July 2012 "UCITS VI" Consultation | KPMG | LU

July 2012 "UCITS VI" Consultation

July 2012 "UCITS VI" Consultation

As part of continuing efforts to improve the UCITS framework and maintain investor confidence in the UCITS product the European Commission issued a new wide-ranging UCITS consultation entitled “Product Rules, Liquidity Management, Depositary, Money Market Funds, Long Term Investments" in July 2012, with response date 18 October 2012.



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UCITS Product Rules (TRC)
Eligible assets and use of derivatives
  • Review of scope of eligible assets and exposures
  • Further rules on liquidity of eligible assets
  • Redefine rules on exposure to non-eligible assets
  • Limit derivatives to traded contracts
Over the Counter (OTC) Derivatives
  • Clarification of treatment of OTC derivatives cleared through central counterparties
  • Additional measures to mitigate risks of dealing with a single counterparty
  • Calculation of counterparty risk and issuer concentration on a daily basis
Efficient Portfolio Management (EPM) Techniques  (Securities lending, repos and related collateral management)
  • Limits to amount of fund assets subject to EPM
  • Define criteria on eligibility, liquidity, diversification and re-use of received collateral
  • Mandatory haircuts  on collateral received
  • Liquidity considerations on duration of EPM transactions
  • Enhanced transparency to investors
UCITS Liquidity Management Tools (TRC)
Extraordinary liquidity management tools
  • Introduce time limits for temporary suspension and deferral of redemptions
  • Define “exceptional cases” when a suspension of redemptions can be applied
  • Introduce side pockets in UCITS
  • Liquidity safeguards in ETF secondary markets
  • Common rules and time limits for execution of redemptions in normal circumstances
UCITS IV framework improvement (TRC)
  • Revision of timelines for  fund mergers
  • Improvement to the notification procedure
  • Alignment with AIFMD organizational rules, risk and liquidity management
Money Market Funds (C)
  • More detailed and harmonized regulation of MMFs at EU level, either as part of UCITS, AIFMD or another instrument
  • Reduction or phasing out of Constant NAV MMFs
  • Introduce capital buffers for CNAV MMF
  • Impose liquidity fees and redemption restrictions
  • Add liquidity constraints to portfolio assets
  • Review Money Market Instruments eligibility criteria
  • Prohibit investment criteria related to ratings
  • Ban of rating of MMF
UCITS Depositary Passport (C)
  • Introduction of a Depositary Passport
  • Specific authorisation regime for depositary
Long-term investments (C)
  • Create a common framework to long-term investments for retail investors; either modify UCITS or a stand-alone initiative
  • Long-term assets include unlisted companies, infrastructure projects, real estate, socially responsible investments


(TRC): Targeted rule change

(C): Conceptual

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