Is the draft UCITS V directive a cloned version of the Alternative Investment Fund Managers Directive?

Abstract

The Alternative Investment Fund Managers Directive (AIFMD), adopted in June 2011, introduced new measures that create a regulatory framework for Alternative Investment Fund Management, ie in substance all investment funds other than UCITS. Notably the AIFMD creates tight rules and obligations in relation to the safe-keeping of investment fund assets by the depositary. Further the AIFMD introduces specific rules on remuneration. The European Commission’s draft of UCITS V proposal updates the UCITS regime to match the standards of AIFMD, in particular the requirements regarding the depositary, the manager’s remuneration. In addition it deals with regulatory sanctions. In fact, having regard to the retail investors nature of UCITS funds and a perceived need for increased investor protection, UCIT V goes beyond AIFMD. It notably provides for an exhaustive list of eligible depositaries (only credit institutions and investment firms). It further increases depositary obligations, notably in relation to a strict obligation to return financial instruments kept in custody with little room for depositaries to escape.