• Service: Infrastructure, Legal Services, Legislative and Regulatory
  • Industry: Financial Services, Fund Management
  • Type: Business and industry issue, Publication series
  • Date: 8/28/2012


Ravi Beegun

+352 22 51 51 - 6248


Charles Muller


Tel. +352 22 51 51 - 7950


Dee Ruddy


Tel. +352 22 51 51 - 7369


July 2012 "UCITS VI" Consultation 

As part of continuing efforts to improve the UCITS framework and maintain investor confidence in the UCITS product the European Commission issued a new wide-ranging UCITS consultation entitled “Product Rules, Liquidity Management, Depositary, Money Market Funds, Long Term Investments" in July 2012, with response date 18 October 2012. 

This Consultation has to a degree been triggered by international regulatory focus on securities lending and repos, OTC derivatives and liquidity and systemic issues regarding ETFs and Money Market Funds and is complementary to the Commission’s work on Shadow Banking.  However the Commission also includes targeted improvements to the UCITS framework and also consults on wider conceptual areas such as long-term investments and a Depositary Passport.


The Commission aims to deepen their understanding on key topics and seeks stakeholder views on the following issues and possible policy orientations :

   UCITS Product Rules

Eligible assets and use of derivatives
  • Review of scope of eligible assets and exposures
  • Further rules on liquidity of eligible assets
  • Redefine rules on exposure to non-eligible assets
  • Limit derivatives to traded contracts
Over the Counter (OTC) Derivatives
  • Clarification of treatment of OTC derivatives cleared through central counterparties
  • Additional measures to mitigate risks of dealing with a single counterparty
  • Calculation of counterparty risk and issuer concentration on a daily basis
Efficient Portfolio Management (EPM) Techniques  (Securities lending, repos and related collateral management)
  • Limits to amount of fund assets subject to EPM
  • Define criteria on eligibility, liquidity, diversification and re-use of received collateral
  • Mandatory haircuts  on collateral received
  • Liquidity considerations on duration of EPM transactions
  • Enhanced transparency to investors

   UCITS Liquidity Management Tools

Extraordinary liquidity management tools
  • Introduce time limits for temporary suspension and deferral of redemptions
  • Define “exceptional cases” when a suspension of redemptions can be applied
  • Introduce side pockets in UCITS
  • Liquidity safeguards in ETF secondary markets
  • Common rules and time limits for execution of redemptions in normal circumstances

   UCITS IV framework improvement

  • Revision of timelines for  fund mergers
  • Improvement to the notification procedure
  • Alignment with AIFMD organizational rules, risk and liquidity management

   Money Market Funds (MMF)

  • More detailed and harmonized regulation of MMFs at EU level, either as part of UCITS, AIFMD or another instrument
  • Reduction or phasing out of Constant NAV MMFs
  • Introduce capital buffers for CNAV MMF
  • Impose liquidity fees and redemption restrictions
  • Add liquidity constraints to portfolio assets
  • Review Money Market Instruments eligibility criteria
  • Prohibit investment criteria related to ratings
  • Ban of rating of MMF

   UCITS Depositary Passport

  • Introduction of a Depositary Passport
  • Specific authorisation regime for depositary

   Long-term investments

  • Create a common framework to long-term investments for retail investors; either modify UCITS or a stand-alone initiative
  • Long-term assets include unlisted companies, infrastructure projects, real estate, socially responsible investments


blue square Targeted rule change 



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