EUROPEAN UNION: Draft Report on proposal for UCITS V Directive

Tuesday November 20 2012

The European Parliament’s Committee on Economic and Monetary Affairs have issued a draft report on the proposal for a UCITS V Directive.

The report welcomes the Commission`s proposal to amend the existing UCITS legislation in order to contribute to rebuilding consumers’ trust in financial markets. After the decision of a more harmonised alternative investment fund regulation (AIFMD) in the internal market in 2011, the already harmonised regime for more retail customer oriented funds now has to be realigned with rules provided for in the AIFM and in some respects provide for even better standards.

With regards to the delegation of custody and liability, UCITS V will seek alignment with the AIFMD Rules.

In the area of remuneration regulation the Commission has transposed the compromise found for the AIFM directive to the UCITS directive, largely based on the principles for remuneration policies established by the Financial Stability Board. Where the transposition was incomplete we aligned it fully with amendments (see Amendments 6, 12 and 13).

The report includes the following amendments:

• The scope of the directive regarding personnel has to cover all decision making and influencing staff in the UCITS and the management company;
• The share of variable compensation that has to be deferred has to at least be 60% as foreseen by the European Parliament its position on the CRD revision (2012);
• The maximum amount of variable remuneration may not exceed 50% of the total remuneration – fixed and variable;
• The responsible remuneration committee shall include employee representatives and shall ensure its rules enable shareholders to act in concert;
• ESMA in close collaboration with the national competent authorities shall supervise the implementation and execution of remuneration policies;
• Remuneration of management companies has to be aligned correctly with the interests of investors applied equally to such remuneration as to the remuneration of individual staff;
• Products that can be distributed across the single market require a regime that provides for harmonised minimum levels of strict sanctions which kick-in, in case of breaches of the obligations of the UCITS directive.

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