Strengthening the global competitiveness of EU investment funds

SUMMARY OF:

Directive 2009/65/EC on rules relating to undertakings for collective investment in transferable securities (UCITS)

WHAT IS THE AIM OF THE DIRECTIVE?

The main aims of the directive are as follows.

To offer investors a wider choice of products at a lower cost through:
- a more efficient market in undertakings for collective investment in transferable securities (UCITS)* in the European Union (EU);
- better investor information; and
- more efficient supervision of funds.
To keep the EU’s investment sector competitive by adjusting the rules to market developments.

KEY POINTS

It lays down uniform rules on investment funds, allowing the cross-border offer of investment funds to be regulated at the EU level.

The directive lays down rules on:

investor information via a standardised summary information document to make it easier for the consumer to understand the product;
a genuine EU passport for UCITS management companies, which will allow a management company located in one EU Member State to manage funds in other Member States;
marketing of UCITS in other countries, for example by simplifying administrative procedures;
mergers of UCITS in other countries;
stronger supervision of UCITS and of the companies that manage them, for example through enhanced cooperation between national financial services supervisors.

Amendments to Directive 2009/65/EC

Amending Directive 2014/91/EU (UCITS V) introduced new rules on UCITS depositaries (the asset-keeping entity), including the entities eligible to assume this role, their tasks, delegation arrangements and the liability of depositaries.
Amending Regulation (EU) 2017/2402 complements Directive 2009/65/EC with requirements for UCITS assuming exposure to securitisation (see summary).
Amending Directive (EU) 2019/1160 introduced rules to remove regulatory barriers that previously hindered the cross-border distribution of investment funds to make their distribution easier, faster and less costly.
Amending Directive (EU) 2019/2034 introduced a new regulatory framework for investment firms (see summary).
Amending Directive (EU) 2019/2162 aims to protect investors by establishing minimum EU-wide harmonised rules, especially on definitions and standards, for covered bonds* issued by credit institutions* (see summary). It remedies the fact that Directive 2009/65/EC did not specify the nature and content of a special supervision framework – an element defining covered bonds – or the authorities that should be responsible for performing such supervision. It also sets out the tasks and responsibilities of the national competent authorities in this regard.
Amending Directive (EU) 2021/2261 adds new rules to ensure key information documents set out in Regulation (EU) No 1286/2014 (see summary) provided by investments companies or management companies of UCITS always satisfy the requirement applicable to key investor information set out in Directive 2009/65/EC.
Amending Directive (EU) 2022/2556 aligns the rules of the directive, and several other related directives, with the requirements on ICT risk for financial entities set out in the digital operational resilience of the financial sector (DORA) regulation, Regulation (EU) 2022/2254 (see summary).

Delegated act

Directive 2009/65/EC was also supplemented by a delegated act adopted by the European Commission. Delegated Regulation (EU) 2016/438 addresses non-market risks related to the depositaries’ activities. It covers aspects of depositaries’ duties such as:
- the safekeeping of UCITS assets;
- oversight duties (e.g. checking that UCITS investments are consistent with their investment strategies as described in their rules and offering documents or ensuring that UCITS do not breach their investment restrictions); and
- the liability for the assets.
Delegated Regulation (EU) 2016/438 also lays down specific due diligence requirements for insolvency protection of UCITS assets, along with detailed independence requirements for managers and custodians of UCITS.

Implementing acts

The Commission has also adopted:

Regulation (EU) No 583/2010 implementing Directive 2009/65/EC as regards key investor information and conditions to be met when providing key investor information or a prospectus in a durable medium other than paper, or by means of a website;
Regulation (EU) No 584/2010 implementing Directive 2009/65/EC on the EU notification procedure for UCITS (see summary);
Implementing Regulation (EU) 2016/1212 laying down technical standards with regard to standard procedures and forms for submitting information in accordance with Directive 2009/65/EC.

FROM WHEN DO THE RULES APPLY?

Directive 2009/65/EC had to be transposed into national law by 30 June 2011 and these rules have applied since that date.
Amending Directive 2014/91/EU had to be transposed into national law by 18 March 2016 and these rules have applied since that date.
Amending Regulation (EU) 2017/2402 has applied since 1 January 2019.
Amending Directive (EU) 2019/1160 had to be transposed into national law by 2 August 2021 and these rules have applied since that date.
Amending Directive (EU) 2019/2034 had to be transposed into national law by 26 June 2021 and these rules have applied since that date.
Amending Directive (EU) 2019/2162 had to be transposed into national law by 8 July 2021. These rules have applied since 8 July 2022.
Amending Directive (EU) 2022/2556 has to be transposed into national law by 17 January 2025 and these rules apply from that date.

BACKGROUND

Directive 2009/65/EC is the fourth version of UCITS legislation, replacing Directive 85/611/EEC.

For further information, see:

Investment funds (European Commission).

KEY TERMS

Undertakings for collective investment in transferable securities (UCITS). Investment vehicles that pool investors’ capital and invest that capital collectively through a portfolio of financial instruments such as stocks, bonds and other securities.

Covered bond. A debt obligation issued by a credit institution that is secured by assets to which its investors have direct recourse. The assets in question are usually a pool of mortgage loans or credits to the public sector, or other high-quality cover assets, that ensure that the credit institution issuing the covered bonds has a claim for payment and that are secured by collateral assets subject to strictly defined requirements.

Credit institution. An undertaking that takes deposits or other repayable funds from the public in order to grant credit.

MAIN DOCUMENT

Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (OJ L 302, 17.11.2009, pp. 32–96).

Successive amendments to Directive 2009/65/EC have been incorporated into the original text. This consolidated version is of documentary value only.