Rolf Bachner (pictured), Managing Director, EMEA Funds Product Manager, BNY Mellon, commenting on the new UCITS V regulations…
UCITS V picks up the AIFMD baton and continues to fine-tune investor protection through further mitigation of asset safety risks. It corrects the current unintended anomaly whereby professional investors in alternative investment funds enjoy higher investor protection and asset safety standards than retail investors in UCITS funds.
Out of the three pillars which underpin the UCITS V regulation – remuneration, regulatory sanctions and depositary requirements – the depositary provisions are the most onerous, while those around remuneration will be viewed as the most contentious.
In addition to introducing AIFMD-style cash monitoring, oversight and safekeeping, the restitution liability provisions have been sharpened. The liability now cannot be limited, delegated or passed on in any way. The scope of assets subject to restitution liability has also been increased.
UCITS V also tightens the safekeeping delegation rules: the sub-custodian must take “all necessary steps” to ensure that the UCITS’s assets aren’t available to creditors should it become insolvent.
Asset managers will also have to introduce new remuneration policies that promote sound and effective risk management that is in line investors’ interests. Remuneration policies will need to be publically disclosed, which many will claim is long overdue – although some managers may not welcome this additional scrutiny.
BNY Mellon welcomes the UCITS V regulation and we are already working closely with our clients to support them through the implementation.