Less than six months remain to comply with the transparency requirements for undertakings for collective investment in pre-contractual documents
Article 14 of Regulation (EU) 2015/2365 of the European Parliament and of the Council of 25 November 2015 on transparency of securities financing transactions and of reuse, and amending Regulation (EU) No 648/2012 (SFTR), deals with the transparency regarding undertakings for collective investment in pre-contractual documents.
Per the SFTR, both the prospectus of a UCITS1 and the pre-investment disclosure by AIFMs2 to investors must specify all securities financing transactions (SFTs) and total return swaps that UCITS management companies, UCITS investment companies and AIFMs are authorised to use. In addition, both must include a clear statement that those transactions and instruments are used.
Pursuant to the SFTR, an SFT means:
(a) a repurchase transaction;
(b) securities or commodities lending and/or securities or commodities borrowing;
(c) a buy-sell back transaction or a sell-buy back transaction;
(d) a margin lending transaction.
Section B of the SFTR includes all information to be included in the UCITS prospectus as well as the alternative investment fund (AIF) disclosure to investors (which may be the offering document of the AIF).
The SFTR became applicable on 12 January 2016.
However, undertakings for collective investment that are subject to either the UCITS Directive or the AIFMD that were constituted before 12 January 2016 benefit from grandfathering provisions and hence will only be bound to the requirements of the aforementioned article 14 by 13 July 2017.
Therefore, both the prospectus of a UCITS and the pre-investment disclosure by AIFMs to investors must be updated by 13 July 2017 if either the UCITS or the AIF, as applicable, use SFTs and/or total return swaps.
[1] An undertaking for collective investment that is subject to the 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 (the UCITS Directive).
[2] An alternative investment fund manager authorised or registered under Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010 (the AIFMD).
