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Making Way for UCITS VI: European Commission publishes UCITS Consultation with series of questions

AUTHOR(S): Shay Lydon, Joe Beashel, Liam Collins, Tara Doyle, Anne-Marie Bohan, Dualta Counihan, Elizabeth Grace
PRACTICE AREA GROUP: Asset Management and Investment Funds
DATE: 16.08.2012

Following on swiftly from its UCITS V proposals, the European Commission has recently published a consultation paper on UCITS titled “Product Rules, Liquidity Management, Depositary, Money Market Funds, Long Term Investments” (the “Consultation Paper”) which puts forward the case for a number of modifications and changes to the UCITS framework. The subject matter tabled for discussion pursuant to the Consultation Paper and the policy orientations in relation thereto are colloquially referred to as “UCITS VI”.

In our full briefing note on the Commission’s UCTS VI initiative, we have identified the key points for industry in terms of the possible future development of the UCITS model. For access to our briefing note, please click here.


The Commission published its UCITS IV Consultation Paper the day after ESMA’s Guidelines on UCITS ETFs and other UCITS matters.  ESMA’s guidelines include provisions which apply to UCITS’ use of efficient portfolio management (“EPM”) techniques, with particular focus on securities lending activities. The Commission’s UCITS VI Consultation Paper continues on this theme, and seeks to assess the EPM techniques typically utilised by UCITS managers in order to measure, appraise and review EPM practices.

The Consultation also incorporates a section on the ongoing debate around eligible assets and the use of financial derivative instruments by “sophisticated” UCITS.  Other matters considered include the impact for UCITS of the treatment of over the counter (“OTC”) derivatives once the new central clearing requirements for derivatives pursuant to EMIR are in place, the potential benefits of a passport for depositaries and how to foster a culture of long-term investment in Europe.

Consistent with general international regulatory discussion and global developments, the Consultation Paper articulates the establishment of appropriate liquidity and redemption management tools which might be incorporated within the UCITS framework. The Commission also focuses on the operation of UCITS money market funds, distinguishing between variable and constant NAV money market funds, and how new rules and harmonisation of money market fund regulation in Europe might be applied.

With regard to the Commission’s discussion on improving certain aspects of UCITS IV, one particular modification considered in the Consultation Paper relates to the UCITS marketing passport.  The Commission proposes extending the electronic regulator to regulator notification regime for any changes to the notification file.  This would be a welcome development, as the electronic regulator to regulator procedure only applies for first registration under the current rules.

At the core of the Commission’s UCITS VI publication are a series of questions which range from the general to the very specific and which are addressed to the various constituencies and stakeholders within the European funds industry in a bid to initiate engagement on the key issues. In this regard, industry participation and input will be vital in terms of shaping the policy direction of the matters raised.  It is critical that any proposed changes to the UCITS framework, and the consequences thereof, are fully thought through, taking into account cost benefit analysis, industry efficiencies and a forward-looking mindset which seeks to foster the positive evolution of UCITS.

Submissions in response to the issues, questions and policy orientations raised in the Consultation Paper are invited by 18 October 2012.  The partners at Matheson will be involved in formulating a response to the matters put forward by the Commission as there are a number of matters raised for discussion in the Consultation Paper which could have long-term implications for the industry.  We welcome your views or any queries in relation to any aspect of the matters highlighted in the Consultation Paper.

The Consultation Paper can be accessed through the following link: UCITS VI Consultation.


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