The directive aims to harmonise the rules governing UCITS and to improve the way their distribution functions within the the European Union.
The directive will significantly update the existing Directive 85/611/EEC by modernising the regulatory framework with a view to:
In general, the European Investment fund industry needs to enhance its competitiveness by improving the quality of its services and reducing costs.
The UCITS IV Directive deals with the following points:
These measures are applicable since 1 July 2011, insofar as each member state has transposed them by that date.
As regards measures for execution, the European Commission has mandated the ESMA (European Securities and Markets Authority) to study the content of different measures and to draw up proposals. The member states will then be invited to transpose these execution measures at the same time as the UCITS IV Directive itself.
The principal measures providing detailed improvements to the UCITS regulations are as follows:
Management companies may carry out activities in other member states for which they have been authorised in their country of origin either through the free offer of services or by establishing a local branch.
Supervision of such activities will be provided by the regulatory authorities of the country of origin, which will send all required information to the relevant authorities in the host member state. The management company must therefore comply with the regulations of both countries.
This approach implies both a distinct procedure in each country as well as cooperation between the supervisory bodies through a point of contact as provided by the directive.
Establishment of a procedure facilitating domestic and cross-border mergers:
- choice of domiciliation of funds
- production of a shared merger scheme regarding a possible merger,
- asset valuation,
- establishment of a standard method for calculating the exchange ratio,
- assessment of tax implications.
This is a process of optimising forces in order to exploit the advantages of different European financial markets and actors: at least two funds will be concerned > the "feeder", generally domiciled in the investor's country, will invest the majority of its assets (85 %) in the "master", which may be domiciled in another country.
These structures will allow considerable economies of scale and provide greater flexibility in the commercialisation of funds.
This is a simplified procedure between the regulator in the home country and the regulator in the host country of the UCITS. The management company will thus be able to commercialise the UCITS freely, ten days after transmission from the regulator in the country of origin to the host country.
The KII or KID will replace the simplified prospectus, considered to be incomprehensible and indigestible. The KII or KID will be short and non-technical while providing accurate, precise and comprehensible information.
This document will be limited to 2 pages, and will contain the following information:
- description of the investment policy,
- description of the objectives,
- historical performance data,
- costs and charges,
- risk profile and performance profile of the fund,
- place where the investor can find further information.
These measures will reinforce existing regulatory requirements at several levels:
- risk management,
- conflicts of interest,
- rules of conduct.
These measures for implementation are currently being finalised (CESR).
This document was prepared by ALFI's implementation working group for the Key Investor Information document (KID). The working group comprises representatives of asset managers, management companies, securities service firms, audit firms, law firms, and document and information management firms.
This document contains the working group's answers to questions about KID implementation. The answers are not necessarily definitive and they might not be suitable for every circumstance. This document is not meant to be an industry standard or a guide to best practice but it represents the view from a group of market participants. The Q&A has not been validated by any regulator. It does not diminish the management company's or the investment company's responsibility to comply with the EU Regulation 583/2010 on the KID, CESR's related guidelines and technical advice papers and any other European or national law or regulation. This document must not be relied upon as advice and is provided without any warranty of any kind and neither ALFI nor its members who contributed to this document accept any liability whatsoever for any action taken in reliance upon it.
This document may be amended without prior notice to incorporate new material and to amend previously published material where the working group considers it appropriate. ALFI will publish amended copies of this document to its members, showing marked-up changes from the immediately preceding copy.
The titles used in this document are references to the relevant recitals, chapters, sections and articles of the EU Regulation 583/2010 and associated CESR guidelines and consultation papers.
Confirming its position as leading European investment fund center, Luxembourg is again the first European Member State to have officialy stepped in the implementation process off Directive 2009/65/EC (the UCITS IV Directive) by depositing a bill with Luxembourg Parliament on 6 August 2010 in order to implement Level 1 provisions of the UCITS IV directive into national law.
On August 6, 2010, the Luxembourg Government submitted to the Chamber of Representatives a draft law, the main objective of which is the implementation of the EU Directive 2009/65/CE (“UCITS IV Directive”). The draft law also includes some additional changes for investment funds, in particular in respect of taxes.
The European Commission has completed a programme of improvements to the EU framework for investment funds. The new rules better empower investors by requiring a new standardised fund document, while also setting out in detail the high standards of conduct of business that UCITS fund managers must comply with. In addition, the new rules improve the efficiency of the UCITS market in the EU by introducing and facilitating new possibilities for the pooling of assets from different funds, by simplifying the cross-border distribution of UCITS and by better coordinating the work of national supervisors.
Major tax issues arise in new cross-border fund management and structuring options available under UCITS IV Directive. With the adoption of the Undertakings for Collective Investment in Transferable Securities (UCITS IV) Directive, the European Union has taken a decisive step towards the realization of a single European fund market. According to a new research report from KPMG International, Fill the glass to the brim: Analysis of the tax implications of UCITS IV and the impact for funds operating cross border, while at first sight, the UCITS IV Directive considerably simplifies regulatory boundaries between management companies and fund structures within Europe, the political decision to focus on the regulatory side of international fund structures, has meant that tax considerations were not included.
Kremer Associés & Clifford Chance welcomed on 25th March 2010 representatives from across a wide range of financial institutions and professions to Luxembourg for the final in a series of conferences aiming to promote discussion of the key provisions of the UCITS IV Directive and their impact on the European funds market.
A survey published today by RBC Dexia Investor Services and KPMG shows how some of Europe's largest asset managers plan to capitalise on UCITS IV and identifies how these reforms will contribute to wider changes across the European Investment fund landscape. The main findings of the report, entitled "UCITS IV: Which business model for tomorrow?" are as follows:
- The number of Management Companies will decrease
- A new wave of fund mergers lies ahead
- Master/Feeder structures will be key for new markets/client segments
- Immediate cost savings are expected
The ABBL and alfi welcome the Commission’s Consultation on the UCITS depositary function dated 3 July 2009 and would like to thank the European Commission for the opportunity to participate in this consultation and share the Commission's view, which “expects this consultation to lead to the development of a set of informed and evidence-based views on the range of issues addressed in this paper”. In order to efficiently and comprehensively achieve this goal we believe a certain number of tasks are prerequisite.
Ernst & Young has released its publication entitled UCITS IV – Transforming the European fund industry.
There are six key enhancements to the UCITS regime in UCITS IV:
1. Time to market and the administrative burden will be significantly reduced for funds distributed cross-border.
2. A procedure facilitating cross-border fund mergers is established. This should accelerate the existing trend towards merging smaller funds into “mega” funds, distributed cross-border.
3. “Master-feeder” UCITS structures may be created. In this case, there will be at least two funds: the feeder, generally, in the country of the investor, invests most of its assets into the master, which may be in another country. It may be considered that the management of most of portfolio of the feeder is delegated to the master.
4. The new standardized key investor information document will provide fair, clear and understandable information to investors, replacing the current simplified prospectus which is often considered to be difficult for investors to understand.
5. The management company passport becomes a reality. Management companies will be permitted to manage funds cross-border, and will not be required to appoint service providers in the domicile of the fund, except the custodian bank.
6. Existing regulatory requirements are strengthened, particularly regarding management companies.
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