The Committee of European Securities Regulators (CESR) has published a new paper in order to provide firms with technical advice for data formats regarding fund mergers, master-feeder structures and notification procedures under UCITS IV. The advice has taken into consideration industry feedback on the measures, following a consultation period that ended in September, and indicates that more advice will be forthcoming regarding a central IT structure for data sharing between member states.
The area of fund mergers relates to the data that funds must provide to unit holders of both the merging and receiving UCITS. According to CESR, these data requirements are based on the key principle that the information should be tailored to meet the different needs of these two groups of unit holders.
CESR’s advice also covers the content of the written agreements that should be put in place between master and feeder UCITS, as well as their respective depositaries and auditors. The regulator recommends discretion around which jurisdiction these parties wish to nominate for these feeder or master UCITS. It also details requirements on the steps to be taken in the case of a liquidation, merger or division of a master UCITS fund in order to satisfy the time constraints established by the UCITS Directive.
The latest incarnation of UCITS is heavily focused on cross border issues as a result of the funds passport and, in accordance with this, the advice indicates marketing data requirements for these funds across member states. It advises on how regulators in the home and host states should communicate this data, in particular the content and format of a standard notification letter and attestation and the procedure for the electronic transmission of notification files.
These recommendations are not mandatory at this stage and CESR has asked industry participants to provide feedback on the practical considerations of implementing these changes. The regulator is therefore keen for an impact assessment of these data formatting alterations with regards to central data infrastructures within asset management firms.
The likely impact of these changes will be to compel asset management firms and funds to speed up the processing and consolidate the storage of this data for electronic transmission. Many of the larger firms may have already invested in solutions to meet this requirement, especially those operating under the jurisdiction of the stricter member states.
Vendors such as SIX Telekurs and Aim Software have been keenly focused on the UCITS data space and last year both teamed up with UCITS focused CetrelSecurities to modify their solutions accordingly. SIX Telekurs launched a new solution in partnership with the Luxembourg-based data integration vendor aimed at providing the pre-trading securities checks required by the UCITS Directive in September. Aim Software teamed up with Cetrel earlier in the year and developed a buy side focused data management offering based on the vendor’s golden copy platform.
According to CESR, the industry feedback prior to the publication of the advice was for the recommendation of specific data formats and therefore harmonisation of the format of the information required. Under the current set up, there is no harmonisation across member states about the data required and how it should be delivered: some mandate specific formats and timelines, whereas others provide no detail at all.
This is the same issue with member states’ regulators themselves in relation to notification documentation, which under UCITS should be freely available to industry participants. In order to rectify this, CESR recommends regulators should make this data available via the web and UCITS funds should submit the data via email at a minimum level.
However, in the future, CESR indicates that a centralised IT system for this data is under consideration: “CESR recognises the benefits that such a system could bring by allowing a more efficient exchange and storage of data and a greater level of automation. CESR has identified a range of options for the type of system that could be developed, ranging from a relatively simple ‘pipe’ that would ensure a secure and efficient electronic exchange of information, through to a more comprehensive database that would be fed directly with information by UCITS.”
The regulator has begun a feasibility study to be conducted during the first half of this year to assess in more detail the requirements of the system and the costs involved.
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