The Central Bank UCITS Regulations (the Regulations) were published in October 2015 and came into effect on 1 November 2015. The Central Bank has undertaken to keep the Regulations under review and, if necessary, to update them periodically. In this respect, the Central Bank recently issued Consultation Paper 105 (CP105) the purpose of which is to set out these proposed amendments and to elicit feedback from stakeholders.
A number of proposed amendments to the Regulations have been identified and can be categorised as being either:
- Consequent to the implementation of UCITS V
- Technical changes, including corrections of typographical errors.
The most material amendments are described below:
Amendments consequent to the implementation of UCITS V
- The UCITS V Level 2 Regulation introduces requirements in relation to the holding of cash accounts by UCITS for operational purposes. These requirements are to be reflected in amendments to the Regulation.
- The UCITS V Level 2 Regulation does not apply safe-keeping obligations in relation to assets held through subsidiary vehicles. This gap is to be addressed through a proposed change to the Regulations. This would result in the Regulations stating that where a depositary holds the assets of a subsidiary of a UCITS, it shall apply its safe-keeping duties as set out in the Regulations and the UCITS V Level 2 Regulation.
- The Central Bank proposes to delete those provisions of the Regulations which reflect pre-existing Central Bank-specific requirements in the areas of
- Custody of assets by delegates
- Record keeping
- Operating conditions to be complied with by depositaries
- The required content of depositary agreements
- The valuation of assets.
The rationale is that those requirements will be superseded by the requirements set out in the UCITS V Level 2 Regulation.
Technical changes including correction of typographical errors
- In the context of the solvency requirements imposed on a depositary of an Irish UCITS, it is proposed to align the definition of ‘own funds’ with the requirements in CRD IV.
- References in the Regulations to ‘efficient portfolio management techniques and instruments’ are to be replaced with references to ‘efficient portfolio management techniques’ to ensure that the Regulations track the text in the ESMA Guidelines on ETFs and other UCITS issues.
- The Regulations set out the manner in which the assets of a UCITS should be valued. It is proposed to revise the Regulations to require that OTC derivatives shall be valued in accordance with Article 11 of EMIR. Accordingly, it would be necessary to value such derivatives mark-to-market on a daily basis and, where market conditions prevent marking-to-market, reliable and prudent marking-to-model would need to be used.
- It is proposed to permit a UCITS that wishes to take short positions, to either disclose in its prospectus the ratio of long positions to short positions or, alternatively, the percentage of the assets of the UCITS that it anticipates will be invested in long positions and short positions, respectively.
- It is proposed to amend the Regulations to clarify that a UCITS must submit its annual and half-yearly reports to the Central Bank within two working days of the deadline for publication of those reports.