information about delegation arrangements would be available upon request. The FCA has therefore revised the relevant provisions in COLL accordingly to make them applicable only to UCITS managers.
What next?
In short, the implementing provisions in the Handbook will come into force on 18 March 2016 (subject to certain transitional provisions), however, the Level 2 Regulation has still not been published in the Official Journal of the EU and, as such, its application date is still uncertain. Despite the mismatch between the time when the UCITS V requirements come into force, in March, and when the detailed provisions supplementing some of these requirements will become applicable to firms, the FCA expects firms to make efforts to comply with the UCITS V requirements as of 18 March 2016 (except where a transitional provision applies). This includes making reference to the existing Handbook provisions (for example in COLL or CASS) until the Level 2 Regulation becomes applicable.
ESMA Q&A
In a busy week for UCITS V implementation, ESMA has also published a consolidated UCITS Q&A, capturing all Q&As relating to the UCITS Directive including three new Q&As with regard to UCITS V. Of particular interest is ESMA’s confirmation that except where a UCITS is subject to requirements in its home Member State that require updates to be made by 18 March 2016, the UCITS will be allowed to update the KIID (to include a prescribed statement in relation to remuneration policy) at the next annual update after 18 March 2016, or on the first occasion after 18 March 2016 on which the KIID is revised or replaced (if the information is available at that point in time). Similarly , a UCITS will be allowed to add prescribed remuneration-related information to the prospectus on the next occasion it is revised for another purpose or by 18 March 2017 at the latest. In the meantime, UCITS ManCos should make available on a relevant website the additional information about the ManCo’s remuneration arrangements as soon as it becomes available.
If you have any queries in relation to the implementation of UCITS V please contact Tom Dunn or Victor Ondoro in the first instance.