The FCA has published Policy Statement 16/2: Implementation of the UCITS V Directive (PS16/2).

In PS16/2 the FCA sets out Handbook changes affecting managers and depositaries of UCITS and alternative investment funds (AIFs). These changes mainly relate to final rules and guidance for implementing UCITS V. The FCA also provides its response to feedback on Part I of Consultation Paper 15/27: UCITS V implementation and other changes to the Handbook affecting investment funds (CP15/27).

Some of the changes the FCA consulted on in Part I of CP15/27 affect managers of non-UCITS retail schemes (NURs). In PS16/2 the FCA sets out final rules for managers of NURS. It also outlines some final guidance for depositaries of AIFs, which it consulted on in its March 2015 quarterly consultation.

Key points in PS16/2 include:

  • in chapter 2 the FCA summarises the feedback received on the proposed remuneration code and disclosure requirements for UCITS managers. In response to comments from respondents the FCA has made some changes to the guidance on payments in non-cash instruments. The FCA also clarifies whether consequential changes to the prospectus and scheme documents, following the implementation of UCITS V, require approval from the regulator;
  • the FCA notes that some respondents objected to extending to managers of NURS certain UCITS V disclosure requirements, in particular the disclosure of the list of the depositary’s delegates and sub-delegates in the prospectus. The FCA has taken this feedback into account, so that managers of NURS will not now be required to disclose in the prospectus the list of the depositary’s delegates and sub-delegates. However, it is maintaining some of the disclosure requirements for NURS where they are consistent with the Alternative Investment Fund Managers’ Directive; and
  • in chapter 3 the FCA responds to feedback on its proposed rules for the appointment, operational duties and responsibilities of UCITS depositaries. In particular, the regulator clarifies its position with regard to the level of infrastructures that non-bank depositaries must have in place when delegating the safekeeping function to a third party. The regulator also clarifies that UCITS depositaries would be able to delegate the performance of administrative and technical tasks to a third party. The FCA has also changed the proposed CASS rules to clarify which of the CASS 6.6 requirements will remain applicable to depositaries of UCITS until the Level 2 Regulation comes into force.

The FCA notes that it is still unclear when the final text for the Level 2 Regulation will be published in the Official Journal of the EU and when it will become applicable. The draft text allows for a six month transitional period which starts when the Regulation comes into force. The FCA therefore expects that firms will not be subject to the Regulation’s requirements until Q3 2016 at the earliest which means that there is a mismatch between the time when the UCITS V requirements come into force on 18 March 2016 and when the detailed provisions supplementing some of the requirements will become applicable to firms. The FCA states that during this period it will expect firms to make efforts to comply with the UCITS V requirements as of 18 March 2016 (unless a relevant transitional provision applies) even if the detailed requirements under the Level 2 Regulation are not yet applicable.

The FCA also adds that the European Securities and Markets Authority (ESMA) is expected to finalise its UCITS V remuneration guidelines in Q1 2016. Once these have been published, it will consider whether any further guidance on applying its UCITS Remuneration Code principles is required. If so, the FCA will consult on further guidance.

The rules and guidance in PS16/2 will come into force on 18 March 2016. The Handbook changes affecting managers and depositaries of AIFs will also take effect on this date. However, there are certain transitional provisions applying to some of the final requirements which run for up to two years, starting from 18 March 2016.

View PS16/2: Implementation of the UCITS V Directive, 2 February 2016