The Undertakings for Collective Investment in Transferable Securities IV Directive (UCITS IV) came into effect on 01 July 2011, when it recast the original UCITS Directive, 85/611/EEC.

The original UCITS directive aimed to offer greater business and investment opportunities for both industry and investors by integrating the EU market for investment funds. In doing so it set out a harmonised regulatory framework for investment funds that invest in certain classes of assets, providing high levels of investor protection and a basis for the cross-border sale of these funds. UCITS IV aims to develop and enhance this framework created for UCITS.

UCITS IV has been implemented in Gibraltar via the Financial Services (Collective Investment Schemes) Act 2011  and the following Regulations:

Scope of UCITS IV

UCITS IV covers provisions for UCITS, UCITS Managers and UCITS Depositaries.

It seeks to remove administrative barriers to the cross-border marketing of UCITS and introduces a provision to permit UCITS Managers to passport throughout the EU, via the provisions of services or establishment of a branch. At the same time it improves co-operation between supervisory authorities and sets out information sharing provisions to allow for effective supervision.

Investor disclosure is further enhanced with the introduction of the Key Investor Information document (KII) which will offer a clearer and more understandable format for investors to make an informed decision.

A framework for mergers between UCITS is included as well as provisions for master-feeder structures have been incorporated into UCITS IV.1

The UCITS IV requirements are set out in the following EU directives:

Level 1

  • Directive 2009/65/EC on the coordination of laws, regulations and administrative provisions relating to UCITS.

Level 2

  • Directive 2010/43/EU - organisational requirements, conflicts of interest, conduct of business, risk management and content of the agreement between a depositary and a management company;
  • Directive 2010/44/EU - provisions concerning fund mergers, master-feeder structures and notification procedure.

Together with EU Regulations:

  • EU Regulation 583/2010 - key investor information and conditions to be met when providing key investor information or the prospectus in a durable medium other than by paper or by means of a website;
  • EU Regulation 584/2010 - the form and content of the standard notification letter and UCITS attestation, the use of electronic communication between competent authorities for the purpose of notification, and procedures for on-the-spot verifications and investigations between competent authorities.

The following level 3 measures are also to be observed, which have been published by CESR (Committee of European Securities Regulators) now superseded by ESMA (European Securities and Markets Authority):

To open the respective documents, click on the reference number in brackets.

  • Guidelines on a common definition of European money market funds (ref: CESR/10-049)
  • Guidelines on the methodology for the calculation of the synthetic risk and reward indicator in the Key Investor Information Document (ref: CESR/10-673)
  • Guidelines on the methodology for calculation of the ongoing charges figure in the Key Investor Information Document (ref: CESR/10-674)
  • Guidelines on Risk Measurement and the Calculation of Global Exposure and Counterparty Risk for UCITS (ref: CESR/10-788)
  • Selection and presentation of performance scenarios in the Key Investor Information document (KII) for structured UCITS (ref: CESR/10-1318)
  • Transition from the Simplified Prospectus to the Key Investor Information document (ref: CESR/10-1319)
  • Guide to clear language and layout for the Key Investor Information document (ref: CESR/10-1320)
  • Template for the Key Investor Information document (ref: CESR/10-1321)
  • Guidelines on risk measurement and the calculation of global exposure for certain types of structured UCITS (ESMA/2011/112).

Any comments or queries in respect of the implementation and application of UCITS IV should be forwarded to the Authorisations Team.