UCITS: ESMA Q&A Update

In July 2018, new questions were added to the ESMA Q&A on UCITS Directive. They cover the following matters:

Possibility for a UCITS to invest in other UCITS with different investment policies: ESMA states that in this case (i) the prospectus of the UCITS should clearly disclose, where relevant, that the target fund(s) might have different investment strategies or restrictions, and (ii) UCITS management companies ("UCITS ManCos")/self-managed UCITS carry out proportionate due diligence to ensure that it does not result in a circumvention of the investment strategies or restrictions of the fund (as set out in the rules or instrument of incorporation and prospectus of the investing UCITS). Supervision of branches: The question relates to the case where a UCITS ManCo provides its investment services through a branch established in a host Member State. ESMA clarifies that supervisory powers are shared between the relevant competent authorities as follows: - the competent authority of the host Member State is responsible for the supervision of the branch's compliance with conduct rules referred to in Article 17(5) of the UCITS Directive; and - the competent authority of the home Member State is responsible for the supervision of the other requirements provided under the relevant applicable framework. According to ESMA, the same principle should apply in the case of performance of MiFID services (Article 6.3 UCITS Directive), i.e. the host Member State is responsible for ensuring that the services provided by the branch in its...