European Commission
UCITS - European Commission adopts legislative proposal for amendments on PRIIPs KID exemption - 16 July 2021
The European Commission has adopted a legislative proposal (COM(2021) 399) for a Directive amending the Undertakings for the Collective Investments in Transferable Securities Directive (2009/65/EC) (UCITS Directive) in relation to the use of key information documents (KIDs) by management companies of UCITS (2021/0219(COD)).
The proposed Directive inserts a new Article 82a in the UCITS Directive. It states that where a KID is drawn up, provided, revised and translated for a UCITS pursuant to the Regulation on Packaged Retail and Insurance-based Investment Products (1286/2014/EU) (PRIIPs), it should be considered as satisfying the requirements applicable to key investor information for the purposes of the UCITS Directive. EU Member states are expected to apply measures implementing the amending Directive from 1 July 2022.
Article 32 of the PRIIPs Regulation also provides for a transitional arrangement for management companies, investment companies and persons advising on, or selling, units of UCITS and non-UCITS, temporarily exempting them from the requirement to provide retail investors with a KID. Given the arrangement currently applies until 31 December 2021, the Commission has adopted a legislative proposal extending it to 30 June 2022 so that it ties in with the date on which the new UCITS Directive takes effect.
Proposal for a Directive amending the UCITS Directive (2009/65/EC) as regards the use of key information documents by management companies of undertakings for collective investment in transferable securities (UCITS) (COM/2021/399 final)
Financial Conduct Authority
ESG and sustainable investment funds - FCA publishes Dear Chair letter and guiding principles - 19 July 2021
The FCA has published a Dear Chair letter addressed to the chairs of authorised fund managers (AFMs) on improving the quality and clarity of authorised environmental, social and governance (ESG) and sustainable investment funds. In the Annex to the letter, the FCA sets out guiding principles that should be considered when an authorised investment fund pursues a responsible or sustainable investment strategy and claims to pursue ESG or sustainability characteristics, themes or outcomes. The principles are intended to complement the FCA’s June 2021 consultation paper (CP21/17) on climate-related disclosure rules for asset managers and asset owners (as reported in this Bulletin).
The Annex sets out an overarching principle and three supporting principles, with each principle being accompanied by a set of key considerations:
- The overarching principle is consistency: a fund’s ESG or sustainability focus should be reflected consistently in its design, delivery and disclosure, particularly in its name, stated objectives, documented investment policy and strategy, and holdings.
The supporting principles relate to:
- Design: references to ESG or related terms in a fund’s name, financial promotions or fund documentation should fairly reflect the materiality of ESG or sustainability considerations to the objectives, or investment policy and strategy, of the fund;
- Delivery: firms should apply appropriate resources in pursuit of a fund’s stated ESG objectives. The way that a fund’s ESG investment strategy is implemented, and the profile of its holdings, should be consistent with its disclosed objectives on an ongoing basis;
- Disclosure: pre-contractual and ongoing periodic disclosures on responsible or sustainable investment funds should be easily available to consumers and contain information that helps them make investment decisions.
The principles’ aim is to help AFMs comply with existing requirements by ensuring that fund disclosures accurately reflect the nature of the fund’s responsible or sustainable investment strategy in both the pre-contractual documentations and on an ongoing basis. The FCA has produced the principles after receiving a large volume of applications for the authorisation of funds with a sustainable focus that have been poor-quality and fallen below its expectations.
Dear Chair letter: Authorised ESG & Sustainable Investment Funds: improving quality and clarity
Press release
