Undertakings for Collective Investment in Transferable Securities (UCITS) V

Background to UCITS V

The original UCITS Directive created the internal market for investment funds in Europe. The current EU legislation for investment funds (the UCITS Directive) has been the basis for an integrated market facilitating the cross-border offer of collective investment funds. UCITS have proved successful and are widely used by European retail investors. UCITS are also regularly sold to investors outside the EU where they are valued due to their high level of investor protection.

The European Commission's (EC) proposed amendments to the original UCITS rules (UCITS V) are designed to continue to ensure the safety of investors and the integrity of the market. In particular, the proposal will aim to ensure that the UCITS brand remains trustworthy by ensuring that the depositary's (the asset-keeping entity) duties and liability are clear and uniform across the EU.

On 25 February 2014, the European Parliament and Council backed the European Commission’s proposal to strengthen the rules for UCITS. On 23 July 2014, the EU formally adopted the Directive, which was then published in the Official Journal on 28 August and subsequently came into force on 17 September 2014.

What are the aims of the UCITS V Directive?

  • To create uniform regulatory conditions across the EU
  • To harmonise the rules regarding depositary duties, eligibility and liabilities across EU member states
  • To align the UCITS legal framework with the Alternative Investment Fund Managers Directive’s (AIFMD) procedures regarding depositary, remuneration and sanctions now in force for non-UCITS funds

Key elements of the 25 Feb 2014 UCITS V agreement:

  1. UCITS V strengthens the rules on eligible entities that can act as a depositary. Only national central banks, credit institutions and regulated firms with sufficient capital and adequate infrastructure will be eligible as UCITS depositaries and will hold for safe-keeping all UCITS assets.
  2. UCITS assets will be protected in the event of insolvency of the depositary through clear segregation rules and safeguards.
  3. The depositary's liability has been strengthened, in particular regarding a loss of UCITS assets held in custody. UCITS investors will have the right of redress directly against the depositary and will not have to rely on the management company's ability to accomplish this task.
  4. Remuneration policies: key risk takers involved in managing UCITS funds must adopt and abide by remuneration practices that do not encourage excessive or short term risk-taking. Similarly, those with key internal control responsibilities must adopt and abide by remuneration practices aligned to sound and effective risk management. The transparency of the remuneration practices will be enhanced. The remuneration policies are similar to those in the AIFMD.
  5. The agreement strengthens the existing regime to ensure effective and harmonised administrative sanctions. The use of criminal sanctions is framed so as to ensure the cooperation between authorities and the transparency of sanctions. A harmonised system of strengthened cooperation will improve the effective detection of breaches of UCITS rules.


UCITS V was published in the EC’s Official Journal on 28 August 2014 and came into force on 17 September. The EC has stated that member states will have until 18 March 2016 to transpose these provisions into national law.

For more information on UCITS V, please refer to the EU’s FAQs.

Last updated: 24 March 2015