Follow Us

Follow us on Twitter  Follow us on LinkedIn
 

29 October 2009

CESR proposes requirements for management company passport and improved investor disclosures for UCITS


The work done by CESR on disclosures will help integrate the single market for financial services further by enabling retail investors to compare products more effectively. It will ensure certainty and clarity for cross-border firms.

CESR delivered to the Commission its advice in two key areas relating to Undertakings for Collective Investment in Transferable Securities (UCITS): the regulatory framework that should underpin the management company passport (and the format and the content of key investor information disclosures). CESR’s advice follows a Commission mandate received in February 2009.

 
This work serves two key CESR objectives: delivering greater convergence by harmonising the requirements firms must fulfil when managing UCITS, and improving investor protection by ensuring greater transparency and clarity of information for retail investors seeking to buy UCITS products. The work on disclosures will help integrate the single market for financial services further by enabling retail investors to compare products more effectively and will ensure certainty and clarity for cross-border firms.
 
·         Advice clarifies requirements for cross-border management of UCITS
CESR’s advice on the management company passport covers both the organisational requirements that companies managing UCITS need to fulfil, and the conflicts of interest such companies must avoid. The advice also includes details on the companies’ rules of conduct, depositaries and risk management, as well as on supervisory co-operation.
 
CESR’s advice follows the objective set out in the Commission’s mandate, which was to seek maximum alignment with the relevant rules in the Markets in Financial Instruments Directive (MiFID), while taking into account the specificities of the UCITS sphere. The advice covers such matters as general organisational procedures and arrangements, responsibility of senior management, voting rights and inducements.
 
CESR’s advice in the area of depositaries focuses on the written agreement to be drawn up between the management company and the depositary, both in domestic and cross-border situations. The advice on risk management is based on the principle that a management company should employ a risk management process enabling it to monitor and measure, at any time, the risk of different positions and their contribution to the overall risk profile of the portfolio of the UCITS. This includes the establishment of a well-documented organisational structure that clearly assigns responsibilities, incorporates proper internal control mechanisms and ensures good flows of information between all parties involved.
 
CESR’s recommendations on supervisory co-operation take into account the existing legal framework in relation to international co-operation, as well as best practice developed within CESR and IOSCO, the International Organization of Securities Commissions.
·         KID to include disclosures for risk and reward, as well as for charges
CESR’s advice recommends the adoption of a synthetic risk and reward indicator accompanied by a narrative text. This text should cover the material risks not fully captured by the indicator. On charges, CESR’s advice foresees the inclusion of a table setting out clearly the different elements of the charging structure (in percentage terms).
 
CESR advises that presentation of past performance should be based on use of a bar chart displaying, where available, up to ten years’ performance. In addition, the proposal allows performance information to be displayed only where there is at least one calendar year’s data. For structured UCITS, CESR proposes an alternative in the form of prospective scenarios. These scenarios are designed to illustrate the potential performance of the fund under a range of market conditions.
 
CESR was requested to deliver its technical advice on possible implementing measures concerning the new UCITS Directive by 30 October 2009. The Commission’s mandate is split into three parts: the advice published today represents CESR’s advice on Parts I and Part II of the mandate. On 17 September 2009 CESR published for consultation its draft advice on Part III of the mandate (request for technical advice on the level 2 measures related to fund mergers, master-feeder structures and notification procedure) (Ref. CESR/09-785) and, in light of stakeholder feedback, will finalise its advice for submission to the Commission by the end of 2009.
 
The Commission intends to adopt implementing measures on the basis of CESR’s advice by July 2010, in view of the deadline for implementation of the UCITS Directive of July 2011.
 


© CESR - Committee of European Securities Regulators


< Next Previous >
Key
 Hover over the blue highlighted text to view the acronym meaning
Hover over these icons for more information



Add new comment