Changes from report parliamentary committee draft to plenary report

Added2. When preparing the report referred to in paragraph 1, ESMA shall work in close cooperation with the European Central Bank (ECB), the other European Supervisory Authorities, and, where relevant, the national competent authorities.’;

Added(6) Article 22a is amended as follows:

Added(a) in paragraph 2, point (c) is replaced by the following:

Added‘(c) the depositary has exercised all due skill, care and diligence in the selection and the appointment of any third party to whom it intends to delegate parts of its tasks, except where that third party is a central securities depository acting in the capacity of an issuer CSD as defined in ▌the delegated act adopted on the basis of Articles 29(3) and 48(10) of Regulation (EU) No 909/2014 and continues to exercise all due skill, care and diligence in the periodic review and ongoing monitoring of any third party to which it has delegated parts of its tasks and of the arrangements of the third party in respect of the matters delegated to it.;

Added(b) paragraph 4 is replaced by the following:

Added‘4. For the purposes of this paragraph, the provision of services by a central securities depository acting in the capacity of an issuer CSD as defined in ▌the delegated act adopted on the basis of Articles 29(3) and 48(10) of Regulation (EU) No 909/2014 shall not be considered a delegation of the depositary’s custody functions.

AddedFor the purposes of this paragraph, the provision of services by a central securities depositary acting in the capacity of an investor CSD as defined in Article 1, point (f), of Commission Delegated Regulation (EU) 2017/392 shall be considered a delegation of the depositary’s custody functions.’;

Added(7) in Article 29(1), point (b) is replaced by the following:

Added‘(b) the directors of the investment company must be of sufficiently good repute and be sufficiently experienced also in relation to the type of business pursued by the investment company and, 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 either two full-time employees or two ▌persons committed full-time or on a full-time equivalent basis to conduct the business of that management company and resident in the Union’ meeting such conditions; and ‘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;

Added(ba) the investment company must ensure that at least one member of its governing body is a non-executive director. The investment company, in appointing a non-executive director of its governing body, must 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 investment company must 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 investment company is managing UCITS in the best interest of investors. Non-executive directors shall contribute to ensuring that the investment company complies with the requirements regarding conflicts of interests and is acting in the best interests of the UCITS and their investors, as specified in this Directive’;

Added(7a) in Article 57, the following paragraph is added:

Added2a. Where the UCITS management company implements side pockets referred to in Article 84(2)(a) by means of assets segregation, the segregated assets can be excluded from the calculation of limits laid down in this Chapter.

Added(8) in Article 84, paragraphs 2 and 3 are replaced by the following:

Added‘2. By way of derogation from paragraph 1:

Added(a) a UCITS may, in the interest of its unit-holders, temporarily suspend the repurchase or redemption of its units or activate other liquidity management tool selected in accordance with Article 18a(2). In the interest of its unit-holders and to ensure subscriptions and redemptions are processed at a fair price, a UCITS may also activate side pockets as referred to in Annex IIA, point 8, when the UCITS cannot ensure the fair and accurate valuation of some assets or where some assets have become non-tradable;

Added(b) in the interest of the unit-holders or of the public, in exceptional circumstances and after consulting the UCITS, competent authorities of a UCITS home Member State may require a UCITS to activate a liquidity management tool referred to in points 1 or 2 of Annex IIA▌, whichever is more suitable considering the type of UCITS and the risks that necessitate taking this measure.

AddedThe temporary suspension referred to in point (a) of the first subparagraph shall be provided for only in exceptional cases where circumstances so require and where suspension is justified having regard to the interests of the unit-holders.

Added3. The UCITS shall▌, without delay, notify the competent authorities of ▌its home Member State and the competent authorities of all Member States in which it markets its units, in any of the following circumstances:

Added- when, in situations of liquidity stress, a UCITS activates or deactivates one of the liquidity management tools listed in points 1 to 2 of Annex IIa

Added- when activating or deactivating side pockets as referred to in point 8 of Annex IIa,

Added- when activating or deactivating any other liquidity management tool in a manner that is not in the ordinary course of business as envisaged in the fund documentation.

AddedThe competent authorities of the home Member State of the UCITS shall inform, without delay, ESMA ▌about any notification received in accordance with this paragraph. The competent authorities of the home Member State of the UCITS shall inform ESRB if there is any potential risk to stability and integrity of financial system.

AddedESMA shall have the power to share the information received in accordance with this paragraph with competent authorities.

Added3a.The competent authorities of the UCITS home Member State shall notify the competent authorities of all Member States in which the UCITS markets its units, ESMA ▌prior to exercising powers pursuant to paragraph 2, point (b). The competent authorities of the home Member State of the UCITS shall inform ESRB if there is any potential risk to stability and integrity of financial system.

Added3b. The competent authority of the Member States in which a UCITS markets its units may request the competent authority of the UCITS home Member State to exercise powers laid down in paragraph 2, point (b), specifying the reasons for the request and notifying ESMA and, in case of any potential risk to the stability and integrity of the financial system, the ESRB thereof.

Added3c. Where the competent authority of the UCITS home Member State does not agree with the request referred to in paragraph 3b, it shall inform the requesting competent authority, ESMA and, in case of any potential risk to the stability and integrity of the financial system, the ESRB thereof, stating the reasons for the disagreement.

Added3d. On the basis of the information received in accordance with paragraphs 3b and 3c, ESMA shall issue an opinion to the competent authorities of the UCITS home Member State on exercising powers laid down in paragraph 2, point (b).

Added3e. Where the competent authority does not act in accordance or does not intend to comply with ESMA’s opinion referred to in paragraph 3d, it shall inform ESMA, stating the reasons for the non-compliance or intention. In the event of a serious threat to investor protection, a threat to the orderly functioning and integrity of financial markets or a risk to the stability of the whole or part of the financial system in the Union, and unless such publication is in conflict with the legitimate interest of the share or unit-holders or of the public, ESMA may publish the fact that a competent authority does not comply or intend to comply with its advice together with the reasons stated by the competent authority for the non-compliance or intention. ESMA shall give the competent authorities advance notice about such publication.’

Added3f. ESMA shall develop draft regulatory technical standards indicating in which situations the competent authorities may exercise the powers set out in paragraph 2, point (b). When developing those standards, ESMA shall consider the potential implications of such supervisory intervention for investor protection and the financial stability in another Member State or in the Union. Those standards shall recognise that the primary responsibility for liquidity risk management remains with the UCITS and that intervention by the competent authorities is a last resort.

AddedPower is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.’;

Added(9) in Article 98, the following paragraphs are added:

Added‘3. The competent authority of the UCITS host Member State may, where it has good reasons to suspect that acts contrary to this Directive are being or have been carried out by the UCITS, request the competent authority of the UCITS home Member State to exercise, without delay, powers laid down in paragraph 2 specifying the reasons for its request in as specific a manner as possible and notifying ESMA and, if there are potential risks to the stability and integrity of the financial system, the ESRB thereof.

AddedThe competent authority of the UCITS home Member State shall, without undue delay, inform the competent authority of the UCITS host Member State, ESMA and, if there are potential risks to the stability and integrity of the financial system, the ESRB of the powers exercised and its findings.’

Added4. ESMA may request the competent authority to submit, within a reasonable timeframe, explanations to ESMA in relation to specific cases, which pose a serious threat to investor protection, threaten the orderly functioning and integrity of financial markets or pose risks to the stability of the whole or part of of financial system.’;

Added(9a) in Article 101(1), the first subparagraph is replaced by the following:

Added‘1. The competent authorities of the Member States shall cooperate with each other and with ESMA and the ESRB whenever necessary for the purpose of carrying out their duties under this Directive or of exercising their powers under this Directive or under national law.’;

Added(10) the following Article is inserted:

Added‘ Article 101a

Added1. By … [12 months before the date of the review referred to in Article 110a] ESMA shall ▌conduct a one-off comprehensive peer review analysis of the supervisory activities of the competent authorities in relation to the application of Article 13. That peer review analysis shall focus on the measures taken to prevent that management companies, which delegate performance of portfolio management or risk management to third parties located in third countries, become letter-box entities.

Added2. When conducting the peer review analysis, ESMA shall use transparent methods to ensure an objective assessment and comparison between the competent authorities reviewed.’;

Added(11) the following Article 110a is inserted:

Added‘ Article 110a

AddedBy [Please insert date = 40 months after the entry into force of this Directive] and following the peer review and analysis referred to in Article 101a and the report produced by ESMA in accordance with Article 13(4), the Commission shall initiate a review of the delegation regime laid down in Article 13 with regard to preventing the creation of letter-box entities in the Union.’;

Added(12) Article 112a is amended as follows:

Added(a) in paragraph 1, the following subparagraph is added:

Added‘The power to adopt the delegated acts referred to in Article 13 shall be conferred on the Commission for a period of four years from [Please insert the date of entry into force of this Directive.]’;

Added(b) in paragraph 3, the first sentence is replaced by the following:

Added‘The delegation of power referred to in Articles 12, 13, 14, 18a, 20a, 26b, 43, 50a, 51, 60, 61, 62, 64, 75, 78, 81, 95 and 111 may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of any delegated acts already in force.’;

Added(c) in paragraph 5, the first sentence is replaced by the following:

Added‘A delegated act adopted pursuant to Articles 12, 13, 14, 18a, 20a, 26b, 43, 50a, 51, 60, 61, 62, 64, 75, 78, 81, 95 and 111 shall enter into force only if no objection has been expressed either by the European Parliament or the Council within a period of three months of notification of that act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by three months at the initiative of the European Parliament or of the Council.’;

Added(13) Annex I is amended as set out in Annex III to this Directive;

Added(14) The text in Annex IV to this Directive is added as Annex IIA.

AddedTransposition

Added1. Member States shall adopt and publish, by [Please insert date = 24 months after the entry into force of this Directive] at the latest, the laws, regulations and administrative provisions necessary to comply with this Directive. They shall forthwith communicate to the Commission the text of those provisions.

Added2. They shall apply those provisions from […].

Added3. When Member States adopt those provisions, they shall contain reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made.

Added4. Member States shall communicate to the Commission the text of the main measures of national law which they adopt in the field covered by this Directive.

AddedEntry into force

AddedThis Directive shall enter into force on the 20th day following that of its publication in the Official Journal of the European Union.

AddedAddressees