[ESMA34-43-392] Q&A on the application of the UCITS Directive

ESMA published an updated Q&As on the application of the UCITS Directive. Specifically, ESMA added four questions in Section I and IVs (the following text is quoted):
#### Section I: General
Question 8: Management of AIFs and pension schemes by UCITS management companies:
– Question 8a: Pursuant to Article 6(2) of the UCITS Directive, are UCITS management companies allowed to manage AIFs as a registered AIFM under Article 3 of Directive 2011/61/EU (AIFMD)? (new) // page 12
Answer: Yes. UCITS management companies are allowed to manage AIFs as AIFMs registered under Article 3 AIFMD. Pursuant to Article 6(2) of the UCITS Directive, management companies can manage other collective investment vehicles, for which the management company is subject to prudential supervision. Registered AIFMs are subject to the prudential supervision under AIFMD to the degree commensurate with their complexity and systemic relevance for the stability of the financial system. Pursuant to Article 3(3) and (4) AIFMD, subthreshold AIFMs shall be at least registered by the home competent authorities and identify the AIFs they manage providing information on the employed investment strategies. Such AIFMs are also subject to the periodic supervisory reporting obligation. There is national discretion to make those requirements stricter. Importantly, the national competent authorities can exert any of the supervisory powers enumerated in Article 46 AIFMD. This allows concluding that AIFMs registered in accordance with Article 3(3) AIFMD should be considered as prudentially supervised within the meaning of Article 6(2) of the UCITS Directive.
– Question 8b: Pursuant to Article 6(2) of the UCITS Directive, are UCITS management companies allowed to manage pension schemes under Directive (EU) 2016/2341? (new) // page 13
Answer: Yes, provided that it is authorised by national legislation implementing the UCITS Directive. The scope of the UCITS license allows UCITS management companies to undertake as core services only the management of UCITS. However, Article 6(3), point (a), of the UCITS Directive provides the possibility for Member States to authorise UCITS management companies to provide, in addition to the management of UCITS, the management of pension funds’ portfolios, in accordance with mandates given by investors on a discretionary, client-byclient basis, where such portfolios include one or more of the instruments listed in Section C of Annex I to Directive 2004/39/EC. Therefore, Member States can authorise UCITS management companies, in addition to the management of UCITS, to manage investment portfolios of pension funds only on a mandate basis, acting as service providers and not as investment managers of the pension funds.
#### Section IV: Notification of UCITS and UCITS management companies; exchange of information between competent authorities
Question 9: De-notification of marketing arrangements for UCITS:
– Question 9: In case there are no investors in a host Member State, do UCITS wishing to de-notify the arrangements previously made for marketing their units have to comply with the obligations set out in Article 93a(1) of the UCITS Directive? (new) // page 40
Answer: Yes. In case there are no investors in a host Member State, UCITS wishing to denotify the arrangements previously made for marketing their units, will still have to comply with all the obligations set out in Article 93a(1) of the UCITS Directive, making sure that there are no investors uninformed about the UCITS’ market exit, that all marketing is publicly terminated and any marketing arrangements with third parties are terminated or modified to prevent any further marketing of the de-notified UCITS.
Question 10: Scope of activities passported by UCITS management companies:
– Question 10: When a management company intends to pursue the activities for which it has been authorised in a host Member State, either directly or through a branch, may that management company passport in that host Member State only the administration or marketing functions referred to in Annex II of the UCITS Directive, without also passporting investment management functions? (new) // page 41
Answer: No. The UCITS passporting regime is linked to the management of UCITS by UCITS management companies on a cross-border basis. Pursuant to Articles 5 and 6 of the UCITS Directive, UCITS management companies are authorised to manage collective investment undertakings and to perform the activities referred to in Annex II to the UCITS Directive. Pursuant to Article 17(2), point (b), and Article18(1), point (b), of the UCITS Directive, a UCITS management company intending to manage UCITS established in another Member State, either directly or through the creation of a branch in another Member State, shall communicate to the competent authorities of its home Member State a program of operations referring to the services it intends to provide. That requirement cannot be interpreted otherwise than referring to investment management foremost, whereas auxiliary services remain as such auxiliary and are to be performed only in relation to the management of a UCITS.