EUROPEAN UNION: ESMA Publishes Q&A on Application of UCITS Directive

Thursday October 5 2017

The European Securities Market Authority (ESMA) has published an updated Q&A on the application of UCITS. The new question concerns periodic reporting under Article 13 of SFTR for UCITS and AIFs to investors on the use of SFTs and total return swaps.

The updated Q&A includes the following new question:

Question 2a: Pursuant to Article 13 of SFTR, UCITS management companies, UCITS investment companies, and AIFMs (“UCITS/AIF managers”) shall inform investors on the use they make of SFTs and total return swaps in annual (UCITS and AIFs) and half-yearly (UCITS only) reports. The information on SFTs and total return swaps shall include the data provided for in Section A of the Annex to SFTR. Should this data be reported as aggregate data (with respect to the whole of the reporting period) or based on a snapshot (taken at the end of the reporting period)?

Answer: ESMA have provided a table which explains how each data item in Section A of the Annex to the SFTR should be reported. All data items should be reported as a snapshot, with the exception of the following:

Data on reuse of collateral

• Cash collateral reinvestment returns to the collective investment undertaking.

Data on return and cost for each type of SFTs and total return swaps

• broken down between the collective investment undertaking, the manager of the collective investment undertaking and third parties (e.g. agent lender) in absolute terms and as a percentage of overall returns generated by that type of SFTs and total return swaps For each of the data items firms should not artificially alter their practices in a way that would lead to the reporting being misleading.

For each of the data items firms should not artificially alter their practices in a way that would lead to the reporting being misleading.

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