On September 3, the Financial Conduct Authority (FCA) published a consultation paper covering changes to its handbook of rules for Undertakings for the Collective Investment of Transferable Securities (UCITS) funds and other investment funds necessitated by the UK implementation of the UCITS V Directive (the Consultation Paper).

The Consultation Paper has three sections with proposed rule changes:

  • Part I: Draft rules and FCA guidance for the transposition of UCITS V into UK regulation. The FCA is required by EU law to transpose UCITS V into UK regulation by March 18, 2016, at the latest. Some of the more significant elements of the new UCITS rules include: (1) UCITS management companies will become subject to compensation rules similar to those applying under the AIFM Directive. The FCA will add a new section to the existing compensation rules in the Handbook for regulated alternative investment fund managers (AIFMs) and other investment firms, SYSC 19E. The FCA’s approach closely follows that used for AIFMs in SYSC 19B. (2) Disclosures that must be provided to UCITS investors (which also is broadly consistent with the AIFM Directive requirement); and (3) depositary requirements (again, principles broadly consistent with the AIFM Directive requirements). The FCA’s consultation on these draft rules closes on November 9 in order for the FCA to finalize the new UCITS rules before the deadline.
  • Part II: Draft rules and FCA guidance to ensure that the FCA Handbook is aligned with the new Regulation on European Long-Term Investment Funds (ELTIF Regulation). The ELTIF Regulation has direct effect in UK law (and that of all other EU countries), and does not need to be implemented in national law; the ELTIF Regulation applies beginning December 9. The FCA’s deadline for comments on Part II is October 5.
  • Part III: Draft incidental changes to the FCA Handbook so as to update the FCA’s rules and guidance for authorized (i.e., licensed) investment funds and set forth the FCA’s views on several matters on which it would like market views before consulting on new rules. The deadline for comments on this part is December 7.

The Consultation Paper is available here.