UCITS Legislation & Overview – Highwire Extensions

Introduction to the UCITS Directive

Undertakings for Collective Investment in Transferable Securities (UCITS).

UCITS are the flagship European retail investment funds product. EFAMA statistics Show that there are over 32,000 UCITS with c. 9.8 trillion Euro assets under management.

Once authorised in any member State, UCITS then benefit from a marketing passport and can be registered for sale and market across all EU member states. UCITS have become established as a well-respected global brand and are also widely sold outside the EU.

EUROPEAN LEGISLATION AND GUIDELINES

The original UCITS Directive was in 1985, but now stretches, at a European level, to 2 Regulations, 5 Directives and a whole series of Guidance Notes.

ESMA also maintains up to date Q&A on the application of the UCITS Directive, and hopefully these should remove the national level inconsistencies over time.

Click here for more details.

NATIONAL IMPLEMENTATION

At a National Level, regulators have each implemented the UCITS provisions into their own Rulebooks. Whilst there is an overwhelming consistency, there are some differences and super-equivalence, which is unnecessary and probably largely unintentional.

Click here for further details on national divergences.

UCITS KIID

The UCITS KIID was introduced in 2012 as part of UCITS IV to replace the cumbersome and lengthy simplified prospectus that was previously required.

The UCITS KIID is a stand-alone, pre-contractual, 2-page document containing the essential features of the fund and is to be systematically provided to investors before they decide to invest.

Whilst it is a standalone document, in some jurisdictions, there is also a requirement for a Supplementary Information Document (SID); see below.

Currently, UCITS are exempt from the provisions of the PRIIPs Regulation until 31 December 2019 (Regulation 1286/2014). Until this date, UCITS will continue to prepare a Key Investor Information Document (“UCITS KIID”) as required by the UCITS Directive. However, the date seems set to be delayed until 31 December 2021.

For detailed analysis of the KIID Requirements, click here.

ASSET ELIGIBILITY AND INVESTMENT RULES

Every single UCITS fund must be suitable for sale to retail investors (although in practical terms institutional investors can be targeted through the use of high minimum subscription amounts etc).

To this end, the UCITS rules are product-based regulation and include requirements in respect of eligible assets for investments into, investment and borrowing limits, liquidity, disclosure, and investor protection, as well as the technical and practical organisation of such funds.

Access Funds-Axis’ comprehensive resources on UCITS Asset Eligibility and Investment Rules by clicking here.

UCITS Investment Compliance

Resources