EUROPEAN UNION: ESMA Update UCITS Directive Q&A’s

Friday July 14 2017

The below UCITS Directive questions have been updated by the European Securities and Markets Authority (ESMA):

Q5a. Does the 40% limit set out in Article 52(2) of the UCITS Directive apply to index-tracking UCITS that are subject to Article 53 of the UCITS Directive?
No. The 40% limit set out in Article 52(2) does not apply to index-tracking UCITS that comply with the requirements set out in Article 53.

Q1. Where a group link exists for the purpose of Article 24 of the Commission Delegated Regulation (EU) 2016/438 (“UCITS V Level 2”), does a person who served in the management body or supervisory body of an entity within the group or was otherwise employed by such an entity fulfil the independence requirement under Article 24(2) of the UCITS V Level 2 where the person has ceased any function within the entity?
A person who served in the management body or supervisory body of an entity or was otherwise employed by such an entity should be deemed to fulfil the independence requirement only after an appropriate cooling-off period following the termination of his/her relationship with the relevant entity. That period should start from the final payment of any outstanding remuneration due to him/her which entails a margin of discretion from the entity (e.g. in case of any portion of variable remuneration which is deferred and still subject to contraction, including through malus or clawback arrangements) and is linked to his/her previous employment or other relationship with that entity. Non-discretionary outstanding payments from the entity to the person should not be taken into account for this purpose.

Without prejudice to any requirements established under the relevant national corporate governance rules or codes, the cooling-off period should be proportionate to the length of the employment or other relationship that the individual had with any of the companies within the group and to the type of functions performed within such company(ies).

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