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Article (105/202)
Undertakings for Collective Investment in Transferable Securities (UCITS V) - regulation memo
Undertakings for Collective Investment in Transferable Securities (UCITS V) - regulation memo

Undertakings for Collective Investment in Transferable Securities (UCITS V) - regulation memo


The UCITS V Directive focuses heavily on increasing investor protection for UCITS (Undertakings for Collective Investment in Transferable Securities) funds, given that these are sold to the general public.

To this effect, the UCITS V Directive (UCITS V) is globally aligned with the Alternative Investment Fund Managers Directive (AIFMD) on rules concerning asset manager remuneration and the duties and liabilities of depositaries. However UCITS V imposes a stricter depositary regime and also introduces a harmonised sanctions regime.


Key changes compared to AIFMD lie in the following provisions:

  • The independence requirement between the UCITS asset manager and the depositary (i.e. independence between their respective governance bodies)
  • The insolvency protection regime when the custody function has been delegated by the depositary although recent amendments of AIFMD delegated acts on safekeeping duties of depositaries, which will entry into application in April 2021 will remove this gap between AIFMD and UCITS V

Key changes compared to UCITS IV are:

  • The introduction of stricter criteria for entities allowed to act as a depositary (now restricted to credit institutions, national central banks and other legal entities authorised under the laws of EU Member States to carry out depositary activities and subject to harmonised additional conditions under UCITS V)
  • The obligation for the depositary and the asset manager/ UCITS fund to enter into an agreement whose content is specified in the level 2 text
  • For depositaries, the strict liability regime for assets held in custody and the introduction of new duties: cash monitoring, record-keeping for assets not held in custody and oversight duties for UCITS funds which have a legal personality


  • EU asset managers managing UCITS funds
  • UCITS depositaries

Industry implications

New remuneration rules have forced asset managers to adapt their remuneration policy. The industry has expressed concern over the overlapping requirements for EU-wide portfolio management activities between UCITS V, AIFMD, MiFID and the Capital Requirement Directive (CRD IV) and the need for proportionality.

When appointing a depositary, asset managers must also:

  • Ensure compliance regarding depositary selection with respect to eligibility criteria and independence requirements
  • Implement required information flows and contractual arrangements with depositaries

Since the entry into effect of UCITS V, segregation requirements and the role of investor CSDs have been interpreted in different ways at the national level. The same issue exists with AIFMD.

On 20 July 2017 ESMA published an opinion on these topics. This opinion, which is not binding, sets out suggestions to the EU institutions for possible clarification of the legislative provisions under AIFMD and the UCITS Directive. Subsequently, on 30 October 2018 amendments of UCITS V delegated acts on safekeeping duties of depositaries were adopted. At the depositary’s delegates level, the use of omnibus accounts including assets of AIFs, UCITS and other clients will be allowed. In counterparty, due diligence and verifications by the depositary all along the custody chain are strengthened and the depositary must keep a record for each UCITS in its book for the assets whose custody has been delegated.

BNP Paribas Securities Services’ view

We welcome the harmonisation and clarification of depositary functions/liabilities introduced by UCITS V and the increase of investor protection it brings. UCITS V enhances the UCITS brand and may provide marketing opportunities.

However, UCITS V is challenging for smaller depositaries given their duties and stricter liabilities.

Asset managers offering UCITS need to appoint a secure depositary given that:

  • The depositary is liable for any loss caused by its sub-custodians, and obliged to restitute the assets lost
  • UCITS V provisions on sanctions reinforce the importance of the oversight function performed by the depositary

With the new Commission to be put in place in Q2 2019, the UCITS legislative framework could be reviewed, together with AIFMD. In particular, EU regulators are expected to seek further harmonisation on the following issues:

  • Definition of share classes
  • Diversification requirements on non-cleared OTC derivatives

Key dates

March 2016

  • UCITS V Directive implementation date
  • ESMA published guidelines on asset managers’ remuneration

October 2016 - Level 2 text provisions entered into effect
January 2017 - Entry into application of the guidelines on asset managers’ remuneration
July 2017 - ESMA opinion on asset segregation rules along the custody chain and the clarification of the role of investor CSDs
October 2018 - amendments of UCITS V delegated acts on safekeeping duties of depositaries
January 2019: Start of the trialogue on cross-border distribution of funds
April 2020: entry into application of the new safekeeping duties for depositaries

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