UCITS VI: In practice

In the context of the work on shadow banking coordinated at a global level by the Financial Stability Board, in 2012 the European Commission (EC) held a consultation entitled ‘Product Rules, Liquidity Management, Depositary, Money Market Funds, Long Term Investments’ to gather the views of stakeholders on a range of topics (regarding especially Undertakings for Collective Investments (UCITS) but also money market funds (MMFs) and long-term investments) that might necessitate a legislative or regulatory update. This consultation was complementary to the guidelines issued by the European Securities and Markets Authority on exchange-traded funds and other UCITS issues and initiated a legislative process that soon was called ‘UCITS VI’ by the industry and is to be seen as part of the EC’s wider strategy to regain investors’ confidence and deepen the integration of financial markets. Although it closely followed issuance of the UCITS V proposal by the EC on 3rd July, 2012, the consultation addressed different issues. UCITS V concentrates on the UCITS depositary regime, remuneration of managers and building up a sanction system, whereas UCITS VI paves the way for several legislative proposals focusing on the following eight areas, which will be looked at in the first part of this paper: eligible assets for UCITS; efficient portfolio management techniques; over-the-counter (OTC) derivatives; extraordinary liquidity management rules; depositary passports; money market funds (MMFs); long-term investments; and UCITS IV updates. Since then, two proposals for regulations already have been issued by the EC: the first on European long-term investment funds on 26th June, 2013, and the second on MMFs on 4th September, 2013. Both are discussed in more detail in the second part of this paper.