VIRGIN ISLANDS
MUTUAL FUNDS (RESTRICTED PUBLIC FUND) REGULATIONS, 2005


ARRANGEMENT OF REGULATIONS
Regulation
1. . Citation.
2. . Interpretation.
3. . Restricted public fund.
4. . Condition.
SCHEDULE
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VIRGIN ISLANDS
STATUTORY INSTRUMENT 2005 NO. 24
MUTUAL FUNDS ACT, 1996
(No. 6 of 1996)
Mutual Funds (Restricted Public Fund) Regulations, 2005
[Gazetted 22nd April, 2005]
The Governor in Council, acting on the advice of the Financial Services
Commission and in exercise of the powers conferred by section 42 of the Mutual
Funds Act, 1996 (No. 6 of 1996), makes the following Regulations:
1. These Regulations may be cited as the Mutual Funds (Restricted Public
Fund) Regulations, 2005.
2. (1) In these Regulations,
“Article” means an Article of the Directive;
“Directive” means the Directive of the Council of the European Union known as
Council Directive 85/611/EEC of 20 December 1985 on the coordination
of laws, regulations and administrative provisions relating to undertakings
for collective investment in transferable securities (UCITS) as in force on
the date of commencement of these Regulations and as set out in the
Schedule.
(2) For the purposes of these Regulations, a reference to “competent
authority” in these Regulations or in the Directive shall, unless the context
otherwise requires, be construed as a reference to the Commission.
3. A public fund which meets the condition stipulated in regulation 4 shall
be deemed a restricted public fund.
4. The condition referred to in regulation 3 is that the prospectus of the
public fund contains express statements that
(a) the sole object of the public fund is the collective
investment in any or all of the liquid financial assets
referred to in Article 19(1);
(b) the public fund shall comply with the obligations
concerning investment policies set out in Articles 19, 22(1),
24(1), 24(2) and 25(2); and
Citation.
Interpretation.
Schedule
Restricted public
fund.
Conditions.
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(c) the public fund shall comply with the obligations set out in
Articles 36(1), 41 and 42.
SCHEDULE
[Regulation 2]
COUNCIL DIRECTIVE
of 20 December 1985
on the coordination of laws, regulations and administrative provisions
relating to undertakings for
collective investment in transferable securities (UCITS)
(85/611/EEC)
(OJ L 375, 31.12.1985, p. 3)
Amended by:
Official Journal
No page date
Council Directive 88/220/EEC of
22 March 1988 L 100 31 19.4.1988
European Parliament and Council
Directive 95/26/EC of 29 June 1995 L 168 7 18.7.1995
Directive 2000/64/EC of the European
Parliament and of the Council of
7 November 2000 L 290 27 17.11.2000
Directive 2001/107/EC of the European
Parliament and of the Council of
21 January 2002 L 41 20 13.2.2002
Directive 2001/108/EC of the European
Parliament and of the Council of
21 January 2002 L 41 35 13.2.2002
Directive 2004/39/EC of the European
Parliament and of the Council of
21 April 2004 L 145 1 30.4.2004
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COUNCIL DIRECTIVE
of 20 December 1985
on the coordination of laws, regulations and administrative provisions
relating to undertakings for collective investment in
transferable securities (UCITS)
(85/611/EEC)
THE COUNCIL OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European Economic Community, and
in particular Article 57 (2) thereof,
Having regard to the proposal from the Commission (1),
Having regard to the opinion of the European Parliament (2),
Having regard to the opinion of the Economic and Social Committee (3),
Whereas the laws of the Member States relating to collective investment
undertakings differ appreciably from one state to another, particularly as regards
the obligations and controls which are imposed on those undertakings; whereas
those differences distort the conditions of competition between those undertakings
and do not ensure equivalent protection for unit-holders;
Whereas national laws governing collective investment undertakings should be
coordinated with a view to approximating the conditions of competition between
those undertakings at Community level, while at the same time ensuring more
effective and more uniform protection for unit-holders; whereas such coordination
will make it easier for a collective investment undertaking situated in one Member
State to market its units in other Member States;
Whereas the attainment of these objectives will facilitate the removal of the
restrictions on the free circulation of the units of collective investment
undertakings in the Community, and such coordination will help to bring about a
European capital market;
Whereas, having regard to these objectives, it is desirable that common basic rules
be established for the authorization, supervision, structure and activities of
collective investment undertakings situated in the Member States and the
information they must publish;
Whereas the application of these common rules is a sufficient guarantee to permit
collective investment undertakings situated in Member States, subject to the
applicable provisions relating to capital movements, to market their units in other
Member States without those Member States’ being able to subject those
undertakings or their units to any provision whatsoever other than provisions
which, in those states, do not fall within the field covered by this Directive;
whereas, nevertheless, if a collective investment undertaking situated in one
(1) OJ No C 171, 26. 7. 1976, p. 1.
(2) OJ No C 57, 7. 3. 1977, p. 31.
(3) OJ No C 75, 26. 3. 1977, p. 10.
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Member State markets its units in a different Member State it must take all
necessary steps to ensure that unit-holders in that other Member State can exercise
their financial rights there with ease and are provided with the necessary
information,
Whereas the coordination of the laws of the Member States should be confined
initially to collective investment undertakings other than of the closed-ended type
which promote the sale of their units to the public in the Community and the sole
object of which is investment in transferable securities (which are essentially
transferable securities officially listed on stock exchanges or similar regulated
markets); whereas regulation of the collective investment undertakings not
covered by the Directive poses a variety of problems which must be dealt with by
means of other provisions, and such undertakings will accordingly be the subject
of coordination at a later stage; whereas pending such coordination any Member
State may, inter alia prescribe those categories of undertakings for collective
investment in transferable securities (UCITS) excluded from this Directive’s
scope on account of their investment and borrowing policies and lay down those
specific rules to which such UCITS are subject in carrying on their business
within its territory;
Whereas the free marketing of the units issued by UCITS authorized to invest up
to 100 % of their assets in transferable securities issued by the same body (State,
local authority, etc.) may not have the direct or indirect effect of disturbing the
functioning of the capital market or the financing of the Member States or of
creating economic situations similar to those which Article 68 (3) of the Treaty
seeks to prevent;
Whereas account should be taken of the special situations of the Hellenic
Republic’s and Portuguese Republic’s financial markets by allowing those
countries and additional period in which to implement this Directive,
HAS ADOPTED THIS DIRECTIVE:
Section I
General provisions and scope
Article 1
1. The Member States shall apply this Directive to undertakings for collective
investment in transferable securities (hereinafter referred to as UCITS) situated
within their territories.
2. For the purposes of this Directive, and subject to Article 2, UCITS shall be
undertakings:
— the sole object of which is the collective investment in transferable securities
and/or in other liquid financial assets referred to in Article 19(1) of capital raised
from the public and which operates on the principle of risk-spreading and
— the units of which are, at the request of holders, re-purchased or redeemed,
directly or indirectly, out of those undertakings’ assets.
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Action taken by a UCITS to ensure that the stock exchange value of its units does
not significantly vary from their net asset value shall be regarded as equivalent to
such re-purchase or redemption.
3. Such undertakings may be constituted according to law, either under the law of
contract (as common funds managed by management companies) or trust law (as
unit trusts) or under statute (as investment companies).
For the purposes of this Directive ‘common funds’ shall also include unit trusts.
4. Investment companies the assets of which are invested through the
intermediary of subsidiary companies mainly otherwise than in transferable
securities shall not, however, be subject to this Directive.
5. The Member States shall prohibit UCITS which are subject to this Directive
from transforming themselves into collective investment undertakings which are
not covered by this Directive.
6. Subject to the provisions governing capital movements and to Articles 44, 45
and 52 (2) no Member State may apply any other provisions whatsoever in the
field covered by this Directive to UCITS situated in another Member State or to
the units issued by such UCITS, where they market their units within its territory.
7. Without prejudice to paragraph 6, a Member State may apply to UCITS
situated within its territory requirements which are stricter than or additional to
those laid down in Article 4 et seq. of this Directive, provided that they are of
general application and do not conflict with the provisions of this Directive.
8. For the purposes of this Directive, ‘transferable securities’ shall mean:
— shares in companies and other securities equivalent to shares in
companies (‘shares’),
— bonds and other forms of securitised debt (‘debt securities’),
— any other negotiable securities which carry the right to acquire any such
transferable securities by subscription or exchange, excluding the techniques and
instruments referred to in Article 21.
9. For the purposes of this Directive ‘money market instruments’ shall mean
instruments normally dealt in on the money market which are liquid, and have a
value which can be accurately determined at any time.
Article 1a
For the purposes of this Directive:
1. ‘depositary’ shall mean any institution entrusted with the duties mentioned in
Articles 7 and 14 and subject to the other provisions laid down in Sections IIIa
and IVa;
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2. ‘management company’ shall mean any company, the regular business of
which is the management of UCITS in the form of unit trusts/common funds
and/or of investment companies (collective portfolio management of UCITS); this
includes the functions mentioned in Annex II;
3. a ‘management company’s home Member State’ shall mean the Member State,
in which the management company’s registered office is situated;
4. a ‘management company’s host Member State’ shall mean the Member State,
other than the home Member State, within the territory of which a management
company has a branch or provides services;
5. a ‘UCITS home Member State’ shall mean:
(a) with regard to a UCITS constituted as unit trust/common fund, the Member
State in which the management company’s registered office is situated,
(b) with regard to a UCITS constituted as investment company, the Member State
in which the investment company’s registered office is situated;
6. a ‘UCITS host Member State’ shall mean the Member State, other than the
UCITS home Member State, in which the units of the common fund/unit trust or
of the investment company are marketed;
7. ‘branch’ shall mean a place of business which is a part of the management
company, which has no legal personality and which provides the services for
which the management company has been authorized; all the places of business
set up in the same Member State by a management company with headquarters in
another Member State shall be regarded as a single branch;
8. ‘competent authorities’ shall mean the authorities which each Member State
designates under Article 49 of this Directive;
9. ‘close links’ shall mean a situation as defined in Article 2(1) of Directive
95/26/EC (1);
10. ‘qualifying holdings’ shall mean any direct or indirect holding in a
management company which represents 10 % or more of the capital or of the
voting rights or which makes it possible to exercise a significant influence over
the management of the management company in which that holding subsists. For
the purpose of this definition, the voting rights referred to in Article 7 of Directive
88/627/EEC (1) shall be taken into account;
(1) OJ L 348, 17.12.1988, p. 62.
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11. ‘ISD’ shall mean Council Directive 93/22/EEC of 10 May 1993 on investment
services in the securities field (2);
12. ‘parent undertaking’ shall mean a parent undertaking as defined in Articles 1
and 2 of Directive 83/349/EEC (3);
13. ‘subsidiary’ shall mean a subsidiary undertaking as defined in Articles 1 and 2
of Directive 83/349/EEC; any subsidiary of a subsidiary undertaking shall also be
regarded as a subsidiary of the parent undertaking which is the ultimate parent of
those undertakings;
14. ‘initial capital’ shall mean capital as defined in items 1 and 2 of Article 34(2)
of Directive 2000/12/EC (4);
15. ‘own funds’ shall mean own funds as defined in Title V, Chapter 2, Section 1
of Directive 2000/12/EC; this definition may, however, be amended in the
circumstances described in Annex V of Directive 93/6/EEC (5).
Article 2
1. The following shall not be UCITS subject to this Directive:
— UCITS of the closed-ended type;
— UCITS which raise capital without promoting the sale of their units to the
public within the Community or any part of it;
— UCITS the units of which, under the fund rules or the investment company’s
instruments of incorporation, may be sold only to the public in non-member
countries;
— categories of UCITS prescribed by the regulations of the Member States in
which such UCITS are situated, for which the rules laid down in Section V and
Article 36 are inappropriate in view of their investment and borrowing policies.
2. Five years after the implementation of this Directive the Commission shall
submit to the Council a report on the implementation of paragraph 1 and, in
particular, of its fourth indent. If necessary, it shall propose suitable measures to
extend the scope.
(2) OJ L 141, 11.6.1993, p. 27. Directive as last amended by Directive 2000/64/
EC (OJ L 290, 17.11.2000, p. 27).
(3) OJ L 193, 18.7.1983, p. 1. Directive as last amended by the 1994 Act of
Accession.
(4) OJ L 126, 26.5.2000, p. 1. Directive as amended by Directive 2000/28/EC
of the European Parliament and of the Council (OJ L 275, 27.10.2000, p.
37).
(5) OJ L 141, 11.6.1993, p. 1. Directive as last amended by Directive 98/33/EC
of the European Parliament and of the Council (OJ L 204, 21.7.1998, p. 29).
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Article 3
For the purposes of this Directive, a UCITS shall be deemed to be situated in the
Member State in which the investment company or the management company of
the unit trust has its registered office; the Member States must require that the
head office be situated in the same Member State as the registered office.
SECTION II
Authorization of UCITS
Article 4
1. No UCITS shall carry on activities as such unless it has been authorized by the
competent authorities of the Member State in which it is situated, hereinafter
referred to as ‘the competent authorities’. Such authorization shall be valid for all
Member States.
2. A unit trust shall be authorized only if the competent authorities have approved
the management company, the fund rules and the choice of depositary. An
investment company shall be authorized only if the competent authorities have
approved both its instruments of incorporation and the choice of depositary.
3. The competent authorities may not authorise a UCITS if the management
company or the investment company do not comply with the preconditions laid
down in this Directive, in Sections III and IV respectively. Moreover the
competent authorities may not authorise a UCITS if the directors of the depositary
are not of sufficiently good repute or are not sufficiently experienced also in
relation to the type of UCITS to be managed. To that end, the names of the
directors of the depositary and of every person succeeding them in office must be
communicated forthwith to the competent authorities. Directors shall mean those
persons who, under the law or the instruments of incorporation, represent the
depositary, or who effectively determine the policy of the depositary.
3a. The competent authorities shall not grant authorisation if the UCITS is legally
prevented (e.g. through a provision in the fund rules or instruments of
incorporation) from marketing its units or shares in its home Member State.
4. Neither the management company nor the depositary may be replaced, nor may
the fund rules or the investment company’s instruments of incorporation be
amended, without the approval of the competent authorities.
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SECTION III
Obligations regarding management companies
Title A
Conditions for taking up business
Article 5
1. Access to the business of management companies is subject to prior official
authorisation to be granted by the home Member State’s competent authorities.
Authorisation granted under this Directive to a management company shall be
valid for all Member States.
2. No management company may engage in activities other than the management
of UCITS authorised according to this Directive except the additional
management of other collective investment undertakings which are not covered
by this Directive and for which the management company is subject to prudential
supervision but which cannot be marketed in other Member States under this
Directive. The activity of management of unit trusts/common funds and of
investment companies includes, for the purpose of this Directive, the functions
mentioned in Annex II which are not exhaustive.
3. By way of derogation from paragraph 2, Member States may authorise
management companies to provide, in addition to the management of unit
trusts/common funds and of investment companies, the following services:
(a) management of portfolios of investments, including those owned by pension
funds, in accordance with mandates given by investors on a discretionary, clientby-
client basis, where such portfolios include one or more of the instruments
listed in Section B of the Annex to the ISD,
(b) as non-core services:
— investment advice concerning one or more of the instruments listed in Section
B of the Annex to the ISD,
— safekeeping and administration in relation to units of collective investment
undertakings.
Management companies may in no case be authorised under this Directive to
provide only the services mentioned in this paragraph or to provide non-core
services without being authorised for the service referred to in point (a).
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4. Articles 2(2), 12, 13 and 19 of Directive 2004//EC (1) of the European
Parliament and of the Council of… on markets in financial instruments (2), shall
apply to the provision of the services referred to in paragraph 3 of this Article by
management companies.
Article 5a
1. Without prejudice to other conditions of general application laid down by
national law, the competent authorities shall not grant authorisation to a
management company unless:
(a) the management company has an initial capital of at least EUR 125 000:
— When the value of the portfolios of the management company, exceeds EUR
250 000 000, the management company shall be required to provide an additional
amount of own funds. This additional amount of own funds shall be equal to 0,02
% of the amount by which the value of the portfolios of the management company
exceeds EUR 250 000 000. The required total of the initial capital and the
additional amount shall not, however, exceed EUR 10 000 000.
— For the purpose of this paragraph, the following portfolios shall be deemed to
be the portfolios of the management company:
(i) unit trusts/common funds managed by the management company including
portfolios for which it has delegated the management function but excluding
portfolios that it is managing under delegation;
(ii) investment companies for which the management company is the designated
management company;
(iii) other collective investment undertakings managed by the management
company including portfolios for which it has delegated the management function
but excluding portfolios that it is managing under delegation.
— Irrespective of the amount of these requirements, the own funds of the
management company shall never be less than the amount prescribed in Annex IV
of Directive 93/6/EEC.
— Member States may authorise management companies not to provide up to 50
% of the additional amount of own funds referred to in the first indent if they
benefit from a guarantee of the same amount given by a credit institution or an
insurance undertaking. The credit institution or insurance undertaking must have
its registered office in a Member State, or in a non-Member State provided that it
is subject to prudential rules considered by the competent authorities as equivalent
to those laid down in Community law.
— No later than 13 February 2005, the Commission shall present a report to the
European Parliament and the Council on the application of this capital
requirement, accompanied where appropriate by proposals for its revision;
(1) OPECE to insert reference to this Directive.
(2) OJ L
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(b) the persons who effectively conduct the business of a management company
are of sufficiently good repute and are sufficiently experienced also in relation to
the type of UCITS managed by the management company. To that end, the names
of these persons and of every person succeeding them in office must be
communicated forthwith to the competent authorities. The conduct of a
management company’s business must be decided by at least two persons meeting
such conditions;
(c) the application for authorisation is accompanied by a programme of activity
setting out, inter alia, the organisational structure of the management company;
(d) both its head office and its registered office are located in the same Member
State.
2. Moreover where close links exist between the management company and other
natural or legal persons, the competent authorities shall grant authorisation only if
those do not prevent the effective exercise of their supervisory functions.
The competent authorities shall also refuse authorisation if the laws, regulations
or administrative provisions of a non-member country governing one or more
natural or legal persons with which the management company has close links, or
difficulties involved in their enforcement, prevent the effective exercise of their
supervisory functions. The competent authorities shall require management
companies to provide them with the information they require to monitor
compliance with the conditions referred to in this paragraph on a continuous
basis.
3. An applicant shall be informed, within six months of the submission of a
complete application, whether or not authorisation has been granted. Reasons
shall be given whenever an authorisation is refused.
4. A management company may start business as soon as authorisation has
been granted.
5. The competent authorities may withdraw the authorisation issued to a
management company subject to this Directive only where that company:
(a) does not make use of the authorisation within 12 months, expressly renounces
the authorisation or has ceased the activity covered by this Directive more than
six months previously unless the Member State concerned has provided for
authorisation to lapse in such cases;
(b) has obtained the authorisation by making false statements or by any other
irregular means;
(c) no longer fulfils the conditions under which authorisation was granted;
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(d) no longer complies with Directive 93/6/EEC if its authorisation also covers the
discretionary portfolio management service referred to in Article 5(3)(a) of this
Directive;
(e) has seriously and/or systematically infringed the provisions adopted pursuant
to this Directive; or
(f) falls within any of the cases where national law provides for withdrawal.
Article 5b
1. The competent authorities shall not grant authorisation to take up the business
of management companies until they have been informed of the identities of the
shareholders or members, whether direct or indirect, natural or legal persons, that
have qualifying holdings and of the amounts of those holdings. The competent
authorities shall refuse authorisation if, taking into account the need to ensure the
sound and prudent management of a management company, they are not satisfied
as to the suitability of the aforementioned shareholders or members.
2. In the case of branches of management companies that have registered offices
outside the European Union and are starting or carrying on business, the Member
States shall not apply provisions that result in treatment more favourable than that
accorded to branches of management companies that have registered offices in
Member States.
3. The competent authorities of the other Member State involved shall be
consulted beforehand on the authorisation of any management company which is:
(a) a subsidiary of another management company, an investment firm, a credit
institution or an insurance undertaking authorised in another Member State,
(b) a subsidiary of the parent undertaking of another management company, an
investment firm, a credit institution or an insurance undertaking authorised in
another Member State, or (c) controlled by the same natural or legal persons as
control another management company, an investment firm, a credit institution or
an insurance undertaking authorised in another Member State.
Title B
Relations with third countries
Article 5c
1. Relations with third countries shall be regulated in accordance with the relevant
rules laid down in Article 7 of the ISD. For the purpose of this Directive, the
expressions ‘firm/investment firm’ and ‘investment firms’ contained in Article 7
of the ISD shall be construed respectively as ‘management company’ and
‘management companies’; the expression ‘providing investment services’ in
Article 7(2) of the ISD shall be construed as ‘providing services’.
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2. The Member States shall also inform the Commission of any general
difficulties which UCITS encounter in marketing their units in any third country.
Title C
Operating conditions
Article 5d
1. The competent authorities of the management company’s home Member State
shall require that the management company which they have authorised complies
at all times with the conditions laid down in Article 5 and Article 5a(1) and (2) of
this Directive. The own funds of a management company may not fall below the
level specified in Article 5a(1)(a). If they do, however, the competent authorities
may, where the circumstances justify it, allow such firms a limited period in
which to rectify their situations or cease their activities.
2. The prudential supervision of a management company shall be the
responsibility of the competent authorities of the home Member State, whether the
management company establishes a branch or provides services in another
Member State or not, without prejudice to those provisions of this Directive
which give responsibility to the authorities of the host country.
Article 5e
1. Qualifying holdings in management companies shall be subject to the same
rules as those laid down in Article 9 of the ISD.
2. For the purpose of this Directive, the expressions ‘firm/investment firm’ and
‘investment firms’ contained in Article 9 of the ISD shall be construed
respectively as ‘management company’ and ‘management companies’.
Article 5f
1. Each home Member State shall draw up prudential rules which management
companies, with regard to the activity of management of UCITS authorised
according to this Directive, shall observe at all times. In particular, the competent
authorities of the home Member State having regard also to the nature of the
UCITS managed by a management company, shall require that each such
company:
(a) has sound administrative and accounting procedures, control and safeguard
arrangements for electronic data processing and adequate internal control
mechanisms including, in particular, rules for personal transactions by its
employees or for the holding or management of investments in financial
instruments in order to invest own funds and ensuring, inter alia, that each
transaction involving the fund may be reconstructed according to its origin, the
parties to it, its nature, and the time and place at which it was effected and that the
assets of the unit trusts/common funds or of the investment companies managed
by the management company are invested according to the fund rules or the
instruments of incorporation and the legal provisions in force;
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(b) is structured and organised in such a way as to minimise the risk of UCITS’ or
clients’ interests being prejudiced by conflicts of interest between the company
and its clients, between one of its clients and another, between one of its clients
and a UCITS or between two UCITS. Nevertheless, where a branch is set up, the
organisational arrangements may not conflict with the rules of conduct laid down
by the host Member State to cover conflicts of interest.
2. Each management company the authorisation of which also covers the
discretionary portfolio management service mentioned in Article 5(3)(a):
— shall not be permitted to invest all or a part of the investor’s portfolio in units
of unit trusts/common funds or of investment companies it manages, unless it
receives prior general approval from the client,
— shall be subject with regard to the services referred to in Article 5(3) to the
provisions laid down in Directive 97/9/EC of the European Parliament and of the
Council of 3 March 1997 on investor-compensation schemes (1).
Article 5g
1. If Member States permit management companies to delegate to third parties for
the purpose of a more efficient conduct of the companies’ business to carry out on
their behalf one or more of their own functions the following preconditions have
to be complied with:
(a) the competent authority must be informed in an appropriate manner;
(b) the mandate shall not prevent the effectiveness of supervision over the
management company, and in particular it must not prevent the management
company from acting, or the UCITS from being managed, in the best interests of
its investors;
(c) when the delegation concerns the investment management, the mandate may
only be given to undertakings which are authorised or registered for the purpose
of asset management and subject to prudential supervision; the delegation must be
in accordance with investment-allocation criteria periodically laid down by the
management companies;
(d) where the mandate concerns the investment management and is given to a
third-country undertaking, cooperation between the supervisory authorities
concerned must be ensured;
(e) a mandate with regard to the core function of investment management shall
not be given to the depositary or to any other undertaking whose interests may
conflict with those of the management company or the unit-holders;
(1) OJ L 84, 26.3.1997, p. 22.
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(f) measures shall exist which enable the persons who conduct the business of the
management company to monitor effectively at any time the activity of the
undertaking to which the mandate is given;
(g) the mandate shall not prevent the persons who conduct the business of the
management company to give at any time further instructions to the undertaking
to which functions are delegated and to withdraw the mandate with immediate
effect when this is in the interest of investors;
(h) having regard to the nature of the functions to be delegated, the undertaking to
which functions will be delegated must be qualified and capable of undertaking
the functions in question, and
(i) the UCITS’ prospectuses list the functions which the management company
has been permitted to delegate.
2. In no case shall the management company’s and the depositary’s liability be
affected by the fact that the management company delegated any functions to
third parties, nor shall the management company delegate its functions to the
extent that it becomes a letter box entity.
Article 5h
Each Member State shall draw up rules of conduct which management companies
authorised in that Member State shall observe at all times. Such rules must
implement at least the principles set out in the following indents. These principles
shall ensure that a management company:
(a) acts honestly and fairly in conducting its business activities in the best
interests of the UCITS it manages and the integrity of the market;
(b) acts with due skill, care and diligence, in the best interests of the UCITS it
manages and the integrity of the market;
(c) has and employs effectively the resources and procedures that are necessary
for the proper performance of its business activities;
(d) tries to avoid conflicts of interests and, when they cannot be avoided, ensures
that the UCITS it manages are fairly treated, and
(e) complies with all regulatory requirements applicable to the conduct of its
business activities so as to promote the best interests of its investors and the
integrity of the market.
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Title D
The right of establishment and the freedom to provide services
Article 6
1. Member States shall ensure that a management company, authorised in
accordance with this Directive by the competent authorities of another Member
State, may carry on within their territories the activity for which it has been
authorised, either by the establishment of a branch or under the freedom to
provide services.
2. Member States may not make the establishment of a branch or the provision of
the services subject to any authorisation requirement, to any requirement to
provide endowment capital or to any other measure having equivalent effect.
Article 6a
1. In addition to meeting the conditions imposed in Articles 5 and 5a, any
management company wishing to establish a branch within the territory of
another Member State shall notify the competent authorities of its home Member
State.
2. Member States shall require every management company wishing to establish a
branch within the territory of another Member State to provide the following
information and documents, when effecting the notification provided for in
paragraph 1:
(a) the Member State within the territory of which the management company
plans to establish a branch;
(b) a programme of operations setting out the activities and services according to
Article 5(2) and (3) envisaged and the organisational structure of the branch;
(c) the address in the host Member State from which documents may be obtained;
(d) the names of those responsible for the management of the branch.
3. Unless the competent authorities of the home Member State have reason to
doubt the adequacy of the administrative structure or the financial situation of a
management company, taking into account the activities envisaged, they shall,
within three months of receiving all the information referred to in paragraph 2,
communicate that information to the competent authorities of the host Member
State and shall inform the management company accordingly. They shall also
communicate details of any compensation scheme intended to protect investors.
Where the competent authorities of the home Member State refuse to
communicate the information referred to in paragraph 2 to the competent
authorities of the host Member State, they shall give reasons for their refusal to
the management company concerned within two months of receiving all the
18
information. That refusal or failure to reply shall be subject to the right to apply to
the courts in the home Member State.
4. Before the branch of a management company starts business, the competent
authorities of the host Member State shall, within two months of receiving the
information referred to in paragraph 2, prepare for the supervision of the
management company and, if necessary, indicate the conditions, including the
rules mentioned in Articles 44 and 45 in force in the host Member State and the
rules of conduct to be respected in the case of provision of the portfolio
management service mentioned in Article 5(3) and of investment advisory
services and custody, under which, in the interest of the general good, that
business must be carried on in the host Member State.
5. On receipt of a communication from the competent authorities of the host
Member State or on the expiry of the period provided for in paragraph 4 without
receipt of any communication from those authorities, the branch may be
established and start business. From that moment the management company may
also begin distributing the units of the unit trusts/common funds and of the
investment companies subject to this Directive which it manages, unless the
competent authorities of the host Member State establish, in a reasoned decision
taken before the expiry of that period of two months — to be communicated to
the competent authorities of the home Member State – that the arrangements
made for the marketing of the units do not comply with the provisions referred to
in Article 44(1) and Article 45.
6. In the event of change of any particulars communicated in accordance with
paragraphs 2(b), (c) or (d), a management company shall give written notice of
that change to the competent authorities of the home and host Member States at
least one month before implementing the change so that the competent authorities
of the home Member State may take a decision on the change under paragraph 3
and the competent authorities of the host Member State may do so under
paragraph 4.
7. In the event of a change in the particulars communicated in accordance with the
first subparagraph of paragraph 3, the authorities of the home Member State shall
inform the authorities of the host Member State accordingly.
Article 6b
1. Any management company wishing to carry on business within the territory of
another Member State for the first time under the freedom to provide services
shall communicate the following information to the competent authorities of its
home Member State:
(a) the Member State within the territory of which the management company
intends to operate;
19
(b) a programme of operations stating the activities and services referred to in
Article 5(2) and (3) envisaged.
2. The competent authorities of the home Member State shall, within one month
of receiving the information referred to in paragraph 1, forward it to the
competent authorities of the host Member State. They shall also communicate
details of any applicable compensation scheme intended to protect investors.
3. The management company may then start business in the host Member State
notwithstanding the provisions of Article 46. When appropriate, the competent
authorities of the host Member State shall, on receipt of the information referred
to in paragraph 1, indicate to the management company the conditions, including
the rules of conduct to be respected in the case of provision of the portfolio
management service mentioned in Article 5(3) and of investment advisory
services and custody, with which, in the interest of the general good, the
management company must comply in the host Member State.
4. Should the content of the information communicated in accordance with
paragraph 1(b) be amended, the management company shall give notice of the
amendment in writing to the competent authorities of the home Member State and
of the host Member State before implementing the change, so that the competent
authorities of the host Member State may, if necessary, inform the company of
any change or addition to be made to the information communicated under
paragraph 3.
5. A management company shall also be subject to the notification procedure laid
down in this Article incases where it entrusts a third party with the marketing of
the units in a host Member State.
Article 6c
1. Host Member States may, for statistical purposes, require all management
companies with branches within their territories to report periodically on their
activities in those host Member States to the competent authorities of those host
Member States.
2. In discharging their responsibilities under this Directive, host Member States
may require branches of management companies to provide the same particulars
as national management companies for that purpose. Host Member States may
require management companies, carrying on business within their territories under
the freedom to provide services, to provide the information necessary for the
monitoring of their compliance with the standards set by the host Member State
that apply to them, although those requirements may not be more stringent than
those which the same Member State imposes on established management
companies for the monitoring of their compliance with the same standards.
20
3. Where the competent authorities of a host Member State ascertain that a
management company that has a branch or provides services within its territory is
in breach of the legal or regulatory provisions adopted in that State pursuant to
those provisions of this Directive which confer powers on the host Member
State’s competent authorities, those authorities shall require the management
company concerned to put an end to its irregular situation.
4. If the management company concerned fails to take the necessary steps, the
competent authorities of the host Member State shall inform the competent
authorities of the home Member State accordingly. The latter shall, at the earliest
opportunity, take all appropriate measures to ensure that the management
company concerned puts an end to its irregular situation. The nature of those
measures shall be communicated to the competent authorities of the host Member
State.
5. If, despite the measures taken by the home Member State or because such
measures prove inadequate or are not available in the Member State in question,
the management company persists in breaching the legal or regulatory provisions
referred to in paragraph 2 in force in the host Member State, the latter may, after
informing the competent authorities of the home Member State, take appropriate
measures to prevent or to penalise further irregularities and, insofar as necessary,
to prevent that management company from initiating any further transaction
within its territory. The Member States shall ensure that within their territories it
is possible to serve the legal documents necessary for those measures on
management companies.
6. The foregoing provisions shall not affect the powers of host Member States to
take appropriate measures to prevent or to penalise irregularities committed
within their territories which are contrary to legal or regulatory provisions
adopted in the interest of the general good. This shall include the possibility of
preventing offending management companies from initiating any further
transactions within
their territories.
7. Any measure adopted pursuant to paragraphs 4, 5 or 6 involving penalties or
restrictions on the activities of a management company must be properly justified
and communicated to the management company concerned. Every such measure
shall be subject to the right to apply to the courts in the Member State which
adopted it.
8. Before following the procedure laid down in paragraphs 3, 4 or 5 the competent
authorities of the host Member State may, in emergencies, take any precautionary
measures necessary to protect the interests of investors and others for whom
services are provided. The Commission and the competent authorities of the other
Member States concerned must be informed of such measures at the earliest
opportunity. After consulting the competent authorities of the Member States
21
concerned, the Commission may decide that the Member State in question must
amend or abolish those measures.
9. In the event of the withdrawal of authorisation, the competent authorities of the
host Member State shall be informed and shall take appropriate measures to
prevent the management company concerned from initiating any further
transactions within its territory and to safeguard investors’ interests. Every two
years the Commission shall submit a report on such cases to the Contact
Committee set up under Article 53.
10. The Member States shall inform the Commission of the number and type of
cases in which there have been refusals pursuant to Article 6a or measures have
been taken in accordance with paragraph 5. Every two years the Commission
shall submit a report on such cases to the Contact Committee set up under Article
53.
SECTION IIIa
Obligations regarding the depositary
Article 7
1. A unit trust’s assets must be entrusted to a depositary for safekeeping.
2. A depositary’s liability as referred to in Article 9 shall not be affected by the
fact that it has entrusted to a third party all or some of the assets in its safekeeping.
3. A depositary must, moreover:
(a) ensure that the sale, issue, re-purchase, redemption and cancellation of units
effected on behalf of a unit trust or by a management company are carried out in
accordance with the law and the fund rules;
(b) ensure that the value of units is calculated in accordance with the law and the
fund rules;
(c) carry out the instructions of the management company, unless they conflict
with the law or the fund rules;
(d) ensure that in transactions involving a unit trust’s assets any consideration is
remitted to it within the usual time limits;
(e) ensure that a unit trust’s income is applied in accordance with the law and the
fund rules.
22
Article 8
1. A depositary must either have its registered office in the same Member State as
that of the management company or be established in that Member State if its
registered office is in an other Member State.
2. A depositary must be an institution which is subject to public control. It must
also furnish sufficient financial and professional guarantees to be able effectively
to pursue its business as depositary and meet the commitments inherent in that
function.
3. The Member States shall determine which of the categories of institutions
referred to in paragraph 2 shall be eligible to be depositaries.
Article 9
A depositary shall, in accordance with the national law of the State in which the
management company’s registered office is situated, be liable to the management
company and the unit-holders for any loss suffered by them as a result of its
unjustifiable failure to perform its obligations or its improper performance of
them. Liability to unit-holders may be invoked either directly or indirectly
through the management company, depending on the legal nature of the
relationship between the depositary, the management company and the unitholders.
Article 10
1. No single company shall act as both management company and depositary.
2. In the context of their respective roles the management company and the
depositary must act independently and solely in the interest of the unit-holders.
Article 11
The law or the fund rules shall lay down the conditions for the replacement of the
management company and the depositary and rules to ensure the protection of
unit-holders in the event of such replacement.
SECTION IV
Obligations regarding investment companies
Title A
Conditions for taking up business
Article 12
Access to the business of investment companies shall be subject to prior official
authorisation to be granted by the home Member States competent authorities.
The Member States shall determine the legal form which an investment company
must take.
23
Article 13
No investment company may engage in activities other than those referred to in
Article 1 (2).
Article 13a
1. Without prejudice to other conditions of general application laid down by
national law, the competent authorities shall not grant authorisation to an
investment company that has not designated a management company unless the
investment company has a sufficient initial capital of at least EUR 300 000. In
addition, when an investment company has not designated a management
company authorised pursuant to this Directive:
— the authorisation shall not be granted unless the application for authorisation is
accompanied by a programme of activity setting out, inter alia, the organisational
structure of the investment company;
— the directors of the investment company shall be of sufficiently good repute
and be sufficiently experienced also in relation to the type of business carried out
by the investment company. To that end, the names of the directors and of every
person succeeding them in office must be communicated forthwith to the
competent authorities. The conduct of an investment company’s business must be
decided by at least two persons meeting such conditions. Directors shall mean
those persons who, under the law or the instruments of incorporation, represent
the investment company, or who effectively determine the policy of the company;
— moreover, where close links exist between the investment company and other
natural or legal persons, the competent authorities shall grant authorisation only if
those do not prevent the effective exercise of their supervisory functions. The
competent authorities shall also refuse authorisation if the laws, regulations or
administrative provisions of a non-member country governing one or more natural
or legal persons with which the investment company has close links, or
difficulties involved in their enforcement, prevent the effective exercise of their
supervisory functions. The competent authorities shall require investment
companies to provide them with the information they require.
2. An applicant shall be informed, within six months of the submission of a
complete application, whether or not authorisation has been granted. Reasons
shall be given whenever an authorisation is refused.
3. An investment company may start business as soon as authorisation has
been granted.
4. The competent authorities may withdraw the authorisation issued to an
investment company subject to this Directive only where that company:
(a) does not make use of the authorisation within 12 months, expressly renounces
the authorisation or has ceased the activity covered by this Directive more than 6
months previously unless the Member State concerned has provided for
authorisation to lapse in such cases;
24
(b) has obtained the authorisation by making false statements or by any other
irregular means;
(c) no longer fulfils the conditions under which authorisation was granted;
(d) has seriously and/or systematically infringed the provisions adopted pursuant
to this Directive; or
(e) falls within any of the cases where national law provides for withdrawal.
Title B
Operating conditions
Article 13b
Articles 5g and 5h shall apply to investment companies that have not designated a
management company authorised pursuant to this Directive. For the purpose of
this Article ‘management company’ shall be construed as ‘investment company’.
Investment companies may only manage assets of their own portfolio and may
not, under any circumstances, receive any mandate to manage assets on behalf of
a third party.
Article 13c
Each home Member State shall draw up prudential rules which shall be observed
at all times by investment companies that have not designated a management
company authorised pursuant to this Directive. In particular, the competent
authorities of the home Member State, having regard also to the nature of the
investment company, shall require that the company has sound administrative and
accounting procedures, control and safeguard arrangements for electronic data
processing and adequate internal control mechanisms including, in particular,
rules for personal transactions by its employees or for the holding or management
of investments in financial instruments in order to invest its initial capital and
ensuring, inter alia, that each transaction involving the company may be
reconstructed according to its origin, the parties to it, its nature, and the time and
place at which it was effected and that the assets of the investment company are
invested according to the instruments of incorporation and the legal provisions in
force.
SECTION IVa
Obligations regarding the depositary
Article 14
1. An investment company’s assets must be entrusted to a depositary for safekeeping.
25
2. A depositary’s liability as referred to in Article 16 shall not be affected by the
fact that it has entrusted to a third party all or some of the assets in its safekeeping.
3. A depositary must, moreover:
(a) ensure that the sale, issue, re-purchase, redemption and cancellation of units
effected by or on behalf of a company are carried out in accordance with the law
and with the company’s instruments of incorporation;
(b) ensure that in transactions involving a company’s assets any consideration is
remitted to it within the usual time limits;
(c) ensure that a company’s income is applied in accordance with the law and its
instruments of incorporation.
4. A Member State may decide that investment companies situated within its
territory which market their units exclusively through one or more stock
exchanges on which their units are admitted to official listing shall not be required
to have depositaries within the meaning of this Directive. Articles 34, 37 and 38
shall not apply to such companies. However, the rules for the valuation of such
companies’ assets must be stated in law or in their instruments of incorporation.
5. A Member State may decide that investment companies situated within its
territory which market at least 80 % of their units through one or more stock
exchanges designated in their instruments of incorporation shall not be required to
have depositaries within the meaning of this Directive provided that their units are
admitted to official listing on the stock exchanges of those Member States within
the territories of which the units are marketed, and that any transactions which
such a company may effect out with stock exchanges are effected at stock
exchange prices only. A company’s instruments of incorporation must specify the
stock exchange in the country of marketing the prices on which shall determine
the prices at which that company will effect any transactions out with stock
exchanges in that country. A Member State shall avail itself of the option
provided for in the preceding subparagraph only if it considers that unit-holders
have protection equivalent to that of unit-holders in UCITS which have
depositaries within the meaning of this Directive. In particular, such companies
and the companies referred to in paragraph 4, must:
(a) in the absence of provision in law, state in their instruments of incorporation
the methods of calculation of the net asset values of their units;
(b) intervene on the market to prevent the stock exchange values of their units
from deviating by more than 5 % from their net asset values;
26
(c) establish the net asset values of their units, communicate them to the
competent authorities at least twice a week and publish them twice a month. At
least twice a month, an independent auditor must ensure that the calculation of the
value of units is effected in accordance with the law and the company’s
instruments of incorporation. On such occasions, the auditor must make sure that
the company’s assets are invested in accordance with the rules laid down by law
and the company’s instruments of incorporation.
6. The Member States shall inform the Commission of the identities of the
companies benefiting from the derogations provided for in paragraphs 4 and 5.
The Commission shall report to the Contact Committee on the application of
paragraphs 4 and 5 within five years of the implementation of this Directive. After
obtaining the Contact Committee’s opinion, the Commission shall, if need be,
propose appropriate measures.
Article 15
1. A depositary must either have its registered office in the same Member State as
that of the investment company or be established in that Member State if its
registered office is in an other Member State.
2. A depositary must be an institution which is subject to public control. It must
also furnish sufficient financial and professional guarantees to be able effectively
to pursue its business as depositary and meet the commitments inherent in that
function.
3. The Member States shall determine which of the categories of institutions
referred to in paragraph 2 shall be eligible to be depositaries.
Article 16
A depositary shall, in accordance with the national law of the State in which the
investment company’s registered office is situated, be liable to the investment
company and the unit-holders for any loss suffered by them as a result of its
unjustifiable failure to perform its obligations, or its improper performance of
them.
Article 17
1. No single company shall act as both investment company and depositary.
2. In carrying out its role as depositary, the depositary must act solely in the
interests of the unit-holders.
Article 18
The law or the investment company’s instruments of incorporation shall lay down
the conditions for the replacement of the depositary and rules to ensure the
protection of unit-holders in the event of such replacement.
27
SECTION V
Obligations concerning the investment policies of UCITS
Article 19
1. The investments of a unit trust or of an investment company must consist solely
of:
(a) transferable securities and money market instruments admitted to or dealt in
on a regulated market within the meaning of Article 1(13) of the ISD and/or;
(b) transferable securities and money market instruments dealt in on another
regulated market in a Member State which operates regularly and is recognized
and open to the public and/or;
(c) transferable securities and money market instruments admitted to official
listing on a stock exchange in a non-member State or dealt in on another regulated
market in a non-member State which operates regularly and is recognized and
open to the public provided that the choice of stock exchange or market has been
approved by the competent authorities or is provided for in law or the fund rules
or the investment company’s instruments of incorporation and/or;
(d) recently issued transferable securities, provided that:
— the terms of issue include an undertaking that application will be made for
admission to official listing on a stock exchange or to another regulated market
which operates regularly and is recognized and open to the public, provided that
the choice of stock exchange or market has been approved by the competent
authorities or is provided for in law or the fund rules or the investment company’s
instruments of incorporation;
— such admission is secured within a year of issue and/or;
(e) units of UCITS authorised according to this Directive and/or other collective
investment undertakings within the meaning of the first and second indent of
Article 1(2), should they be situated in a Member State or not, provided that:
— such other collective investment undertakings are authorised under laws which
provide that they are subject to supervision considered by the UCITS’ competent
authorities to be equivalent to that laid down in Community law, and that
cooperation between authorities is sufficiently ensured;
— the level of protection for unit-holders in the other collective investment
undertakings is equivalent to that provided for unit-holders in a UCITS, and in
particular that the rules on assets segregation, borrowing, lending, and uncovered
sales of transferable securities and money market instruments are equivalent to
the requirements of this Directive;
— the business of the other collective investment undertakings is reported in halfyearly
and annual reports to enable an assessment to be made of the assets and
liabilities, income and operations over the reporting period;
28
— no more than 10 % of the UCITS’ or the other collective investment
undertakings’ assets, whose acquisition is contemplated, can, according to their
fund rules or instruments of incorporation, be invested in aggregate in units of
other UCITS or other collective investment undertakings and/or;
(f) deposits with credit institutions which are repayable on demand or have the
right to be withdrawn, and maturing in no more than 12 months, provided that the
credit institution has its registered office in a Member State or, if the registered
office of the credit institution is situated in a non-Member State, provided that it is
subject to prudential rules considered by the UCITS’ competent authorities as
equivalent to those laid down in Community law and/or;
(g) financial derivative instruments, including equivalent cash-settled instruments,
dealt in on a regulated market referred to in subparagraphs (a), (b) and (c); and/or
financial derivative instruments dealt in over-the-counter (‘OTC derivatives’),
provided that:
— the underlying consists of instruments covered by this paragraph, financial
indices, interest rates, foreign exchange rates or currencies, in which the UCITS
may invest according to its investment objectives as stated in the UCITS’ fund
rules or instruments of incorporation;
— the counterparties to OTC derivative transactions are institutions subject to
prudential supervision, and belonging to the categories approved by the UCITS’
competent authorities and;
— the OTC derivatives are subject to reliable and verifiable valuation on a daily
basis and can be sold, liquidated or closed by an offsetting transaction at any time
at their fair value at the UCITS’ initiative, and/or;
(h) money market instruments other than those dealt in on a regulated market,
which fall under Article 1(9), if the issue or issuer of such instruments is itself
regulated for the purpose of protecting investors and savings, and provided that
they are:
— issued or guaranteed by a central, regional or local authority or central bank of
a Member State, the European Central Bank, the European Union or the European
Investment Bank, a non-Member State or, in the case of a Federal State, by one of
the members making up the federation, or by a public international body to which
one or more Member States belong or;
— issued by an undertaking any securities of which are dealt in on regulated
markets referred to in subparagraphs (a), (b) or (c), or;
— issued or guaranteed by an establishment subject to prudential supervision, in
accordance with criteria defined by Community law, or by an establishment
which is subject to and complies with prudential rules considered by the
competent authorities to be at least as stringent as those laid down by Community
law or;
— issued by other bodies belonging to the categories approved by the UCITS’
competent authorities provided that investments in such instruments are subject to
investor protection equivalent to that laid down in the first, the second or the third
29
indent and provided that the issuer is a company whose capital and reserves
amount to at least EUR 10 million and which presents and publishes its annual
accounts in accordance with Directive 78/660/EEC (1), is an entity which, within
a group of companies which includes one or several listed companies, is dedicated
to the financing of the group or is an entity which is dedicated to the financing of
securitisation vehicles which benefit from a banking liquidity line.
2. However:
(a) a UCITS may invest no more than 10 % of its assets in transferable securities
and money market instruments other than those referred to in paragraph 1;
(c) an investment company may acquire movable and immovable property which
is essential for the direct pursuit of its business;
(d) a UCITS may not acquire either precious metals or certificates representing
them.
4. Unit trusts and investment companies may hold ancillary liquid assets.
Article 21
1. The management or investment company must employ a risk management
process which enables it to monitor and measure at any time the risk of the
positions and their contribution to the overall risk profile of the portfolio; it must
employ a process for accurate and independent assessment of the value of OTC
derivative instruments. It must communicate to the competent authorities
regularly and in accordance with the detailed rules they shall define, the types of
derivative instruments, the underlying risks, the quantitative limits and the
methods which are chosen in order to estimate the risks associated with
transactions in derivative instruments regarding each managed UCITS.
2. The Member States may authorise UCITS to employ techniques and
instruments relating to transferable securities and money market instruments
under the conditions and within the limits which they lay down provided that such
techniques and instruments are used for the purpose of efficient portfolio
management. When these operations concern the use of derivative instruments,
these conditions and limits shall conform to the provisions laid down in this
Directive. Under no circumstances shall these operations cause the UCITS to
(1) Fourth Council Directive 78/660/EEC of 25 July 1978 based on Article
54(3)(g) of the Treaty on the annual accounts of certain types of companies
(OJ L 222, 14.8.1978, p. 11). Directive as last amended by Directive 1999/
60/EC (OJ L 162, 26.6.1999, p. 65).
30
diverge from its investment objectives as laid down in the UCITS’ fund rules,
instruments of incorporation or prospectus.
3. A UCITS shall ensure that its global exposure relating to derivative instruments
does not exceed the total net value of its portfolio. The exposure is calculated
taking into account the current value of the underlying assets, the counterparty
risk, future market movements and the time available to liquidate the positions.
This shall also apply to the following subparagraphs. A UCITS may invest, as a
part of its investment policy and within the limit laid down in Article 22(5), in
financial derivative instruments provided that the exposure to the underlying
assets does not exceed in aggregate the investment limits laid down in Article 22.
The Member States may allow that, when a UCITS invests in index-based
financial derivative instruments, these investments do not have to be combined to
the limits laid down in Article 22. When a transferable security or money market
instrument embeds a derivative, the latter must be taken into account when
complying with the requirements of this Article.
4. The Member States shall send the Commission full information and any
subsequent changes in their regulation concerning the methods used to calculate
the risk exposures mentioned in paragraph 3, including the risk exposure to a
counterparty in OTC derivative transactions, no later than 13 February 2004. The
Commission shall forward that information to the other Member States. Such
information will be the subject of exchanges of views within the Contact
Committee in accordance with the procedure laid down in Article 53(4).
Article 22
1. A UCITS may invest no more than 5 % of its assets in transferable securities or
money market instruments issued by the same body. A UCITS may not invest
more than 20 % of its assets in deposits made with the same body. The risk
exposure to a counterparty of the UCITS in an OTC derivative transaction may
not exceed:
— 10 % of its assets when the counterpart is a credit institution referred to in
Article 19(1)(f), or
— 5 % of its assets, in other cases.
2. Member States may raise the 5 % limit laid down in the first sentence of
paragraph 1 to a maximum of 10 %. However, the total value of the transferable
securities and the money market instruments held by the UCITS in the issuing
bodies in each of which it invests more than 5 % of its assets must not then
exceed 40 % of the value of its assets. This limitation does not apply to deposits
and OTC derivative transactions made with financial institutions subject to
prudential supervision. Notwithstanding the individual limits laid down in
paragraph 1, a UCITS may not combine:
— investments in transferable securities or money market instruments issued by,
— deposits made with, and/or
31
— exposures arising from OTC derivative transactions undertaken with a single
body in excess of 20 % of its assets.
3. The Member States may raise the 5 % limit laid down in the first sentence of
paragraph 1 to a maximum of 35 % if the transferable securities or money market
instruments are issued or guaranteed by a Member State, by its local authorities,
by a non-member State or by public international bodies to which one or more
Member States belong.
4. Member States may raise the 5 % limit laid down in the first sentence of
paragraph 1 to a maximum of 25 % in the case of certain bonds when these are
issued by a credit institution which has its registered office in a Member State and
is subject by law to special public supervision designed to protect bond-holders.
In particular, sums deriving from the issue of these bonds must be invested in
conformity with the law in assets which, during the whole period of validity of the
bonds, are capable of covering claims attaching to the bonds and which, in the
event of failure of the issuer, would be used on a priority basis for the
reimbursement of the principal and payment of the accrued interest. When a
UCITS invests more than 5 % of its assets in the bonds referred to in the first
subparagraph and issued by one issuer, the total value of these investments may
not exceed 80 % of the value of the assets of the UCITS. The Member States shall
send the Commission a list of the aforementioned categories of bonds together
with the categories of issuers authorised, in accordance with the laws and
supervisory arrangements mentioned in the first subparagraph, to issue bonds
complying with the criteria set out above. A notice specifying the status of the
guarantees offered shall be attached to these lists. The Commission shall
immediately forward that information to the other Member States together with
any comments which it considers appropriate, and shall make the information
available to the public. Such communications may be the subject of exchanges of
views within the Contact Committee in accordance with the procedure laid down
in Article 53(4).
5. The transferable securities and money market instruments referred to in
paragraphs 3 and 4 shall not be taken into account for the purpose of applying the
limit of 40 % referred to in paragraph 2. The limits provided for in paragraphs 1,
2, 3 and 4 may not be combined, and thus investments in transferable securities or
money market instruments issued by the same body or in deposits or derivative
instruments made with this body carried out in accordance with paragraphs 1, 2, 3
and 4 shall under no circumstances exceed in total 35 % of the assets of the
UCITS. Companies which are included in the same group for the purposes of
consolidated accounts, as defined in accordance with Directive 83/349/EEC (1) or
in accordance with recognised international accounting rules, are regarded as a
single body for the purpose of calculating the limits contained in this Article.
(1) Seventh Council Directive 83/349/EEC of 13 June 1983 based on the Article
54(3)(g) of the Treaty on consolidated accounts (OJ L 193, 18.7.1983, p. 1).
Directive as last amended by the 1994 Act of Accession.
32
Member States may allow cumulative investment in transferable securities and
money market instruments within the same group up to a limit of 20 %.
Article 22a
1. Without prejudice to the limits laid down in Article 25, the Member States may
raise the limits laid down in Article 22 to a maximum of 20 % for investment in
shares and/or debt securities issued by the same body when, according to the fund
rules or instruments of incorporation, the aim of the UCITS’ investment policy is
to replicate the composition of a certain stock or debt securities index which is
recognised by the competent authorities, on the following basis:
— its composition is sufficiently diversified,
— the index represents an adequate benchmark for the market to which it refers,
— it is published in an appropriate manner.
2. Member States may raise the limit laid down in paragraph 1 to a maximum of
35 % where that proves to be justified by exceptional market conditions in
particular in regulated markets where certain transferable securities or money
market instruments are highly dominant. The investment up to this limit is only
permitted for a single issuer.
Article 23
1. By way of derogation from Article 22 and without prejudice to Article 68 (3) of
the Treaty, the Member States may authorize UCITS to invest in accordance with
the principle of risk-spreading up to 100 % of their assets in different transferable
securities and money market instruments issued or guaranteed by any Member
State, its local authorities, a non-member State or public international bodies of
which one or more Member States are members. The competent authorities shall
grant such a derogation only if they consider that unit-holders in the UCITS have
protection equivalent to that of unit-holders in UCITS complying with the limits
laid down in Article 22. Such a UCITS must hold securities from at least six
different issues, but securities from any one issue may not account for more than
30 % of its total assets.
2. The UCITS referred to in paragraph 1 must make express mention in the fund
rules or in the investment company’s instruments of incorporation of the States,
local authorities or public international bodies issuing or guaranteeing securities
in which they intend to invest more than 35 % of their assets; such fund rules or
instruments of incorporation must be approved by the competent authorities.
3. In addition each such UCITS referred to in paragraph 1 must include a
prominent statement in its prospectus and any promotional literature drawing
attention to such authorization and indicating the States, local authorities and/or
public international bodies in the securities of which it intends to invest or has
invested more than 35 % of its assets.
33
Article 24
1. A UCITS may acquire the units of UCITS and/or other collective investment
undertakings referred to in Article 19(1)(e), provided that no more than 10 % of
its assets are invested in units of a single UCITS or other collective investment
undertaking. The Member States may raise the limit to a maximum of 20 %.
2. Investments made in units of collective investment undertakings other than
UCITS may not exceed, in aggregate, 30 % of the assets of the UCITS. The
Member States may allow that, when a UCITS has acquired units of UCITS
and/or other collective investment undertakings, the assets of the respective
UCITS or other collective investment undertakings do not have to be combined
for the purposes of the limits laid down in Article 22.
3. When a UCITS invests in the units of other UCITS and/or other collective
investment undertakings that are managed, directly or by delegation, by the same
management company or by any other company with which the management
company is linked by common management or control, or by a substantial direct
or indirect holding, that management company or other company may not charge
subscription or redemption fees on account of the UCITS’s investment in the units
of such other UCITS and/or collective investment undertakings. A UCITS that
invests a substantial proportion of its assets in other UCITS and/or collective
investment undertakings shall disclose in its prospectus the maximum level of the
management fees that may be charged both to the UCITS itself and to the other
UCITS and/or collective investment undertakings in which it intends to invest. In
its annual report it shall indicate the maximum proportion of management fees
charged both to the UCITS itself and to the UCITS and/or other collective
investment undertaking in which it invests.
Article 24a
1. The prospectus shall indicate in which categories of assets a UCITS is
authorised to invest. It shall mention if transactions in financial derivative
instruments are authorised; in this event, it must include a prominent statement
indicating if these operations may be carried out for the purpose of hedging or
with the aim of meeting investment goals, and the possible outcome of the use of
financial derivative instruments on the risk profile.
2. When a UCITS invests principally in any category of assets defined in Article
19 other than transferable securities and money market instruments or replicates a
stock or debt securities index in accordance with Article 22a, its prospectus and,
where necessary, any other promotional literature must include a prominent
statement drawing attention to the investment policy.
3. When the net asset value of a UCITS is likely to have a high volatility due to its
portfolio composition or the portfolio management techniques that may be used,
34
its prospectus and, where necessary, any other promotional literature must include
a prominent statement drawing attention to this characteristic.
4. Upon request of an investor, the management company must also provide
supplementary information relating to the quantitative limits that apply in the risk
management of the UCITS, to the methods chosen to this end and to the recent
evolution of the main instrument categories’ risks and yields.
Article 25
1. An investment company or a management company acting in connection with
all of the unit trusts which it manages and which fall within the scope of this
Directive may not acquire any shares carrying voting rights which would enable it
to exercise significant influence over the management of an issuing body.
Pending further coordination, the Member States shall take account of existing
rules defining the principle stated in the first subparagraph under other Member
States’ legislation.
2. Moreover, an investment company or unit trust may acquire no more than:
— 10 % of the non-voting shares of any single issuing body;
— 10 % of the debt securities of any single issuing body;
— 25 % of the units of any single UCITS and/or other collective investment
undertaking within the meaning of the first and second indent of Article 1(2);
— 10 % of the money market instruments of any single issuing body.
The limits laid down in the second, third and fourth indents may be disregarded at
the time of acquisition if at that time the gross amount of the debt securities or of
the money market instruments, or the net amount of the securities in issue, cannot
be calculated.
3. A Member State may waive application of paragraphs 1 and 2 as regards:
(a) transferable securities and money market instruments issued or guaranteed by
a Member State or its local authorities;
(b) transferable securities and money market instruments issued or guaranteed by
a non-member State;
(c) transferable securities and money market instruments issued by public
international bodies of which one or more Member States are members;
(d) shares held by a UCITS in the capital of a company incorporated in a nonmember
State investing its assets mainly in the securities of issuing bodies having
their registered offices in that State, where under the legislation of that State such
a holding represents the only way in which the UCITS can invest in the securities
of issuing bodies of that State. This derogation, however, shall apply only if in its
investment policy the company from the non-member State complies with the
35
limits laid down in Articles 22, 24 and 25 (1) and (2). Where the limits set in
Articles 22 and 24 are exceeded Article 26 shall apply mutatis mutandis;
(e) shares held by an investment company or investment companies in the capital
of subsidiary companies carrying on only the business of management, advice or
marketing in the country where the subsidiary is located, in regard to the
repurchase of units at unit-holders’ request exclusively on its or their behalf.
Article 26
1. UCITS need not comply with the limits laid down in this section when
exercising subscription rights attaching to transferable securities or money market
instruments which form part of their assets. While ensuring observance of the
principle of risk spreading, the Member States may allow recently authorised
UCITS to derogate from Articles 22, 22a, 23 and 24 for six months following the
date of their authorisation.
2. If the limits referred to in paragraph 1 are exceeded for reasons beyond the
control of a UCITS or as a result of the exercise of subscription rights, that
UCITS must adopt as a priority objective for its sales transactions the remedying
of that situation, taking due account of the interests of its unit-holders.
SECTION VI
Obligations concerning information to be supplied to unit-holders
A. Publication of a prospectus and periodical reports
Article 27
1. An investment company and, for each of the unit trusts and common funds it
manages, a management company, must publish:
— a simplified prospectus,
— a full prospectus,
— an annual report for each financial year, and
— a half-yearly report covering the first six months of the financial year.
2. The annual and half-yearly reports must be published within the following time
limits, with effect from the ends of the periods to which they relate:
— four months in the case of the annual report,
— two months in the case of the half-yearly report.
Article 28
1. Both the simplified and the full prospectuses must include the information
necessary for investors to be able to make an informed judgement of the
investment proposed to them, and, in particular, of the risks attached thereto. The
latter shall include, independent of the instruments invested in, a clear and easily
understandable explanation of the fund’s risk profile.
36
2. The full prospectus shall contain at least the information provided for in
Schedule A, Annex I to this Directive, in so far as that information does not
already appear in the fund rules or instruments of incorporation annexed to the
full prospectus in accordance with Article 29(1).
3. The simplified prospectus shall contain in summary form the key information
provided for in Schedule C, Annex I to this Directive. It shall be structured and
written in such a way that it can be easily understood by the average investor.
Member States may permit that the simplified prospectus be attached to the full
prospectus as a removable part of it. The simplified prospectus can be used as a
marketing tool designed to be used in all Member States without alterations
except translation. Member States may therefore not require any further
documents or additional information to be added.
4. Both the full and the simplified prospectus may be incorporated in a written
document or in any durable medium having an equivalent legal status approved
by the competent authorities.
5. The annual report must include a balance-sheet or a statement of assets and
liabilities, a detailed income and expenditure account for the financial year, a
report on the activities of the financial year and the other information provided for
in Schedule B, Annex I to this Directive, as well as any significant information
which will enable investors to make an informed judgment on the development of
the activities of the UCITS and its results.
6. The half-yearly report must include at least the information provided for in
Chapters I to IV of Schedule B, Annex I to this Directive; where a UCITS has
paid or proposes to pay an interim dividend, the figures must indicate the results
after tax for the half-year concerned and the interim dividend paid or proposed.
Article 29
1. The fund rules or an investment company’s instruments of incorporation
shall form an integral part of the full prospectus and must be annexed thereto.
2. The documents referred to in paragraph 1 need not, however, be annexed to the
full prospectus provided that the unit-holder is informed that on request he or she
will be sent those documents or be apprised of the place where, in each Member
State in which the units are placed on the market, he or she may consult them.
Article 30
The essential elements of the simplified and the full prospectuses must be kept up
to date.
Article 31
The accounting information given in the annual report must be audited by one or
more persons empowered by law to audit accounts in accordance with Council
37
Directive 84/253/EEC of 10 April 1984 based on Article 54 (3) (g) of the EEC
Treaty on the approval of persons responsible for carrying out the statutory audits
of accounting documents (1). The auditor’s report, including any qualifications,
shall be reproduced in full in the annual report.
Article 32
UCITS must send their simplified and full prospectuses and any amendments
thereto, as well as their annual and half-yearly reports, to the competent
authorities.
Article 33
1. The simplified prospectus must be offered to subscribers free of charge before
the conclusion of the contract. In addition, the full prospectus and the latest
published annual and half yearly reports shall be supplied to subscribers free of
charge on request.
2. The annual and half-yearly reports shall be supplied to unit-holders free of
charge on request.
3. The annual and half-yearly reports must be available to the public at the places,
or through other means approved by the competent authorities, specified in the
full and simplified prospectus.
B. Publication of other information
Article 34
A UCITS must make public in an appropriate manner the issue, sale, re-purchase
or redemption price of its units each time it issues, sells, re-purchases or redeems
them, and at least twice a month. The competent authorities may, however, permit
a UCITS to reduce the frequency to once a month on condition that such a
derogation does not prejudice the interests of the unit-holders.
Article 35
All publicity comprising an invitation to purchase the units of UCITS must
indicate that prospectuses exist and the places where they may be obtained by the
public or how the public may have access to them.
SECTION VII
The general obligations of UCITS
Article 36
1. Neither:
— an investment company, nor
— a management company or depositary acting on behalf of a unit trust,
(1) OJ No L 126, 12. 5. 1984, p. 20.
38
may borrow. However, a UCITS may acquire foreign currency by means of a
‘back-to-back’ loan.
2. By way of derogation from paragraph 1, a Member State may authorize a
UCITS to borrow:
(a) up to 10 %
— of its assets, in the case of an investment company, or
— of the value of the fund, in the case of a unit trust,
provided that the borrowing is on a temporary basis;
(b) up to 10 % of its assets, in the case of an investment company, provided that
the borrowing is to make possible the acquisition of immovable property essential
for the direct pursuit of its business; in this case the borrowing and that referred to
in subparagraph (a) may not in any case in total exceed 15 % of the borrower’s
assets.
Article 37
1. A UCITS must re-purchase or redeem its units at the request of any unit-holder.
2. By way of derogation from paragraph 1:
(a) a UCITS may, in the cases and according to the procedures provided for by
law, the fund rules or the investment company’s instruments of incorporation,
temporarily suspend the re-purchase or redemption of its units. Suspension may
be provided for only in exceptional cases where circumstances so require, and
suspension is justified having regard to the interests of the unit-holders;
(b) the Member States may allow the competent authorities to require the
suspension of the re-purchase or redemption of units in the interest of the unitholders
or of the public.
3. In the cases mentioned in paragraph 2 (a), a UCITS must without delay
communicate its decision to the competent authorities and to the authorities of all
Member States in which it markets its units.
Article 38
The rules for the valuation of assets and the rules for calculating the sale or issue
price and the re-purchase or redemption price of the units of a UCITS must be
laid down in the law, in the fund rules or in the investment company’s instruments
of incorporation.
Article 39
The distribution or reinvestment of the income of a unit trust or of an investment
company shall be effected in accordance with the law and with the fund rules or
the investment company’s instruments of incorporation.
39
Article 40
A UCITS unit may not be issued unless the equivalent of the net issue price is
paid into the assets of the UCITS within the usual time limits. This provision shall
not preclude the distribution of bonus units.
Article 41
1. Without prejudice to the application of Articles 19 and 21, neither:
— an investment company, nor
— a management company or depositary acting on behalf of a unit trust
may grant loans or act as a guarantor on behalf of third parties.
2. Paragraph 1 shall not prevent such undertakings from acquiring transferable
securities, money market instruments or other financial instruments referred to in
Article 19(1)(e), (g) and (h) which are not fully paid.
Article 42
Neither:
— an investment company, nor
— a management company or depositary acting on behalf of a unit trust
may carry out uncovered sales of transferable securities, money market
instruments or other financial instruments referred to in Article 19(1)(e), (g) and
(h).
Article 43
The law or the fund rules must prescribe the remuneration and the expenditure
which a management company is empowered to charge to a unit trust and the
method of calculation of such remuneration. The law or an investment company’s
instruments of incorporation must prescribe the nature of the cost to be borne by
the company.
SECTION VIII
Special provisions applicable to UCITS which market their units in Member
States other than those in which they are situated
Article 44
1. A UCITS which markets its units in another Member State must comply with
the laws, regulations and administrative provisions in force in that State which do
not fall within the field governed by this Directive.
2. Any UCITS may advertise its units in the Member State in which they are
marketed. it must comply the provisions governing advertising in that State.
40
3. The provisions referred to in paragraphs 1 and 2 must be applied without
discrimination.
Article 45
In the case referred to in Article 44, the UCITS must, inter alia, in accordance
with the laws, regulations and administrative provisions in force in the Member
State of marketing, take the measures necessary to ensure that facilities are
available in that State for making payments to unit-holders, re-purchasing or
redeeming units and making available the information which UCITS are obliged
to provide.
Article 46
If a UCITS proposes to market its units in a Member State other than that in
which it is situated, it must first inform the competent authorities of that other
Member State accordingly. It must simultaneously send the latter authorities:
— an attestation by the competent authorities to the effect that it fulfils the
conditions imposed by this Directive,
— its fund rules or its instruments of incorporation,
— its full and simplified prospectuses,
— where appropriate, its latest annual report and any subsequent half yearly
report, and
— details of the arrangements made of the marketing of its units in that other
Member State.
An investment company or a management company may begin to market its units
in that other Member State two months after such communication, unless the
authorities of the Member States concerned establish, in a reasoned decision taken
before the expiry of that period of two months, that the arrangements made for the
marketing of units do not comply with the provisions referred to in Article 44(1)
and Article 45.
Article 47
If a UCITS markets its units in a Member State other than that in which it is
situated, it must distribute in that other Member State, in accordance with the
same procedures as those provided for in the home Member State, the full and
simplified prospectuses, the annual and half-yearly reports and the other
information provided for in Articles 29 and 30. These documents shall be
provided in the or one of the official languages of the host Member State or in a
language approved by the competent authorities of the host Member State.
Article 48
For the purpose of carrying on its activities, a UCITS may use the same generic
name (such as investment company or unit trust) in the Community as it uses in
the Member State in which it is situated. In the event of any danger of confusion,
the host Member State may, for the purpose of clarification, require that the name
be accompanied by certain explanatory particulars.
41
SECTION IX
Provisions concerning the authorities responsible for authorization and
supervision
Article 49
1. The Member States shall designate the authorities which are to carry out the
duties provided for in this Directive. They shall inform the Commission thereof,
indicating any division of duties.
2. The authorities referred to in paragraph 1 must be public authorities or bodies
appointed by public authorities.
3. The authorities of the State in which a UCITS is situated shall be competent to
supervise that UCITS. However, the authorities of the State in which a UCITS
markets its units in accordance with Article 44 shall be competent to supervise
compliance with Section VIII.
4. The authorities concerned must be granted all the powers necessary to carry out
their task.
Article 50
1. The authorities of the Member States referred to in Article 49 shall collaborate
closely in order to carry out their task and must for that purpose alone
communicate to each other all information required.
2. Member States shall provide that all persons who work or who have worked for
the competent authorities, as well as auditors and experts instructed by the
competent authorities, shall be bound by the obligation of professional secrecy.
Such secrecy implies that no confidential information which they may receive in
the course of their duties may be divulged to any person or authority whatsoever,
save in summary or aggregate form such that UCITS and management companies
and depositaries (hereinafter referred to as undertakings contributing towards their
business activity) cannot be individually identified, without prejudice to cases
covered by criminal law. Nevertheless, when an UCITS or an undertaking
contributing towards its business activity has been declared bankrupt or is being
compulsorily wound up, confidential information which does not concern third
parties involved in rescue attempts may be divulged in civil or commercial
proceedings.
3. Paragraph 2 shall not prevent the competent authorities of the various Member
States from exchanging information in accordance with this Directive or other
Directives applicable to UCITS or to undertakings contributing towards their
business activity. That information shall be subject to the conditions of
professional secrecy imposed in paragraph 2.
42
4. Member States may conclude cooperation agreements providing for exchange
of information with the competent authorities of third countries or with authorities
or bodies of third countries as defined in paragraphs 6 and 7 only if the
information disclosed is subject to guarantees of professional secrecy at least
equivalent to those referred to in this Article. Such exchange of information must
be intended for the performance of the supervisory task of the authorities or
bodies mentioned. Where the information originates in another Member State, it
may not be disclosed without the express agreement of the competent authorities
which have disclosed it and, where appropriate, solely for the purposes for which
those authorities gave their agreement.
5. Competent authorities receiving confidential information under paragraphs 2 or
3 may use it only in the course of their duties:
— to check that the conditions governing the taking-up of the business of UCITS
or of undertakings contributing towards their business activity are met and to
facilitate the monitoring of the conduct of that business, administrative and
accounting procedures and internal-control mechanisms,
— to impose sanctions,
— in administrative appeals against decisions by the competent authorities, or
— in court proceedings initiated under Article 51 (2).
6. Paragraphs 2 and 5 shall not preclude the exchange of information:
(a) within a Member State, where there are two or more competent authorities; or
(b) within a Member State or between Member States, between competent
authorities; and
— authorities with public responsibility for the supervision of credit institutions,
investment undertakings, insurance undertakings and other financial organizations
and the authorities responsible for the supervision of financial markets,
— bodies involved in the liquidation or bankruptcy of UCITS and other similar
procedures and of undertakings contributing towards their business activity,
— persons responsible for carrying out statutory audits of the accounts of
insurance undertakings, credit institutions, investment undertakings and other
financial institutions, in the performance of their supervisory functions, or the
disclosure to bodies which administer compensation schemes of information
necessary for the performance of their functions. Such information shall be
subject to the conditions of professional secrecy imposed in paragraph 2.
7. Notwithstanding paragraphs 2 to 5, Member States may authorize exchanges of
information between the competent authorities and:
— the authorities responsible for overseeing the bodies involved in the liquidation
and bankruptcy of undertakings for collective investment in transferable securities
(UCITS) or undertakings contributing towards their business activity and other
similar procedures, or
— the authorities responsible for overseeing persons charged with carrying out
statutory audits of the accounts of insurance undertakings, credit institutions,
investment firms and other financial institutions. Member States which have
43
recourse to the option provided for in the first subparagraph shall require at least
that the following conditions are met:
— the information shall be for the purpose of performing the task of overseeing
referred to in the first subparagraph,
— information received in this context shall be subject to the conditions of
professional secrecy imposed in paragraph 2,
— where the information originates in another Member State, it may not be
disclosed without the express agreement of the competent authorities which have
disclosed it and, where appropriate, solely for the purposes for which those
authorities gave their agreement.
Member States shall communicate to the Commission and to the other Member
States the names of the authorities which may receive information pursuant to this
paragraph.
8. Notwithstanding paragraphs 2 to 5, Member States may, with the aim of
strengthening the stability, including integrity, of the financial system, authorize
the exchange of information between the competent authorities and the authorities
or bodies responsible under the law for the detection and investigation of breaches
of company law. Member States which have recourse to the option provided for in
the first subparagraph shall require at least that the following conditions are met:
— the information shall be for the purpose of performing the task referred to in
the first subparagraph,
— information received in this context shall be subject to the conditions of
professional secrecy imposed in paragraph 2,
— where the information originates in another Member State, it may not be
disclosed without the express agreement of the competent authorities which have
disclosed it and, where appropriate, solely for the purposes for which those
authorities gave their agreement. Where, in a Member State, the authorities or
bodies referred to in the first subparagraph perform their task of detection or
investigation with the aid, in view of their specific competence, of persons
appointed for that purpose and not employed in the public sector the possibility of
exchanging information provided for in the first subparagraph may be extended to
such persons under the conditions stipulated in the second subparagraph. In order
to implement the final indent of the second subparagraph, the authorities or bodies
referred to in the first subparagraph shall communicate to the competent
authorities which have disclosed the information the names and precise
responsibilities of the persons to whom it is to be sent. Member States shall
communicate to the Commission and to the other Member States the names of the
authorities or bodies which may receive information pursuant to this paragraph.
Before 31 December 2000, the Commission shall draw up a report on the
application of this paragraph.
9. This Article shall not prevent a competent authority from transmitting to central
banks and other bodies with a similar function in their capacity as monetary
authorities information intended for the performance of their tasks, nor shall it
prevent such authorities or bodies from communicating to the competent
44
authorities such information as they may need for the purposes of paragraph 5.
Information received in this context shall be subject to the conditions of
professional secrecy imposed in this Article.
10. This Article shall not prevent the competent authorities from communicating
the information referred to in paragraphs 2 to 5 to a clearing house or other
similar body recognized under national law for the provision of clearing or
settlement services for one of their Member State’s markets if they consider that it
is necessary to communicate the information in order to ensure the proper
functioning of those bodies in relation to defaults or potential defaults by market
participants. The information received in this context shall be subject to the
conditions of professional secrecy imposed in paragraph 2. Member States shall,
however, ensure that information received under paragraph 3 may not be
disclosed in the circumstances referred to in this paragraph without the express
consent of the competent authorities which disclosed it.
11. In addition, notwithstanding the provisions referred to in paragraphs 2 and 5,
Member States may, by virtue of provisions laid down by law, authorize the
disclosure of certain information to other departments of their central government
administrations responsible for legislation on the supervision of UCITS and of
undertakings contributing towards their business activity, credit institutions,
financial institutions, investment undertakings and insurance undertakings and to
inspectors instructed by those departments. Such disclosures may, however, be
made only where necessary for reasons of prudential control. Member States
shall, however, provide that information received under paragraphs 3 and 6 may
never be disclosed in the circumstances referred to in this paragraph except with
the express agreement of the competent authorities which disclosed the
information.
Article 50a
1. Member States shall provide at least that:
(a) any person authorized within the meaning of Directive 84/253/ EEC (1),
performing in an undertaking for collective investment in transferable securities
(UCITS) or an undertaking contributing towards its business activity the task
described in Article 51 of Directive 78/660/EEC (2), Article 37 of Directive
83/349/EEC or Article 31 of Directive 85/611/EEC or any other statutory task,
shall have a duty to report promptly to the competent authorities any fact or
decision concerning that undertaking of which he has become aware while
carrying out that task which is liable to:
(1) OJ No L 126, 12. 5. 1984, p. 20.
(2) OJ No L 222, 14. 8. 1978, p. 11. Directive as last amended by Directive 90/
605/EEC (OJ No L 317, 16. 11. 1990, p. 60).
45
— constitute a material breach of the laws, regulations or administrative
provisions which lay down the conditions governing authorization or which
specifically govern pursuit of the activities of undertakings for collective
investment in transferable securities (UCITS) or undertakings contributing
towards their business activity, or
— affect the continuous functioning of the undertaking for collective investment
in transferable securities (UCITS) or an undertaking contributing towards its
business activity, or
— lead to refusal to certify the accounts or to the expression of reservations;
(b) that person shall likewise have a duty to report any facts and decisions of
which he becomes aware in the course of carrying out a task as described in (a) in
an undertaking having close links resulting from a control relationship with the
undertaking for collective investment in transferable securities (UCITS) or an
undertaking contributing towards its business activity within which he is carrying
out the abovementioned task.
2. The disclosure in good faith to the competent authorities, by persons authorized
within the meaning of Directive 84/253/EEC, of any fact or decision referred to in
paragraph 1 shall not constitute a breach of any restriction on disclosure of
information imposed by contract of by any legislative, regulatory or
administrative provision and shall not involve such persons in liability of any
kind.
Article 51
1. The authorities referred to in Article 49 must give reasons for any decision to
refuse authorization, and any negative decision taken in implementation of the
general measures adopted in application of this Directive, and communicate them
to applicants.
2. The Member States shall provide that decisions taken in respect of a UCITS
pursuant to laws, regulations and administrative provisions adopted in accordance
with this Directive are subject to the right to apply to the courts; the same shall
apply if no decision is taken within six months of its submission on an
authorization application made by a UCITS which includes all the information
required under the provisions in force.
Article 52
1. Only the authorities of the Member State in which a UCITS is situated shall
have the power to take action against it if it infringes any law, regulation or
administrative provision or any regulation laid down in the fund rules or in the
investment company’s instruments of incorporation.
2. Nevertheless, the authorities of the Member State in which the units of a
UCITS are marketed may take action against it if it infringes the provisions
referred to in Section VIII.
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3. Any decision to withdraw authorization, or any other serious measure taken
against a UCITS, or any suspension of re-purchase or redemption imposed upon
it, must be communicated without delay by the authorities of the Member State in
which the UCITS in question is situated to the authorities of the other Member
States in which its units are marketed.
Article 52a
1. Where, through the provision of services or by the establishment of branches, a
management company operates in one or more host Member States, the
competent authorities of all the Member States concerned shall collaborate
closely. They shall supply one another on request with all the information
concerning the management and ownership of such management companies that
is likely to facilitate their supervision and all information likely to facilitate the
monitoring of such companies. In particular, the authorities of the home Member
State shall cooperate to ensure that the authorities of the host Member State
collect the particulars referred to in Article 6c(2).
2. Insofar as it is necessary for the purpose of exercising their powers of
supervision, the competent authorities of the home Member State shall be
informed by the competent authorities of the host Member State of any measures
taken by the host Member State pursuant to Article 6c(6) which involve penalties
imposed on a management company or restrictions on a management company’s
activities.
Article 52b
1. Each host Member State shall ensure that, where a management company
authorised in another Member State carries on business within its territory
through a branch, the competent authorities of the management company’s home
Member State may, after informing the competent authorities of the host Member
State, themselves or through the intermediary of persons they instruct for the
purpose, carry out on-the-spot verification of the information referred to in Article
52a.
2. The competent authorities of the management company’s home Member State
may also ask the competent authorities of the management company’s host
Member State to have such verification carried out. Authorities which receive
such requests must, within the framework of their powers, act upon them by
carrying out the verifications themselves, by allowing the authorities who have
requested them to carry them out or by allowing auditors or experts to do so.
3. This Article shall not affect the right of the competent authorities of the host
Member State, in discharging their responsibilities under this Directive, to carry
out on-the-spot verifications of branches established within their territory.
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SECTION X
Contact Committee
Article 53
1. A Contact Committee, hereinafter referred to as ‘the Committee’, shall be set
up alongside the Commission. Its function shall be:
(a) to facilitate, without prejudice to Articles 169 and 170 of the Treaty, the
harmonized implementation of this Directive through regular consultations on any
practical problems arising from its application and on which exchanges of views
are deemed useful;
(b) to facilitate consultation between Member States either on more rigorous or
additional requirements which they may adopt in accordance with Article 1 (7), or
on the provisions which they may adopt in accordance with Articles 44 and 45;
(c) to advise the Commission, if necessary, on additions or amendments to be
made to this Directive.
2. It shall not be the function of the Committee to appraise the merits of decisions
taken in individual cases by the authorities referred to in Article 49.
3. The Committee shall be composed of persons appointed by the Member States
and of representatives of the Commission. The Chairman shall be a representative
of the Commission. Secretarial services shall be provided by the Commission.
4. Meetings of the Committee shall be convened by its chairman, either on his
own initiative or at the request of a Member State delegation. The Committee
shall draw up its rules of procedure.
Article 53a
1. In addition to its functions provided for in Article 53(1), the Contact
Committee may also meet as a Regulatory Committee within the meaning of
Article 5 of Decision 1999/468/EC (1) to assist the Commission in regard to the
technical modifications to be made to this Directive in the following areas:
— clarification of the definitions in order to ensure uniform application of this
Directive throughout the Community,
— alignment of terminology and the framing of definitions in accordance with
subsequent acts on UCITS and related matters.
(1) OJ L 184, 17.7.1999, p. 23.
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2. Where reference is made to this paragraph, Articles 5 and 7 of Decision
1999/468/EC shall apply, having regard to the provisions of Article 8 thereof.
The period provided for in Article 5(6) of Decision 1999/468/EC shall be set at
three months.
3. The Committee shall adopt its rules of procedure.
SECTION XI
Transitional provisions, derogations and final provisions
Article 54
Solely for the purpose of Danish UCITS, pantebreve issued in Denmark shall be
treated as equivalent to the transferable securities referred to in Article 19 (1) (b).
Article 55
By way of derogation from Articles 7 (1) and 14 (1), the competent authorities
may authorize those UCITS which, on the date of adoption of this Directive, had
two or more depositaries in accordance with their national law to maintain that
number of depositaries if those authorities have guarantees that the functions to be
performed under Articles 7 (3) and 14 (3) will be performed in practice.
Article 56
1. By way of derogation from Article 6, the Member States may authorize
management companies to issue bearer certificates representing the registered
securities of other companies.
2. The Member States may authorize those management companies which, on the
date of adoption of this Directive, also carry on activities other than those
provided for in Article 6 to continue those other activities for five years after that
date.
Article 57
1. The Member States shall bring into force no later than 1 October 1989 the
measures necessary for them to comply with this Directive. They shall forthwith
inform the Commission thereof.
2. The Member States may grant UCITS existing on the date of implementation of
this Directive a period of not more than 12 months from that date in order to
comply with the new national legislation.
3. The Hellenic Republic and the Portuguese Republic shall be authorized to
postpone the implementation of this Directive until 1 April 1992 at the latest. One
year before that date the Commission shall report to the Council on progress in
implementing the Directive and on any difficulties which the Hellenic Republic or
the Portuguese Republic may encounter in implementing the Directive by the date
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referred to in the first subparagraph. The Commission shall, if necessary, propose
that the Council extend the postponement by up to four years.
Article 58
The Member States shall ensure that the Commission is informed of the texts of
the main laws, regulations and administrative provisions which they adopt in the
field covered by this Directive.
Article 59
This Directive is addressed to the Member States.
ANNEX
50
51
52
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2. Information concerning the depositary:
2.1. Name or style, form in law, registered office and head office if different from
the registered office;
2.2. Main activity.
3. Information concerning the advisory firms or external investment advisers who
give advice under contract which is paid for out of the assets of the UCITS:
3.1. Name or style of the firm or name of the adviser;
3.2. Material provisions of the contract with the management company or the
investment company which may be relevant to the unit-holders, excluding those
relating to remuneration;
3.3. Other significant activities.
4. Information concerning the arrangements for making payments to unit-holders,
re-purchasing or redeeming units and making available information concerning
the UCITS. Such information must in any case be given in the Member State in
which the UCITS is situated. In addition, where units are marketed in another
Member State, such information shall be given in respect of that Member State in
the prospectus published there.
5. Other investment information:
5.1. Historical performance of the unit trust/common fund or of the investment
company (where applicable) — such information may be either included in or
attached to the prospectus.
5.2. Profile of the typical investor for whom the unit trust/common fund or the
investment company is designed.
6. Economic information:
6.1. Possible expenses or fees, other than the charges mentioned in paragraph
1.17, distinguishing between those to be paid by the unit-holder and those to be
paid out of the unit trust’s/common fund’s or of the investment company’s assets.
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SCHEDULE B
Information to be included in the periodic reports
I. Statement of assets and liabilities
— transferable securities,
— debt instruments of the type referred to in Article 19 (2) (b),
— bank balances,
— other assets,
— total assets,
— liabilities,
— net asset value.
II. Number of units in circulation
III. Net asset value per unit
IV. Portfolio, distinguishing between:
(a) transferable securities admitted to official stock exchange listing;
(b) transferable securities dealt in on another regulated market;
(c) recently issued transferable securities of the type referred to in Article
19 (1) (d);
(d) other transferable securities of the type referred to in Article 19 (2) (a);
(e) debt instruments treated as equivalent in accordance with Article 19 (2)
(b);
and analyzed in accordance with the most appropriate criteria in the light
of the investment policy of the UCITS (e. g. in accordance with economic,
geographical or currency criteria) as a percentage of net assets; for each of
the above investments the proportion it represents of the total assets of the
UCITS should be stated.
Statement of changes in the composition of the portfolio during the reference
period.
V. Statement of the developments concerning the assets of the UCITS during
the reference period including the following:
— income from investments,
— other income,
— management charges,
— depositary’s charges,
— other charges and taxes,
— net income,
— distributions and income reinvested,
— changes in capital account,
— appreciation or depreciation of investments,
— any other changes affecting the assets and liabilities of the UCITS.
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VI. A comparative table covering the last three financial years and including,
for each financial year, at the end of the financial year:
— the total net asset value,
— the net asset value per unit.
VII. Details, by category of transaction within the meaning of Article 21
carried out by the UCITS during the reference period, of the resulting
amount of commitments.
SCHEDULE C
Contents of the simplified prospectus
Brief presentation of the UCITS
— when the unit trust/common fund or the investment company was created
and indication of the Member State where the unit trust/common fund or
the investment company has been registered/incorporated,
— in the case of UCITS having different investment compartments, the indication
of
this circumstance,
— management company (when applicable),
— expected period of existence (when applicable),
— depositary,
— auditors,
— financial group (e.g. a bank) promoting the UCITS.
Investment information
— short definition of the UCITS’ objectives,
— the unit trust’s/common fund’s or the investment company’s investment
policy and a brief assessment of the fund’s risk profile (including, if applicable,
information according to Article 24a and by investment compartment),
— historical performance of the unit trust/common fund/investment company
(where applicable) and a warning that this is not an indicator of future
performance — such information may be either included in or attached to
the prospectus,
— profile of the typical investor the unit trust/common fund or the investment
company is designed for.
Economic information
— tax regime,
— entry and exit commissions,
— other possible expenses or fees, distinguishing between those to be paid by
the unit-holder and those to be paid out of the unit trust’s/common fund’s or
the investment company’s assets.
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Commercial information
— how to buy the units,
— how to sell the units,
— in the case of UCITS having different investment compartments how to pass
from one investment compartment into another and the charges applicable in
such cases,
— when and how dividends on units or shares of the UCITS (if applicable) are
distributed,
— frequency and where/how prices are published or made available.
Additional information
— statement that, on request, the full prospectus, the annual and half-yearly
reports may be obtained free of charge before the conclusion of the contract
and afterwards,
— competent authority,
— indication of a contact point (person/department, timing, etc.) where additional
explanations may be obtained if needed,
— publishing date of the prospectus.
ANNEX II
Functions included in the activity of collective portfolio management:
— Investment management.
— Administration:
(a) legal and fund management accounting services;
(b) customer inquiries;
(c) valuation and pricing (including tax returns);
(d) regulatory compliance monitoring;
(e) maintenance of unit-holder register;
(f) distribution of income;
(g) unit issues and redemptions;
(h) contract settlements (including certificate dispatch);
(i) record keeping.
— Marketing.
Made by the Governor in Council this 20th day of April, 2005.
SUZETTE VANTERPOOL,
Clerk of the Executive Council.

 

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