Published: 12th February 2016

Of Relevance To
UCITS Management Companies; AIFMs of NURS; depositaries and custodians of UCITS schemes and AIFs.


The FCA has released Policy Statement PS16/2 “Implementation of the UCITS V Directive”. Despite its title, the paper is not only of importance to UCITS Management Companies but also to Alternative Investment Fund Managers (“AIFMs”) of non-UCITS retail schemes (“NURS”) and, of course, to the relevant depositaries and custodians. The reason for the inclusion of NURS is not because of UCITS V but rather because the FCA has taken the opportunity to extend some of the requirements to NURS.

As a reminder, UCITS V has to be implemented by 18 March 2016 – see Regulatory Roundup 68. UCITS V amends, rather than rewrites, UCITS IV and so both have to be read together. As might be expected, ‘UCITS V’ consists of not only a Directive (2014/91) but also a Regulation which will be binding within all Member States. The Regulation is currently only in draft form as it still has to be agreed by the European Council and European Parliament.

Fortunately the Regulation will apply 6 months after entering into force and so does not have to be in place by this coming 18 March. However, on the other hand, this does leave firms with the problem of legal uncertainty – which is recognised by the FCA – in the period between UCITS V applying and the Regulation applying. The message from the FCA is that it “expects firms to make efforts to comply with the UCITS V requirements as of 18 March 2016 …. even if detailed requirements under the Level 2 Regulation are not yet applicable at this date”.

Perhaps the major change under UCITS V is the introduction of the need for UCITS Management Companies to establish and apply remuneration policies and practices.

Remuneration Code

The nine principles of the UCITS Remuneration Code appear in SYSC 19E. They are broadly similar to the nine principles of the AIFMD Remuneration Code (SYSC 19B), although not a mirror match.

Article 14b(1) of the UCITS Directive advises that UCITS Management Companies shall comply with the remuneration principles “in a way and to the extent that it is appropriate to their size, internal organisation and the nature, scope and complexity of their activities”, which is captured in SYSC 19E.2.4. Note that whilst ESMA has consulted on Remuneration Guidelines (see ‘Useful Links’), they have yet to be finalised. At that time the FCA “may consider” giving further guidance on proportionality.

Where a UCITS Management Company is a UCITS investment firm subject to BIPRU then it will meet its obligations under SYSC 19C (BIPRU Remuneration Code) and SYSC 19E by complying with SYSC 19E. The FCA is unable to apply a similar approach where the UCITS Management Company is subject to IFPRU as the latter derives from CRD IV. One ray of hope is that the FCA “may” provide further guidance on this once the above mentioned Remuneration Guidelines have been finalised.

By virtue of SYSC TP3, a UCITS Management Company need not apply the UCITS remuneration principles to any awards of variable remuneration until it commences its first full performance year starting on or after 18 March 2016.


The prospectus will need to be expanded to include relevant details of the firm’s remuneration policy; provide information on the potential conflicts of interest that may arise between the depositary and other parties, including the scheme; and, where relevant, a description of any safekeeping functions delegated by the depositary. The table in COLL 4.2.5 sets out the additional details required. Note that COLL 4.2.5 also applies to a NURS, although, following feedback from the earlier consultation, some of the expanded requirements will not be applied to a NURS.

The annual long report of a UCITS scheme must include details of remuneration paid split between the fixed and variable components. Please see COLL 4.5.7(7) (and the guidance in COLL 4.5.7A) for details of the enhanced disclosure requirements.

Key investor information will need to identify the FCA as the competent authority of the scheme; a statement that details of the up-to-date remuneration policy are available on a website; and confirm that a paper copy of that website is available free of charge (COLL 4.7).


UCITS Management Companies are required to have appropriate ‘whistleblowing’ procedures in place (SYSC 4.1.1E).

The (single) appointed depositary must be a national central bank or a credit institution. A full-scope IFPRU investment firm or an investment management firm to which IPRU(INV) 5 applies may also be appointed provided that they meet required minimum own funds and satisfy certain organisational requirements. The UCITS Management Company must ensure that the appointment of the depositary is evidenced by a written contract. Reference should be made to COLL 6.6A.7 – 13 for further details.

The revised Handbook Rules can be found in Appendix 1 of PS16/2.

Key dates

  • Subject to any transitional provisions, UCITS V will be implemented on 18 March 2016.
  • Managers of UCITS will not have to comply with some of the remuneration requirements until the start of the first full performance year starting after 18 March 2016.
  • The prospectus of a UCITS scheme (or a NURS) will not need updating with the relevant new disclosure requirements until 30 September 2016 (UCITS) or until 31 March 2017 (NURS). However, the prospectus must include a description of the depositary’s principal business activity.
  • The key investor information document (“KIID”) of a UCITS scheme will not need to include the new UCITS V disclosure requirements until it is updated for other reasons, and then only if the relevant information on remuneration is available at the time of the update – otherwise they should be included as part of the 2017 annual update and no later than 18 March 2017.
  • Non-bank depositaries appointed before 18 March 2016 may continue to provide depositary services to their UCITS clients until 18 March 2018, even if they do not meet all the new operational and prudential requirements applicable to them.
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