Although the UCITS IV directive only entered into force on 1 July 2011, the European Commission is already actively preparing UCITS V. Following the various innovations resulting from the AIFM directive, the updated UCITS directive intends to establish a European framework for alternative fund management in the broader sense (non-UCITS funds or alternative UCITS). The text aims to clarify the responsibilities of depositary banks. Nevertheless, there remain a number of details that still need to be addressed more closely, such as:
- the technical details for each of the newly introduced instruments,
- the cross-border taxation aspect,
- the selection of funds in relation to their country of origin,
In light of this, the European Commission launched a public consultation, which closed on 31 January 2011, on the amendments to be made to the UCITS Directive 2009/65/CE in order to clarify the UCITS depositary regime as well as that of the remuneration of UCITS fund managers, while at the same time keeping an eye on the overarching objective of improving European investor protection.
The provisions of this new European framework for the broader field of alternative fund management – i.e. funds other than those falling under the scope of UCITS – should ensure an appropriate level of financial security for investors.
On 3 July 2012, the European Commission published a legislative package with a view to reinforcing investor protection. Among the proposed measures, are amendments to the UCITS Directive (UCITS V), addressing three areas:
- precise definition of the tasks and liabilities of all depositaries acting on behalf of a UCITS fund;
- clear rules on the remuneration of UCITS managers: the way they are remunerated should not encourage excessive risk-taking. Remuneration policy will be better linked with the long-term interest of investors and the achievement of the investment objectives of the UCITS; and
- a common approach to how core breaches of the UCITS legal framework are sanctioned, introducing common standards on the levels of administrative fines so as to ensure they always exceed potential benefits derived from the violation of provisions.