(1)

Directive 2009/65/EC of the European Parliament and of the Council (2) should be amended in order to take into account market developments and the experiences of market participants and supervisors gathered so far, in particular to address discrepancies between national provisions in respect of depositaries' duties and liability, remuneration policy and sanctions.

(2)

In order to address the potentially detrimental effect of poorly designed remuneration structures on the sound management of risks and control of risk-taking behaviour by individuals, there should be an express obligation for undertakings of collective investment in transferable securities (UCITS) management companies to establish and maintain, for those categories of staff whose professional activities have a material impact on the risk profiles of the UCITS they manage, remuneration policies and practices that are consistent with sound and effective risk management. Those categories of staff should include any employee and any other member of staff at fund or sub-fund level who are decision takers , fund managers and persons who take real investment decisions, persons who have the power to exercise influence on such employees or members of staff, including investment policy advisors and analysts, senior management and any employees receiving total remuneration that takes them into the same remuneration bracket as senior management and decision takers. Those rules should also apply to UCITS investment companies that do not designate a management company.

(3)

The principles governing remuneration policies should recognise that UCITS management companies are able to apply those policies in different ways according to their size and the size of the UCITS they manage, their internal organisation and the nature, scope and complexity of their activities. However, UCITS management companies should, in any event, ensure that they apply all those principles simultaneously.

(4)

The principles regarding sound remuneration policies established in this Directive should be consistent with and be complemented by the principles set out in the Commission Recommendation 2009/384/EC of 30 April 2009 on remuneration policies in the financial services sector (3) and by the work of the Financial Stability Board and G-20 commitments to mitigate risk in the financial services sector .

(4a)

Guaranteed variable remuneration should be exceptional because it is not consistent with sound risk management or the pay-for-performance principle and should not be a part of prospective compensation plans.

(4b)

Remuneration paid from the fund to management companies should, like the remuneration paid by management companies to their staff, be consistent with sound and effective risk management and with the interests of investors.

(4c)

In addition to pro rata remuneration, it should be possible for costs and expenses directly linked to the maintenance and safeguarding of investments, such as those for legal action, protection or enforcement of the rights of the unit-holder or for retrieval of or compensation for lost assets, to be charged to the fund by the management company. The Commission should assess which are the common product related costs and expenses in the Member States for retail investment products. The Commission should conduct a consultation exercise and an impact assessment, and should put forward a legislative proposal if there is a need for further harmonisation.

(5)

In order to promote supervisory convergence in the assessment of remuneration policies and practices, the European Securities and Markets Authority (ESMA), established by Regulation (EU) No 1095/2010 of the European Parliament and of the Council (4) should ensure the existence of guidelines on sound remuneration policies in the asset management sector. The European Banking Authority (EBA) established by Regulation (EU) No 1093/2010 of the European Parliament and of the Council (5) should assist ESMA in the elaboration of such guidelines. Those guidelines should, in particular, provide further instructions on partial neutralisation of the remuneration principles reconcilable with the risk profile, risk appetite and the strategy of the management company and the UCITS it manages. ESMA's guidelines on remuneration policies should, where appropriate, be aligned, to the extent possible, with those for funds regulated under Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers  (6) . Furthermore, ESMA should supervise the adequate enforcement of those guidelines by competent authorities. Deficiencies should be addressed promptly with supervisory action in order to safeguard the level playing field across the internal market.

(6)

The provisions on remuneration should be without prejudice to the full exercise of fundamental rights guaranteed by the Treaties, to general principles of national contract and labour law, applicable legislation regarding shareholders’ rights and involvement and the general responsibilities of the administrative and supervisory bodies of the institution concerned, as well as the right, where applicable, of social partners to conclude and enforce collective agreements, in accordance with national laws and custom.

(7)

In order to ensure the necessary level of harmonisation of the relevant regulatory requirements in different Member States, additional rules should be adopted defining the tasks and duties of depositaries, designating the legal entities that may be appointed as depositaries and clarifying the liability of depositaries in cases UCITS assets are lost in custody or in the case of depositaries' improper performance of their oversight duties. Such improper performance may result in the loss of assets but also in the loss of the value of assets, if, for example, a depositary tolerated investments that were not compliant with fund rules, while exposing the investor to unexpected or anticipated risks. Additional rules should also clarify the conditions under which depositary functions may be delegated.

(8)

It is necessary to clarify that a UCITS should appoint a single depositary having general oversight over the UCITS's assets. Requiring that there be a single depositary should ensure that the depositary has a view over all the assets of the UCITS and both fund managers and investors have a single point of reference in the event that problems occur in relation to the safekeeping of the assets or the performance of oversight functions. The safekeeping of assets includes holding assets in custody or, where assets are of such a nature that they cannot be held in custody, verification of the ownership of those assets as well as record-keeping for those assets.

(9)

In performing its tasks, a depositary should act honestly, fairly, professionally, independently and in the interest of the UCITS or of the investors of the UCITS.

(10)

In order to ensure a harmonised approach to the performance of depositaries duties in all Member States irrespective of the legal form taken by the UCITS, it is necessary to introduce a uniform list of oversight duties that are incumbent on both a UCITS with a corporate form (an investment company) and a UCITS in a contractual form.

(11)

The depositary should be responsible for the proper monitoring of the UCITS' cash flows, and, in particular, for ensuring that investor money and cash belonging to the UCITS is booked correctly on accounts opened in the name of the UCITS, or in the name of the management company acting on behalf of the UCITS, or in the name of the depositary acting on behalf of the UCITS. Therefore detailed provisions should be adopted on cash monitoring so as to ensure effective and consistent levels of investor protection. When ensuring investor money is booked in cash accounts, the depositary should take into account the principles set out in Article 16 of Commission Directive 2006/73/EC of 10 August 2006 implementing Directive 2004/39/EC of the European Parliament and of the Council as regards organisational requirements and operating conditions for investment firms and defined terms for the purposes of that Directive (7).

(12)

In order to prevent fraudulent cash transfers, it should be required that no cash account associated with the funds' transactions be opened without the depositary's knowledge.

(13)

Any financial instrument held in custody for a UCITS should be distinguished from the depositary's own assets, and at all times be identified as belonging to that UCITS; such a requirement should confer an additional layer of protection for investors should the depositary default.

(14)

In addition to the existing duty to safe keep assets belonging to a UCITS, assets should be differentiated between those that are capable of being held in custody and those that are not, where a record-keeping and ownership verification requirement applies instead. The group of assets that can be held in custody should be clearly differentiated, since the duty to return lost assets should only apply to that specific category of financial assets.

(14a)

The financial instruments held in custody by the depositary should not be reused by the depositary or by any third party to whom the custody function has been delegated for their own account.

(15)

It is necessary to define the conditions for the delegation of the depositary's safe-keeping duties to a third party. Delegation and sub-delegation should be objectively justified and subject to strict requirements in relation to the suitability of the third party entrusted with the delegated function, and in relation to the due skill, care and diligence that the depositary should employ to select, appoint and review that third party. For the purpose of achieving uniform market conditions and an equally high level of investor protection, such conditions should be aligned with those applicable under Directive 2011/61/EU, Regulation (EC) No 1060/2009 of the European Parliament and of the Council of 16 September 2009 on credit rating agencies  (8) and Regulation (EU) No 1095/2010. Provisions should be adopted to ensure that third parties have the necessary means to perform their duties and that they segregate UCITS' assets.

(16)

Entrusting the custody of assets to the operator of a securities settlement system as provided for in Directive 98/26/EC of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems (9) or entrusting the provision of similar services to third-country securities settlement systems should not be considered a delegation of custody functions.

(17)

A third party to whom the safe-keeping of assets is delegated should be able to maintain an omnibus account, as a common segregated account for multiple UCITS.

(18)

Where custody is delegated to a third party, it is also necessary to ensure that the third party is subject to specific requirements on effective prudential regulation and supervision. In addition, in order to ensure that the financial instruments are in the possession of the third party to whom custody was delegated, periodic external audits should be performed.

(19)

In order to ensure consistently high levels of investor protection, provisions on conduct and on the management of conflicts of interest should be adopted and they should apply in all situations, including in case of delegation of safe-keeping duties. Those rules should in particular ensure a clear separation of tasks and functions between the depositary, the UCITS and the management company.

(20)

In order to ensure a high level of investor protection and to guarantee an appropriate level of prudential regulation and on-going control, it is necessary to establish an exhaustive list of entities that are eligible to act as depositaries, such that only credit institutions and investment firms are permitted to act as UCITS depositaries. In order to allow other entities that may have previously been eligible to act as depositaries for UCITS funds to convert themselves into eligible entities, transitional provisions should be provided for those entities.

(21)

It is necessary to specify and clarify the UCITS depositary's liability in case of the loss of a financial instrument that is held in custody. The depositary should be liable, where a financial instrument held in custody has been lost, to return a financial instrument of the identical type or of the corresponding amount to the UCITS. No further discharge of liability in case of loss of assets should be envisaged, except where the depositary is able to prove that the loss is due to an ‘external event beyond its reasonable control, the consequences of which would have been unavoidable despite all reasonable efforts to the contrary’. In this context, a depositary should not be able to rely on internal situations such as a fraudulent act by an employee to discharge itself of liability.

(22)

Where the depositary delegates custody tasks and the financial instruments held in custody by a third party are lost, the depositary should be liable. It should also be established that in case of loss of an instrument held in custody, a depositary is bound to return a financial instrument of identical type or the corresponding amount, even if the loss occurred with a sub-custodian. The depositary should only discharge that liability where it can prove that the loss resulted from an external event beyond its reasonable control and with consequences that were unavoidable despite all reasonable efforts to the contrary. In this context, a depositary should not be able to rely on internal situations such as a fraudulent act by an employee to discharge itself of liability. No discharge of liability either regulatory or contractual should be possible in case of loss of assets by a depository or its sub-custodian.

(23)

Every investor in a UCITS fund should be able to invoke claims relating to the liability of its depositary, either directly or indirectly, through the management company. Redress against the depositary should not depend on the legal form that a UCITS fund takes (corporate or contractual form) or the legal nature of the relationship between the depositary, the management company and the unit-holders.

(24)

On 12 July 2010 the Commission proposed amendments to Directive 97/9/EC of the European Parliament and of the Council of 3 March 1997 on investor-compensation schemes (10). It is essential that that the proposal of 12 July 2010 be complemented by clarifying the obligations and the scope of the liability of the depositary and the sub-custodians of UCITS with a view to provide a high level of protection for UCITS investors where a depositary cannot meet its obligations set out in this Directive.

(24a)

In the light of the provisions laid down in this Directive determining the scope of the functions and liabilities of depositaries, the Commission should analyse in which situations the failure of a UCITS depositary or a sub-custodian could lead to losses to UCITS unit holders, whether through the loss of net asset value of their units or other causes, which are not recoverable under those provisions and which, therefore, could require an extension of existing investor-compensation schemes to cover insurance or some kind of compensation which covers the custodian against the failure of a sub-custodian. The analysis should further investigate how to ensure that, in such situations, protection of investors or transparency is equivalent, whatever the chain of intermediation between the investor and the transferable securities affected by the failure. That analysis should be submitted to the European Parliament and to the Council, together with legislative proposals if necessary.

(25)

It is necessary to ensure that the same requirements apply to depositaries irrespective of the legal form a UCITS takes. Consistency of requirements should enhance legal certainty, increase investor protection and contribute to creating uniform market conditions. The Commission has not received any notification that the derogation from the general obligation to entrust assets to a depositary has been used by an investment company. Therefore, the requirements of Directive 2009/65/EC regarding the depositary of an investment company should be considered redundant.

(26)

In line with the Commission Communication of 8 December 2010 on reinforcing sanctioning regimes in the financial services sector, competent authorities should be empowered to impose pecuniary sanctions which are sufficiently high so as to be effective, dissuasive and proportionate, so as to offset expected benefits from behaviours which breach requirements.

(27)

In order to ensure a consistent application across Member States, when determining the type of administrative sanctions or measures and the level of administrative pecuniary sanctions, Member States should be required to ensure that their competent authorities take into account all relevant circumstances.

(28)

In order to strengthen the dissuasive effect on the public at large and to inform them about breaches of rules which may be detrimental to investors' protection, sanctions should be published, save in certain well-defined circumstances. In order to ensure compliance with the principle of proportionality, sanctions should be published on an anonymous basis where publication would cause a disproportionate damage to the parties involved.

(29)

In order to detect potential breaches, competent authorities should be entrusted with the necessary investigatory powers, and should establish effective mechanisms to encourage reporting of potential or actual breaches.

(30)

This Directive should be without prejudice to any provisions in the law of Member States relating to criminal offences and sanctions.

(31)

This Directive respects the fundamental rights and observes the principles recognised in the Charter of Fundamental Rights of the European Union as enshrined in the Treaty on the Functioning of the European Union.

(32)

In order to ensure that the objectives of this Directive are attained, the Commission should be empowered to adopt delegated acts in accordance with Article 290 of the Treaty on the Functioning of the European Union. In particular, the Commission should be empowered to adopt delegated acts to specify the particulars that need to be included in the standard agreement between the depositary and the management company or the investment company, the conditions for performing depositary functions, including the type of financial instruments that should be included in the scope of the depositary's custody duties, the conditions subject to which the depositary may exercise its custody duties over financial instruments registered with a central depositary and the conditions subject to which the depositary should safe keep the financial instruments issued in a nominative form and registered with an issuer or a registrar, the due diligence duties of depositaries, the segregation obligation, the conditions subject to and circumstances in which financial instruments held in custody should be considered as lost, what is to be understood by external events beyond reasonable control, the consequences of which would have been unavoidable despite all reasonable efforts to the contrary. The level of investor protection provided by those delegated acts should be at least as high as that provided by delegated acts adopted under Directive 2011/61/EU. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level. The Commission, when preparing and drawing-up delegated acts, should ensure simultaneous, timely and appropriate transmission of relevant documents to the European Parliament and to the Council.

(33)

In accordance with the Joint Political Declaration ▌of Member States and the Commission on explanatory documents of 28 September 2011  (11), Member States have undertaken to accompany, in justified cases, the notification of their transposition measures with one or more documents explaining the relationship between the components of a directive and the corresponding parts of national transposition instruments. With regard to this Directive, the legislator considers the transmission of such documents to be justified.

(34)

Since the objectives of this Directive, namely to improve investors' confidence in UCITS, by enhancing requirements concerning the duties and the liability of depositaries, the remuneration policies of management companies and investment companies, and by introducing common standards for the sanctions applying to the main breaches of the provisions of this Directive, cannot be sufficiently achieved by Member States acting independently of one another, and can therefore, by reason of its scale and effects, be better achieved at Union level, the Union may adopt the ▌measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty on the European Union. In accordance with the principle of proportionality, as set out in that Article, this Directive does not go beyond what is necessary in order to achieve those objectives.

(34a)

The European Data Protection Supervisor has been consulted in accordance with Regulation (EC) No 45/2001 of the European Parliament and of the Council of 18 December 2000 on the protection of individuals with regard to the processing of personal data by the Community institutions and bodies and on the free movement of such data.

(35)

Directive 2009/65/EC should therefore be amended accordingly,

(1)

The following Articles ▌are inserted:

‘Article 14a

1.   Member States shall require management companies to establish and apply remuneration policies and practices that are consistent with and promote sound and effective risk management and do not encourage risk-taking which is inconsistent with the risk profiles, rules or instruments of incorporation of the UCITS they manage.

2.   The remuneration policies and practices shall cover fixed and variable components of salaries and discretionary pension benefits.

3.   The remuneration policies and practices shall apply to those categories of staff, including employees and other members of staff such as, but not limited to, temporary or contractual staff, at fund or subfund level who are:

4.   In accordance with Article 16 of Regulation (EU) No 1095/2010 ▌, ESMA shall issue guidelines addressed to competent authorities which comply with Article 14b. Those guidelines shall take into account the principles on sound remuneration policies set out in ▌ Recommendation 2009/384/EC, the size of the management company and the size of UCITS they manage, their internal organisation and the nature, the scope and the complexity of their activities. In the process of development of the guidelines ESMA shall cooperate closely with the ▌EBA in order to ensure consistency with requirements developed for other sectors of financial services, in particular credit institutions and investment firms.

Article 14b

1.   When establishing and applying the remuneration policies referred to in Article 14a, management companies shall comply with the following principles in a way and to the extent that is appropriate to their size, internal organisation and the nature, scope and complexity of their activities:

1a.     ESMA shall, in cooperation with the competent authorities, monitor the remuneration policies referred to in Article 14a. In the case of a breach of Article 14a and of this Article, ESMA may act in accordance with its powers under Article 17 of Regulation (EU) No 1095/2010, in particular by addressing recommendations to the competent authorities to prohibit temporarily, or restrict, the application of particular remuneration policies.

1b.     The [UCITS/management company/remuneration committee] shall provide the investors with information in a durable medium on an annual basis setting out the remuneration policy of the UCITS for staff within the scope of Article 14a and describing how the remuneration has been calculated.

1c.     Notwithstanding paragraph 1, Member States shall ensure that the competent authority may require the [UCITS/management company/remuneration committee] to explain in writing how any variable remuneration package is consistent with its obligation to adopt a remuneration policy that:

Cooperating closely with EBA, ESMA shall include in its Guidance on remuneration policies how different sectoral remuneration principles, such as those in Directive 2011/61/EU and Directive 2013/36/EU, are to be applied where employees or other categories of personnel perform services subject to different sectoral remuneration principles. [Am. 3]

2.   The principles set out in paragraph 1 shall apply to remuneration of any type paid by the management companies and to any transfer of units or shares of the UCITS, made to the benefits of those categories of staff, including senior management, risk takers, control functions and any employee receiving total remuneration that falls into the remuneration bracket of senior management and risk takers, whose professional activities have a material impact on the risk profile or the risk profiles of the UCITS that they manage.

3.   Management companies that are significant in terms of their size or the size of the UCITS they manage, their internal organisation and the nature, the scope and the complexity of their activities shall establish a remuneration committee. The remuneration committee shall be constituted in a way that enables it to exercise competent and independent judgment on remuneration policies and practices and the incentives created for managing risk.

The remuneration committee set up, where appropriate, in accordance with ESMA guidelines shall be responsible for the preparation of decisions regarding remuneration, including those which have implications for the risk and risk management of the management company or the UCITS concerned and which are to be taken by the management body in its supervisory function. The remuneration committee shall be chaired by a member of the management body who does not perform any executive functions in the management company concerned. The members of the remuneration committee shall be members of the management body who do not perform any executive functions in the management company concerned. The remuneration committee shall include employee representatives and shall ensure that its rules enable shareholders to act in concert. When preparing its decisions, the remuneration committee shall take into account the long-term interest of stakeholders, investors and the public interest .’

(2)

In Article 20(1), point (a) is replaced by the following:

(3)

Article 22 is replaced by the following:

‘Article 22

1.   An investment company and, for each of the common funds it manages, a management company shall ensure that a single depositary is appointed in accordance with the provisions of this Chapter.

2.   The appointment of the depositary shall take the form of a written contract.

That contract shall comprise rules establishing the flow of information deemed necessary to allow the depositary to perform its functions in respect of the UCITS for which it has been appointed as depositary, as set out in this Directive and in other laws, regulations and administrative provisions which are relevant for depositaries in the UCITS home Member State.

3.   The depositary shall:

4.   The depositary shall ensure that the cash flows of the UCITS are properly monitored, and shall in particular ensure that all payments made by or on behalf of investors upon the subscription of units of the UCITS have been received, and that all cash of the UCITS has been booked in cash accounts that meet the following conditions:

Where the cash accounts are opened in the name of the depositary acting on behalf of the UCITS, no cash of the entity referred to in point (b) of the first subparagraph and none of the own cash of the depositary shall be booked on such accounts.

5.   The assets of the UCITS shall be entrusted to the depositary for safe-keeping as follows:

5a.     The depositary shall provide the management company, on a regular basis, with a comprehensive inventory of all of the assets held in the name of the UCITS.

5b.     The financial instruments held in custody by the depositary shall not be reused by the depositary or by any third party to whom the custody function has been delegated for their own account.

For the purposes of this Article, reuse means any use of financial instruments delivered in one transaction in order to collateralise another transaction including, but not limited to, transferring, pledging, selling and lending.

6.   Member States shall ensure that in the event of insolvency of the depositary or of any regulated entity which holds in custody financial instruments belonging to a UCITS, financial instruments of a UCITS held ▐ in custody are unavailable for distribution among or realisation for the benefit of creditors of the depositary or of the regulated entity .

7.   The depositary shall not delegate to third parties its functions as referred to in paragraphs 3 and 4.

The depositary may delegate to third parties the functions referred to in paragraph 5 only where:

The functions referred to in paragraph 5 may be delegated by the depositary only to a third party which at all time during the performance of the tasks delegated to it:

For the purposes of point (e), ESMA shall issue guidelines addressed to competent authorities, in accordance with Article 16 of Regulation (EU) No 1095/2010, concerning adequate arrangements in the event of insolvency of the third party.

Notwithstanding point (b) of the third subparagraph, where the law of a third country requires that certain financial instruments be held in custody by a local entity and no local entities satisfy the delegation requirements laid down in points (a) to (f) of the third subparagraph , the depositary may delegate its functions to such a local entity only to the extent required by the law of the third country and only for as long as there are no local entities that satisfy the delegation requirements, and only where:

The third party may, in turn, sub-delegate those functions, subject to the same requirements. In such a case, Article 24(2) shall apply mutatis mutandis to the relevant parties.

For the purposes of this paragraph, the provision of services by securities settlement systems as designated by Directive 98/26/EC ▌ or the provision of similar services by third-country securities settlement systems shall not be considered a delegation of its custody functions.’

(4)

Article 23 is amended as follows:

(5)

Article 24 is replaced by the following:

‘Article 24

1.   Member States shall ensure that the depositary shall be liable to the UCITS and to the unit holders of the UCITS for the loss by the depositary or a third party to whom the custody of financial instruments held in custody in accordance with ▐ Article 22(5) has been delegated.

In case of a loss of a financial instrument held in custody, Member States shall ensure that the depositary shall return a financial instrument of identical type or the corresponding amount to the UCITS or the management company acting on behalf of the UCITS without undue delay. The depositary shall not be liable if it can prove that the loss has arisen as a result of an external event beyond its reasonable control, the consequences of which would have been unavoidable despite all reasonable efforts to the contrary.

Member States shall ensure that the depositary shall also be liable to the UCITS, and to the investors of the UCITS, for all other losses suffered as a result of the depositary’s negligent or intentional failure to properly fulfil its obligations pursuant to this Directive.

2.   The liability of the depositary shall not be affected by any delegation referred to in Article 22(7).

3.   The liability of the depositary referred to in paragraph 1 shall not be excluded or limited by agreement.

4.   Any agreement that contravenes the provision of paragraph 3 shall be void.

5.   Unit holders in the UCITS may invoke the liability of the depositary directly or indirectly through the management company.

5a.     Nothing in this Article shall preclude a depositary from making arrangements for the purposes of meeting its liabilities under paragraph 1, provided that such arrangements do not limit or reduce those liabilities or result in a delay in the fulfilment of the depositary's obligations.’;

(6)

In Article 25, paragraph 2 is replaced by the following:

‘2.   In carrying out their respective functions, the management company and the depositary shall act honestly, fairly, professionally, independently and in the interest of the UCITS and the investors of the UCITS.

Neither the depositary nor any of its delegates shall ▐ carry out activities with regard to the UCITS or the management company on behalf of the UCITS that may create conflicts of interest between the UCITS, the investors in the UCITS, the management company and itself, unless the depositary has ensured that there is functional and hierarchical separation of the performance of potentially conflicting tasks, and the potential conflicts of interest are properly identified, managed, monitored and disclosed to the investors of the UCITS.’

(7)

Article 26 is replaced by the following:

‘Article 26

1.   The law or the fund rules of the common fund shall lay down the conditions for the replacement of the management company and of the depositary and rules to ensure the protection of unit-holders in the event of such replacement.

2.   The law or the instruments of incorporation of the investment company shall lay down the conditions for the replacement of the management company and of the depositary and rules to ensure the protection of unit-holders in the event of such replacement.’

(8)

The following Articles ▌are inserted:

‘Article 26a

The depositary shall make available to its competent authorities, on request, all information which it has obtained while performing its duties and that may be necessary for the competent authorities of the UCITS or the UCITS management company. If the competent authorities of the UCITS or the management company are different from those of the depositary, the competent authorities of the depositary shall share the information received without delay with the competent authorities of the UCITS and the management company .

Article 26b

1.   The Commission shall be empowered to adopt ▌ delegated acts in accordance with Article 112 ▌ specifying:

(9)

In Article 30, the first paragraph is replaced by the following:

‘Articles 13, 14, 14a and 14b shall apply mutatis mutandis to investment companies that have not designated a management company authorised pursuant to this Directive.’

(10)

Section 3 of Chapter V is deleted.

(11)

In Article 69(3) the following ▌ subparagraph is added:

‘The annual report shall also contain:

(11a)

in Article 78(3), point (a) is replaced by the following:

(12)

Article 98 is amended as follows:

(13)

Article 99 is replaced by the following:

‘Article 99

1.    Without prejudice to the supervisory powers of competent authorities under Article 98 and without prejudice to the right for Member States to provide for and impose criminal penalties, Member States shall lay down rules on administrative penalties and other measures where the national provisions adopted in the implementation of this Directive have not been complied with, and shall ensure that those measures are applied. The sanctions and measures shall be effective, proportionate and dissuasive.

2.   Member States shall ensure that where obligations apply to UCITS, management companies, investment companies or depositaries, in case of a breach, sanctions or measures may be applied to the members of the management body, and to any other individuals who under national law are responsible for the breach.

3.   Competent authorities shall be given all investigatory powers that are necessary for the exercise of their functions. In the exercise of their powers, competent authorities shall cooperate closely to ensure that sanctions or measures produce the desired results and coordinate their action when dealing with cross border cases.’

(14)

The following articles ▌are inserted:

‘Article 99a

1.    Member States shall ensure that their laws, regulations or administrative provisions provide for penalties in respect of :

2.   Member States shall ensure that in all cases referred to in paragraph 1, the administrative sanctions and measures that may be applied include at least the following:

Article 99b

Member States shall ensure that the competent authorities publish any sanction or measure imposed for breach of the national provisions adopted for the transposition of this Directive without undue delay, including information on the type and nature of the breach and the identity of persons responsible for it, unless such publication would seriously jeopardise the stability of financial markets. Where publication would cause a disproportionate damage to the parties involved, competent authorities shall publish the sanction or measure imposed on an anonymous basis.

Article 99c

1.   Member States shall ensure that when determining the type of administrative sanctions or measures and the level of administrative pecuniary sanctions, the competent authorities ensure that they are effective, proportionate and dissuasive and take into account all relevant circumstances, including:

2.   ESMA shall issue guidelines addressed to competent authorities in accordance with Article 16 of Regulation (EU) No 1093/2010 on types of administrative measures and sanctions and level of administrative pecuniary sanctions.

Article 99d

1.   Member States shall ensure that competent authorities establish effective mechanisms to encourage reporting of breaches of the national provisions transposing this Directive to competent authorities and that the competent authorities provide one or more secure communication channels for persons to provide notification of such breaches. Member States shall ensure that the identity of the persons making such notifications by way of those channels is known only to the competent authority.

2.   The mechanisms referred to in paragraph 1 shall include at least:

2a.     ESMA shall provide one or more secure communication channels for the notification of breaches of the national provisions transposing this Directive. Member States shall ensure that the identity of the persons making such notification by way of those channels is known only to ESMA.

2b.     The notification in good faith to ESMA or to the competent authority of a breach of the national provisions transposing this Directive pursuant to paragraph 2a shall not constitute a breach of any restriction on disclosure of information imposed by contract or by any law, regulation or administrative provision, and shall not involve the person making that notification in liability of any kind relating to such notification.

3.   Member states shall require institutions to have in place appropriate procedures for their employees to report breaches internally through a specific channel.

Article 99e

1.   Member States shall provide ESMA annually with aggregated information regarding all measures or sanctions imposed in accordance with Article 99. ESMA shall publish this information in an annual report.

2.   Where the competent authority has published a measure or sanction, it shall also report the measures or sanctions to ESMA. Where a published measure or sanction relates to a management company, ESMA shall add a reference to the published measure or sanction in the list of management companies published under Article 6(1).

3.   ESMA shall develop draft implementing technical standards concerning the procedures and forms for submitting information as referred to in this Article.

ESMA shall submit those draft implementing technical standards to the Commission by …

Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.

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(13)   OJ L 281, 23.11.1995, p. 31.’;"

(15)

The following Article is inserted:

‘Article 104a

1.   Member State shall apply Directive 95/46/EC to the processing of personal data carried out in the Member State pursuant to this Directive.

2.   Regulation (EC) No 45/2001 of the European Parliament and of the Council of 18 December 2000 on the protection of individuals with regard to the processing of personal data by the Community institutions and bodies and on the free movement of such data  (14) shall apply to the processing of personal data carried out by ESMA pursuant to this Directive.

(14)   OJ L 8, 12.1.2001, p. 1.’"

(16)

In Article 112, paragraph 2 is replaced by the following:

‘2.   The power to adopt the delegated acts is conferred on the Commission subject to the conditions laid down in this Article.

The power to adopt delegated acts referred to in Articles 12, 14, 43, 51, 60, 61, 62, 64, 75, 78, 81, 90 , 95 and 111 shall be conferred on the Commission for a period of four years from 4 January 2011.

The power to adopt the delegated acts referred to in Article 50a shall be conferred on the Commission for a period of four years from 21 July 2011.

The power to adopt the delegated acts referred to in Articles 22 and 24 shall be conferred on the Commission for a period of four years from […]. The Commission shall draw up a report in respect of delegated powers not later than six months before the end of the four-year period. The delegation of power shall be automatically extended for periods of an identical duration, unless the European Parliament or the Council revokes them in accordance with Article 112a.’

(17)

In Article 112a, paragraph 1 is replaced by the following:

‘1.   The delegation of power referred to in Articles 12, 14, 22, 24 , 43, 50a, 51, 60, 61, 62, 64, 75, 78, 81, 90, 95 and 111 may be revoked at any time by the European Parliament or by the Council.’

(18)

Annex I is amended as set out in the Annex to this Directive