Those firms subject to UCITS may want to note on the calendar that UCITS V (Directive 2014/91/EU) came into force on 17 September (see also Regulatory Roundup 53). However there is no immediate panic as Member States have until 18 March 2016 (Article 2) to transpose the Directive into national law so we can expect a consultation paper or two from the FCA in the intervening period.
The good news is that UCITS V only consists of four Articles, although the downside is that Article 1 runs to around 20 pages. The reason for this is that Directive 2014/91/EU does not rewrite UCITS but rather has the effect of amending the current UCITS IV (Directive 2009/65/EC) – with all the amendments being in Article 1. As such, to understand the requirements of UCITS V both the Directives have to be read together.
It’s worth drawing attention to Article 1(2) of UCITS V as this introduces the need for firms to have in place remuneration policies and practices that do not encourage risk taking. As mentioned in the Article, ESMA has been asked to draw up guidelines on the application of UCITS remuneration obligations. At first sight the requirements look similar to those within the AIFMD and indeed the Directive requests ESMA to endeavour to ensure the resultant guidelines “be aligned to the extent possible” with those under the AIFMD. A further area of similarity is the requirement to disclose certain details of remuneration paid (see Article 1(13)).
