UCITS - ESMA publishes Q&As on updating documents under UCITS V

On 12 October 2016, the European Securities and Markets Authority (ESMA) published an updated consolidated set of Q&As on the application of the UCITS Directive.

The updated Q&As include ESMA’s views on four new topics.

Regulated markets in Member States under UCITS

A multilateral trading facility (MTF) operated in the EU is a regulated market within the scope of the UCITS framework provided it meets the requirements set out in Article 50(1)(b) of the UCITS Directive. Instruments in which a UCITS invests that are traded on such an MTF on behalf of a UCITS must comply with the Eligible Assets Directive (in particular with Article 2(1) thereof). If a UCITS proposes to invest in an instrument traded on an MTF, it should actively seek and review information regarding the liquidity and negotiability of the instrument in order to be satisfied that that the presumptions of liquidity and negotiability in the last sub-paragraph of Article 2(1) are met.

Translation requirements in relation to the remuneration disclosure

When a UCITS is distributed cross-border, the information on the remuneration policy which has to be made available on a website (and of which a paper must be made available on request) does not need to be translated into the same language as the one into which the KIID has to be translated. Since information on the remuneration policy falls under Article 94(1)(c) of the UCITS Directive, which relates to information or documents other than the KIID, this information should be translated, at the choice of the UCITS, into one of the following:

• the official language, or one of the official languages of the UCITS host Member State
• a language approved by the competent authorities of that Member State, or
• a language customary in the sphere of international finance.

Reinvestment of cash collateral

Investment of cash collateral in short-term money market funds should be treated in the same way as any other investment made by the UCITS in units of other UCITS or other collective investment undertakings and should be compliant with all the requirements of the UCITS Directive (including those under Article 50 (1)(e)(iv)).

Commencement of periodical reporting pursuant to Article 13 of the Securities Financing Transactions Regulation (SFTR)

Information on the use of securities financing transactions (SFT) and total return swaps, required to be disclosed under the SFT Regulation, should be included in the next annual or half-yearly report to be published after 13 January 2017- the information so disclosed  may relate to a reporting period beginning before that date.