ESMA published updated Q&A on UCITS Directive
News    ·   27-07-2017

AUTHOR: Andrew Caruana Scicluna; Andrea Vianelli

As mentioned in our previous client alert on the AIMFD Q&A published on 13 July 2017, the European Securities and Markets Authority (“ESMA”) has recently issued two updated questions and answers documents (“Q&A”) on the application of the Alternative Investment Fund Managers Directive (“AIFMD”) and the Undertakings for the Collective Investment in Transferable Securities Directive (“UCITS”). The present article will comment on the main updates registered across 2017 on the UCITS Q&A.

Issuer Concentration

On July 2017 ESMA clarified that the 40% limit set out in Article 52(2) does not apply to index-tracking UCITS that comply with the requirements set out in Article 53, UCITS Directive.

Advance notification of provision of services

In April 2017, ESMA clarified the content of the notification letter to be sent, in a preliminary phase, by a UCITS management company engaging in certain cross-border activities (MiFID services, collective portfolio management of UCITS) on the basis of the passporting regime set forth by Articles 16 to 21 of the UCITS Directive. ESMA specified that, in the first stage, the management company can notify cross-border activities without having to identify a specific UCITS. Then, when it will have identified the UCITS to be managed, the management company shall provide the competent authorities with full information in accordance with Article 20 of the UCITS Directive.

Application to UCITS of the exemption for intra-group transactions under EMIR

Asked whether a UCITS subject to the clearing obligation of Article 4(1) of EMIR, would be able to benefit from the exemption for intragroup transactions (Article 4(2) of EMIR), ESMA specified that in the case of UCITS the exemption for intragroup transactions should be construed narrowly, and that in most cases it will not be possible for the exemption to be used. A UCITS can only make use of the exemption for intragroup transactions if it has been established to form part of the same group (as defined in Article 2(16) of EMIR) as the counterparty to the OTC derivative contract and if it fulfils all the criteria for intragroup transactions set out in Article 3(2)(a)(i)-(iv), (b), or (d) of EMIR. The intragroup exemption for the clearing obligation implies that the UCITS will not be considered a distinct entity and will not be treated separately for other purposes under EMIR either. The same principles apply also to, mutatis mutandis, to AIFM as commented in the previous client alert mentioned above.

Group links, independence and cooling-off periods

As a final remark, please note that, on July 2017, ESMA clarified that a proportionate “cooling off” period is required in order to consider a person independent where such person served in the management body or supervisory body of an entity or was otherwise employed by such an entity for the purposes of Article 24(2) of the UCITS V Level 2 legislation. Said period should be proportionate to (i) the length of the employment or other relationship that the individual had with any of the companies within the group and (ii) to the type of functions performed within such companies.

That period should start from the final payment of any outstanding remuneration (excluded non-discretionary outstanding payments) due to him/her and is linked to his/her previous employment or other relationship with that entity.

Should you require any assistance with regards to the UCITS Directive and its implementation, or wish to discuss your ideas, please contact us on


Keep in touch with us
Send us a message

Enter the code shown:

Where we are

Camilleri Preziosi

Level 3, Valletta Buildings

South Street

Valletta, VLT 1103


footerPhone (+356) 2123 8989