UCITS III presented a major advance for the funds industry in the EU, not least by broadening the assets eligible for inclusion in the Undertakings for Collective Investment in Transferable Securities regime. Nevertheless, it left gaps in the framework that need filling with further legislation before a fully functioning single market becomes reality. Implementation of that legislation - in the shape of UCITS IV - is now on the horizon following the vote by the Luxembourg Parliament on 17 December 2010 of the law transposing the UCITS IV Directive into Luxembourg Law.
The new law entered into force on 1 January 2011 and provides the option to already use the UCITS IV framework with no obligation to make use of such option before 1 July 2011. The existing Fund Law of 20 December 2002 will be repealed on 1 July 2012, when all transitory provisions of the new Law will extinguish.
A range of Level 2 implementing measures, notably for the Management Company Passport, was also transposed in Luxembourg by means of two CSSF Regulations: Règlement 10-04 and 10-05. These complete the transposition of the UCITS IV package in Luxembourg. However, the funds industry will still be left to wrestle with various tax implications arising from the MCP, cross-border merger and master-feeder structure proposals and will still need to wait for the transposition of the Directive across Europe before they can take full advantage of the opportunities UCITS IV holds out.
UCITS IV, which has been widely welcomed, introduces an "Efficiency Package" of six major amendments that aim to improve the effectiveness of the UCITS regime and provide the funds industry with billions of euros worth of efficiency gains. This package consists of:
- A full Management Company Passport (MCP).
- Introduction of a framework for master-feeder structures.
- A new framework for fund mergers.
- A Key Investor Information (KII) document in place of the Simplified Prospectus.
- Speedier regulator-to-regulator notification procedures.
- Improved supervisory cooperation mechanisms.