What did UCITS V change? : a study on the impact of UCITS V on the fund industry, including fund depositaries

Abstract

Since 1985, the regulatory framework for Undertakings for Collective Investment in Transferable Securities (UCITS) has become the guiding principle for fund regulation and a pillar for a harmonised European fund industry. As a combination of the overall market development, evolution of the UCITS Directive and the global financial crisis in 2007-2008, UCITS V is the latest recital of the initial Directive and imposes new remuneration rules, sanctions regime and depositary role on the fund industry. This thesis examines the impact of the newly in force UCITS V Directive, the direct and indirect effect its new provisions leave on the fund industry. The analysis discovers that UCITS V is not leaving a break-through impact to the previously existing business conduct for already operating parties, given the fact that a large amount of depositaries are servicing and many UCITS management companies also hold a licence for alternative investment funds covered by AIFMD, on which UCITS V provisions are largely modelled. Despite the compliance obligations, the more proactive management companies can use regulatory change and the increased investor protection as an opportunity to attract more business. Depositaries now have more responsibilities and increased strict liability, and the relationships with third parties have intensified due to increased information sharing. Apart from several opportunities, UCITS V can in the long run result in the concentration of assets in a fewer, yet larger depositaries, thus increasing the concentration of systemic and operational risks. In addition to the impact assessment of the new provisions, the conclusions also draw attention to the future challenges for regulatory change in this industry.