DENMARK: FSA Publishes Guide on UCITS eligible markets requirements

Thursday January 15 2015

The Danish Financial Supervisory Authority (FSA) has published guidelines which stipulate requirements on the markets in which Danish UCITS can invest, as well as the criteria which the market must meet under UCITS. Under the UCITS Directive, a UCITS fund may invest in securities and money market instruments admitted to or dealt in on 1) a regulated market, 2) another market in an EU Member State or 3) markets in third countries subject to assessment by a UCITS manager.

Regulated markets are markets covered by Article 4 paragraph 1, item 14 of MiFID. In Denmark there are two regulated markets; NASDAQ OMX Copenhagen A / S and GXG Official List. A list of regulated markets is maintained centrally on the MiFID database.

Other markets in an EU member state are markets that operates regularly and are regulated and open to the public, but which are not covered by Article 4 paragraph 1, item 14 of MiFID.

Markets in third countries are markets that are stock exchanges in a third country or another regulated market in a third country which operate regularly, are regulated and open to the public, and the choice of stock exchange or market has been approved by the Danish FSA or appears in the Danish UCITS articles of association or fund rules.

The Board of Directors and the Investment Manager for a Danish UCITS must continually examine whether the market meets the criteria in § 139 paragraph 1 of LIF, when the Board has determined that a UCITS can invest in the market.

If a market does not meet the criteria of being a regulated market, a market in an EU Member State or a market in a third country, the fund may not invest more than 10 per cent of assets in securities and money market instruments traded in that market.

Criteria for assessment of individual markets as established by the Danish FSA include the market must be regulated; operate regularly; have sufficient market liquidity; regulated; and open to the public. The criteria used to assess markets are the same regardless of whether it is an EU regulated market or not. The Board of Directors and the investment management company must make an overall assessment of the market, including whether there are other factors that should be included in the assessment of the market.

The Danish UCITS must inform the FSA, when the Board has decided that a fund may invest in one of the in § 139 paragraph. 1 pt. 2 and 3 in the LIF mentioned markets, see. § 139 paragraph. 3, in LIF. With the notification the Board must declare that the market meets the conditions to be regulated, operates regularly and is recognized and publicly. The statement sent by. e-mail to the FSA`s official email address Finanstilsynet@ftnet.dk, indicating the name and FT-number of the relevant association and department. The declaration may also be submitted in connection with applications for authorization of a new UCITS or a new department in a UCITS.

The names of the markets approved by the Board in cooperation with the investment management company and the custodian bank that have been assessed as meeting the criteria must be set out in the Articles of Association or fund rules.

Click on the above link for further information (Available in Danish only).

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