What is UCITS V?

UCITS V is the latest proposed iteration of the UCITS Directive, the first of which was published in 1985. The directive aims to harmonise retail investor protection and covers three areas:

  1. Depositaries

  2. UCITS Management Company remuneration policies

  3. Sanctions for breaches of UCITS law

When did UCITS V start?

The Commission formally proposed the UCITS V text on 3 July 2012. In April 2013 the European Parliament and Council of Ministers formally consider it for adoption. Effective application is expected by the end of 2014.

Who does UCITS V affect?

It will affect any stakeholder in a European UCITS fund, including asset managers and depositaries, with the ultimate aim being to benefit the end investor.

How does UCITS V affect you?

Depositories

  • A “strict liability” standard is being introduced. This requires assets lost in custody to be returned, irrespective of fault or negligence (other than due to external events beyond the control of depositaries). The directive will hold the depositary responsible, even if the loss took place at sub-custodian level.

  • The directive defines who can act as a depositary, namely: EU authorised credit institutions or MiFID authorised investment firms. There is an exemption of two years for existing UCITS with other arrangements.

  • New rules have been established to outline when a depository can delegate “safekeeping duties” to a sub-custodian, this brings it in line with rules in AIFMD. The depository must:

  •      prove there is good reason to delegate safekeeping

  •      take great care in the selection of the third party

  •      periodically review the performance of the third party

Remuneration

Remuneration policies have been introduced to ensure appropriate risk management and to discourage short term risk taking. The policies will apply to all “senior management” and any employee whose activities have an impact on the risk profile of the UCITS.

Sanctions for breaching UCITS law

The directive introduces a harmonised list of breaches that must be prosecuted by national supervisory authorities, as well as a selection of potential sanctions that can be levied on UCITS.

Related Regulations

How can UnaVista Help?

UnaVista can assist you in complying with a number of regulations, thereby eliminating the need to build separate solutions for each business problem. Future regulations can be addressed via the platform as required, enabling seamless evolution of your compliance solution. Examples of how UnaVista can assist with UCITS V include:

Data Consolidation

– UnaVista can maintain a centralised repository of all fund information required to comply with UCITS investment restrictions (across multiple buy-side clients in the case of depositories*). Data can be imported from multiple disparate systems and in many different file formats. Documents (e.g. PDFs, MS Word) may also be securely stored within the system and permissioned according to users. * The flexible nature of UnaVista allows client-sensitive data to be segregated securely and permissioned at the individual user, department and client level.

AuM Calculation

– UnaVista can help firms calculate and monitor their Assets under Management (NAV or GAV), taking into consideration liabilities and assisting with complex calculations (e.g. derivative valuation). A bespoke exception management process, including tailored workflow and full auditing, will highlight breaches of UCITS-imposed restrictions and facilitate resolution.

Reconciliation

– UnaVista’s inbuilt matching and reconciliation engine enables efficient reconciliation of multi-asset class datasets in a variety of contexts including (but not limited to) inter-system, portfolio and NAV/GAV reconciliations.

Exception Management

– UnaVista supports a comprehensive exception management process for unreconciled data that can be easily tailored to meet your individual requirements and align with your internal business processes. Graphical dashboards further enhance the exception management functionality by providing valuable Management Information related to operational efficiency, thereby facilitating ongoing improvement of the reconciliation process.

Annual Reporting

– As a centralised repository for all fund related information, UnaVista can facilitate the creation, evaluation, approval sign-off and submission of reports required for UCITS compliance.

 

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