Changes from report parliamentary committee draft to plenary report

Added‘(u) central securities depository’ means a central securities depository as defined in Article 2(1), point (1), of Regulation (EU) No 909/2014 of the European Parliament and of the Council*.’

Added* Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 2014/65/EU and Regulation (EU) No 236/2012 (OJ L 257, 28.8.2014, p. 1);’

Added(1a) in Article 5, paragraph 8 is replaced by the following:

Added‘(8) In order to ensure consistent harmonisation of this Article, the European Supervisory Authority (European Securities and Markets Authority) ( ESMA), established by Regulation (EU) No 1095/2010 of the European Parliament and of the Council 1▌shall develop draft regulatory technical standards to specify the information to be provided to the competent authorities in the application for authorisation of a UCITS, including the programme of activity, and situations where the name of a UCITS could be materially deceptive or misleading to the investor.’;

Added(1b) in Article 6(3), the following point is inserted:

Added‘(ba) benchmark administration in accordance with Regulation (EU) 2016/1011.’

Added(2) Article 7(1) is amended as follows:

Added(a) points (b) and (c) are replaced by the following:

Added‘(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, the names of those persons and of every person succeeding them in office being communicated forthwith to the competent authorities and the conduct of the business of a management company being decided by at least two persons who are either employed full-time or on a full-time equivalent basis by that management company or who are committed full-time to conduct the business of that management company and who are resident in the Union meeting such conditions;

Added(ba) the management company ensures that at least one member of its governing body is a non-executive director. The management company, in appointing a non-executive director of its governing body, shall determine whether such a member is independent in character and judgement and whether there are relationships or circumstances, which are likely to affect that member’s judgement. The management company shall take reasonable steps to ensure that any non-executive directors appointed to its governing body have sufficient expertise and experience to be able to make judgements on whether the management company is managing UCITS in the best interest of investors. Non-executive directors shall contribute to ensuring that the management company complies with the requirements regarding conflicts of interests and acting in the best interests of the UCITS and their investors, as specified in this Directive;

Added(c) the application for authorisation is accompanied by a programme of activity setting out, at least, the organisational structure of the management company, specifying technical and human resources that will be used to conduct the business of the management company, information about the persons effectively conducting the business of that management company, including:

Added(i) a detailed description of their role, title and level of seniority;

Added(ii) a description of their reporting lines and responsibilities inside and outside of the management company;

Added(iii) an overview of their time allocated to each responsibility;

Added(iiia) information on how the management company intends to comply with its obligations under this Directive, and with its obligations under Regulation (EU) 2019/2088 and a detailed description of the appropriate human and technical resources that will be used by the management company to this effect;’

Added(b) the following point (e) is added:

Added‘(e) information is provided by the management company on arrangements made for the delegation to third parties of functions in accordance with Article 13, including:

Added(i) the legal name and relevant legal identifier of the management company;

Added(ii) the legal name and relevant legal identifier of the UCITS and its investment strategy;

Added(iii) the legal name and relevant legal identifier of each delegate, its jurisdiction of establishment and, where relevant, its supervisory authority;

Added(iv) a brief description of the delegated risk management functions, including whether each such delegation amounts to a partial or full delegation;

Added(v) a brief description of the delegated portfolio management functions, by investment strategy and relevant geographies, including whether each such delegation amounts to a partial or full delegation;

Added(vi) a brief description of other functions listed in Annex II which the management company additionally performs; and

Added(vii) for each of the following, a detailed description of the human and technical resources:

Added- employed by or committed to the management company for performing day-to-day portfolio or risk management tasks within the management company;

Added- employed by or committed to the delegate for performing those services on a delegated basis; and

Added- employed by or committed to the management company for monitoring and controlling the delegate;

Added(viii) an explanation of the added value of the delegation to the investor.’;

Added(2a) in Article 7, the following paragraph is inserted:

Added‘1a. A management company shall report to the competent authority any material changes that may affect the scope of the authorisation by that authority and in particular any modification on the arrangements of the delegation and sub-delegation to third parties provided at the time of authorisation.’;

Added(3) Article 13 is amended as follows:

Added(a) paragraph 1 is amended as follows:

Added(i) the introductory phrase is replaced by the following:

Added‘1. Management companies, which intend to delegate to third parties the task of carrying out, on their behalf, one or more of the functions listed in Annex II and the services referred to in Article 6(3), shall notify the competent authorities of their home Member State before the delegation arrangements become effective. The following conditions shall be met:’;

Added(ii) point (b) is replaced by the following:

Added‘(b) the mandate must not prevent the effectiveness of supervision over the management company, and, in particular, must not prevent the management company from acting, or the UCITS from being managed, in the best interests of its investors and clients.’;

Added(iii) points (g), (h) and (i) are replaced by the following:

Added‘(g) the mandate must not prevent the persons who conduct the business of the management company from giving further instructions to the undertaking to which functions or provision of services are delegated at any time or from withdrawing the mandate with immediate effect when this is in the interest of investors and clients.

Added(h) having regard to the nature of the functions and provision of services to be delegated, the undertaking to which functions or provision of services will be delegated must be qualified and capable of undertaking the functions or performing the services in question; and

Added(i) the UCITS’ prospectuses must list the services and functions which the management company has been allowed to delegate in accordance with this Article;’;

Added(iv) the following point (j) is added:

Added‘(j) the management company must be able to justify its entire delegation structure on objective reasons.’;

Added(b) paragraph 2 is replaced by the following:

Added‘2. The liability of the management company or the depositary shall not be affected by delegation to third parties of any functions or of provision of services by the management company. The management company shall not delegate its functions or provision of services to the extent that, in essence, it can no longer be considered to be the manager of the UCITS and to the extent that it becomes a letter-box entity.

Added(ba) the following paragraphs are inserted:

Added‘2a. By way of derogation from paragraphs 1 and 2, where the marketing function, as referred to in the third indent of Annex II, is performed by one or several distributors which are acting on their own behalf and which market the UCITS under Directive 2014/65/EU or through insurance-based investment products in accordance with Directive 2016/97/EU, such function shall not be considered to be a delegation that is subject to the requirements set out in paragraphs 1 and 2, irrespective of any distribution agreement between the management company and the distributor.

Added2b. The management company shall ensure that the management of funds for which it is the management company complies with the requirements set out in this Directive. That obligation applies irrespective of the regulatory status or location of any delegate or subdelegate.’;

Added(c) the following paragraphs 3, 4, 5 and 6 are added:

Added3. ▌

Added4. ▌

Added5. By … [24 months after the date of application of this amending Directive] ESMA shall provide the European Parliament, the Council and the Commission with a ▌report ▌ analysing market practices regarding delegation to entities ▌and compliance with Articles 7 and 13.

Added6. The Commission shall adopt, by means of delegated acts in accordance with Article 112a, measures specifying:

Added(a) the conditions for fulfilling the requirements set out in paragraph 1;

Added(b) the conditions under which the management company of UCITS shall be deemed to have delegated its functions to the extent that it becomes a letter-box entity and can no longer be considered to be the manager of the UCITS as set out in paragraph 2.’;

Added(3a) Article 14 is amended as follows:

Added(a) in paragraph 1, point (a) is replaced by the following:

Added‘(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 in particular as regards fees and costs charged to investors;’;

Added(b) the following paragraphs are inserted:

Added‘2a. For the purposes of point (a) of paragraph 1, ESMA shall by ... [18 months after the entry into force of this amending Directive] submit a report to the European Parliament, the Council and the Commission:

Added- assessing the costs charged by management companies to investors in UCITS, and the reasons for cost levels and for differences between them;