UK Regulator Consults on UCITS, SFTR and consequential Changes to the Handbook

The Financial Conduct Authority published a consultation paper outlining proposed changes to the rules and guidance in the Client Assets sourcebook and the Collective Investment Schemes sourcebook (COLL), following the adoption of the UCITS V (the Undertakings for Collective Investment in Transferable Securities V Level 2 Regulation).   The consultation paper also proposes minor changes to the Senior Management Arrangements Systems and Controls sourcebook (SYSC) and consequential amendments in COLL and the Investment Funds sourcebook (FUND) to reflect certain measures in the Securities Financing Transactions Regulation. The UCITS V Level 2 Regulation sets out additional, detailed requirements for UCITS management companies and depositaries and will apply to UCITS management firms from October 13, 2016. Requirements include, for example, minimum terms in the contract between a management company and depositary, detailed oversight, cash monitoring and safe-keeping requirements for depositories, and requirements for independence between management companies and the depositaries. 

The FCA has proposed consequential amendments to CASS, including disapplying certain CASS rules and guidance to ensure consistency with requirements under the UCITS V Level 2 Regulation.  The FCA has also proposed guidance to signpost the conditions for meeting the independence requirements under the UCITS V Level 2 Regulation. Minor amendments to SYSC will set out circumstances where a UCITS management company must appoint a remuneration committee. Lastly, the FCA is consulting on transplanting SFTR provisions into COLL which require managers of UCITS and Alternative Investment Funds to disclose details of their use of Securities Financing Transactions and total return swaps in funds’ pre-contractual documents and periodical reports to investors.  

Responses to the consultation are due by July 19, 2016. The FCA intends to publish a policy statement between July and September 2016.

View the consultation paper.