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 (UCITS) (recast) (Text with EEA relevance)

CONTENT	CONTENT
CHAPTER I	SUBJECT MATTER, SCOPE AND DEFINITIONS
CHAPTER II	AUTHORISATION OF UCITS
CHAPTER III	OBLIGATIONS REGARDING MANAGEMENT COMPANIES
SECTION 1	Conditions for taking up business
SECTION 2	Relations with third countries
SECTION 3	Operating conditions
SECTION 4	Freedom of establishment and freedom to provide services
CHAPTER IV	OBLIGATIONS REGARDING THE DEPOSITARY
CHAPTER V	OBLIGATIONS REGARDING INVESTMENT COMPANIES
SECTION 1	Conditions for taking up business
SECTION 2	Operating conditions
CHAPTER VI	MERGERS OF UCITS
SECTION 1	Principle, authorisation and approval
SECTION 2	Third party control, information of unit-holders and other rights of unit-holders
SECTION 3	Costs and entry into effect
CHAPTER VII	OBLIGATIONS CONCERNING THE INVESTMENT POLICIES OF UCITS
CHAPTER VIII	MASTER-FEEDER STRUCTURES
SECTION 1	Scope and approval
SECTION 2	Common provisions for feeder UCITS and master UCITS
SECTION 3	Depositaries and auditors
SECTION 4	Compulsory information and marketing communications by the feeder UCITS
SECTION 5	Conversion of existing UCITS into feeder UCITS and change of master UCITS
SECTION 6	Obligations and competent authorities
CHAPTER IX	OBLIGATIONS CONCERNING INFORMATION TO BE PROVIDED TO INVESTORS
SECTION 1	Publication of a prospectus and periodical reports
SECTION 2	Publication of other information
SECTION 3	Key investor information
SECTION 4	Accessibility of information on the european single access point
CHAPTER X	GENERAL OBLIGATIONS OF UCITS
CHAPTER XI	SPECIAL PROVISIONS APPLICABLE TO UCITS WHICH MARKET THEIR UNITS IN MEMBER STATES OTHER THAN THOSE IN WHICH THEY ARE ESTABLISHED
CHAPTER XII	PROVISIONS CONCERNING THE AUTHORITIES RESPONSIBLE FOR AUTHORISATION AND SUPERVISION
CHAPTER XIII	DELEGATED ACTS AND POWERS OF EXECUTION
CHAPTER XIV	DEROGATIONS, TRANSITIONAL AND FINAL PROVISIONS
SECTION 1	Derogations
SECTION 2	Transitional and final provisions
ANNEX I	Schedules A and B
ANNEX II	Functions included in the activity of collective portfolio management
ANNEX III
Part A	Repealed Directive with list of its successive amendments
Part B	List of time limits for transposition into national law and application
ANNEX IV	Correlation table

CHAPTER I SUBJECT MATTER, SCOPE AND DEFINITIONS

Article 1

• (a) with the sole object of collective investment in transferable securities or in other liquid financial assets referred to in Article 50(1) of capital raised from the public and which operate on the principle of risk-spreading; and

• (b) with units which are, at the request of holders, repurchased or redeemed, directly or indirectly, out of those undertakings’ assets. Action taken by a UCITS to ensure that the stock exchange value of its units does not significantly vary from their net asset value shall be regarded as equivalent to such repurchase or redemption.

Member States may allow UCITS to consist of several investment compartments.

For the purposes of this Directive:

• (a) ‘common funds’ shall also include unit trusts;

• (b) ‘units’ of UCITS shall also include shares of UCITS.

Article 2

• (a) ‘depositary’ means an institution entrusted with the duties set out in Articles 22 and 32 and subject to the other provisions laid down in Chapter IV and Section 3 of Chapter V;

• (b) ‘management company’ means a company, the regular business of which is the management of UCITS in the form of common funds or of investment companies (collective portfolio management of UCITS);

• (c) ‘management company’s home Member State’ means the Member State in which the management company has its registered office;

• (d) ‘management company’s host Member State’ means a Member State, other than the home Member State, within the territory of which a management company has a branch or provides services;

• (e) ‘UCITS home Member State’ means the Member State in which the UCITS is authorised pursuant to Article 5;

• (f) ‘UCITS host Member State’ means a Member State, other than the UCITS home Member State, in which the units of the UCITS are marketed;

• (g) ‘branch’ means a place of business which is a part of the management company, which has no legal personality and which provides the services for which the management company has been authorised;

• (h) ‘competent authorities’ means the authorities which each Member State designates under Article 97;

• (i) ‘close links’ means a situation in which two or more natural or legal persons are linked by either:
• (i) ‘participation’, which means the ownership, direct or by way of control, of 20 % or more of the voting rights or capital of an undertaking; or
• (ii) ‘control’, which means the relationship between a ‘parent undertaking’ and a ‘subsidiary’, as defined in Articles 1 and 2 of Seventh Council Directive 83/349/EEC of 13 June 1983 based on the Article 54(3)(g) of the Treaty on consolidated accounts ([^E0001]) and in all the cases referred to in Article 1(1) and (2) of Directive 83/349/EEC, or a similar relationship between any natural or legal person and an undertaking;

• (j) ‘qualifying holding’ means a direct or indirect holding in a management company which represents 10 % or more of the capital or of the voting rights or which makes it possible to exercise a significant influence over the management of the management company in which that holding subsists;

• (k) ‘initial capital’ means the funds as referred to in Article 57(a) and (b) of Directive 2006/48/EC;

• (l) ‘own funds’ means own funds as referred to in Title V, Chapter 2, Section 1 of Directive 2006/48/EC;

• (m) ‘durable medium’ means an instrument which enables an investor to store information addressed personally to that investor in a way that is accessible for future reference for a period of time adequate for the purposes of the information and which allows the unchanged reproduction of the information stored;

• (n) ‘transferable securities’ means:
• (i) shares in companies and other securities equivalent to shares in companies (shares);
• (ii) bonds and other forms of securitised debt (debt securities);
• (iii) any other negotiable securities which carry the right to acquire any such transferable securities by subscription or exchange;

• (o) ‘money market instruments’ means instruments normally dealt in on the money market which are liquid and have a value which can be accurately determined at any time;

• (p) ‘mergers’ means an operation whereby:
• (i) one or more UCITS or investment compartments thereof, the ‘merging UCITS’, on being dissolved without going into liquidation, transfer all of their assets and liabilities to another existing UCITS or an investment compartment thereof, the ‘receiving UCITS’, in exchange for the issue to their unit-holders of units of the receiving UCITS and, if applicable, a cash payment not exceeding 10 % of the net asset value of those units;
• (ii) two or more UCITS or investment compartments thereof, the ‘merging UCITS’, on being dissolved without going into liquidation, transfer all of their assets and liabilities to a UCITS which they form or an investment compartment thereof, the ‘receiving UCITS’, in exchange for the issue to their unit-holders of units of the receiving UCITS and, if applicable, a cash payment not exceeding 10 % of the net asset value of those units;
• (iii) one or more UCITS or investment compartments thereof, the ‘merging UCITS’, which continue to exist until the liabilities have been discharged, transfer their net assets to another investment compartment of the same UCITS, to a UCITS which they form or to another existing UCITS or an investment compartment thereof, the ‘receiving UCITS’;

• (q) ‘cross-border merger’ means a merger of UCITS:
• (i) at least two of which are established in different Member States; or
• (ii) established in the same Member State into a newly constituted UCITS established in another Member State;

• (r) ‘domestic merger’ means a merger between UCITS established in the same Member State where at least one of the involved UCITS has been notified pursuant to Article 93;

• (s) ‘management body’ means the body with ultimate decision-making authority in a management company, investment company or depositary, comprising the supervisory and the managerial functions, or only the managerial function if the two functions are separated. Where, according to national law, the management company, investment company or depositary has in place different bodies with specific functions, the requirements laid down in this Directive directed at the management body or at the management body in its supervisory function shall also, or shall instead, apply to those members of other bodies of the management company, investment company or depositary to whom the applicable national law assigns the respective responsibility;

• (t) ‘financial instrument’ means a financial instrument specified in Section C of Annex I to Directive 2014/65/EU of the European Parliament and of the Council ([^E0002]);

• (v) ‘central counterparty’ or ‘CCP’ means a CCP as defined in Article 2, point (1), of Regulation (EU) No 648/2012 of the European Parliament and of the Council ([^E0003]);

• (u) ‘central securities depository’ means a central securities depository as defined in Article 2(1), point (1), of Regulation (EU) No 909/2014 of the European Parliament and of the Council ([^E0004]).

• (a) a subsidiary undertaking of a subsidiary undertaking shall also be considered to be a subsidiary of the parent undertaking which is at the head of those undertakings;

• (b) situations in which two or more natural or legal persons are permanently linked to the same person by a control relationship shall also be regarded as constituting a close links between such persons.

Article 3

The following undertakings are not subject to this Directive:

• (a) collective investment undertakings of the closed-ended type;

• (b) collective investment undertakings which raise capital without promoting the sale of their units to the public within the Community or any part of it;

• (c) collective investment undertakings the units of which, under the fund rules or the instruments of incorporation of the investment company, may be sold only to the public in third countries;

• (d) categories of collective investment undertakings prescribed by the regulations of the Member States in which such collective investment undertakings are established, for which the rules laid down in Chapter VII and Article 83 are inappropriate in view of their investment and borrowing policies.

Article 4

For the purposes of this Directive, a UCITS shall be deemed to be established in its home Member State.

CHAPTER II AUTHORISATION OF UCITS

Article 5

Such authorisation shall be valid for all Member States.

• (a) they establish that the investment company does not comply with the preconditions laid down in Chapter V; or

• (b) the management company is not authorised for the management of UCITS in its home Member State.

Without prejudice to Article 29(2), the management company or, where applicable, the investment company, shall be informed, within two months of the submission of a complete application, whether or not authorisation of the UCITS has been granted.

The competent authorities of the UCITS home Member State shall not authorise a UCITS if the directors of the depositary are not of sufficiently good repute or are not sufficiently experienced also in relation to the type of UCITS to be managed. To that end, the names of the directors of the depositary and of every person succeeding them in office shall be communicated forthwith to the competent authorities.

Directors shall mean those persons who, under the law or the instruments of incorporation, represent the depositary, or who effectively determine the policy of the depositary.

Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with the procedure laid down in Articles 10 to 14 of Regulation (EU) No 1095/2010.

CHAPTER III OBLIGATIONS REGARDING MANAGEMENT COMPANIES

SECTION 1 Conditions for taking up business

Article 6

ESMA shall be notified of every authorisation granted and shall publish and keep up-to-date a list of authorised management companies on its website.

The activity of management of UCITS shall include, for the purpose of this Directive, the functions referred to in Annex II.

• (a) management of portfolios of investments, including those owned by pension funds, in accordance with mandates given by investors on a discretionary, client-by-client basis, where such portfolios include one or more of the instruments listed in Annex I, Section C to Directive 2004/39/EC; and

• (b) as non-core services:
• (i) investment advice concerning one or more of the instruments listed in Annex I, Section C to Directive 2004/39/EC;
• (ii) safekeeping and administration in relation to units of collective investment undertakings;
• (iii) reception and transmission of orders in relation to financial instruments;
• (iv) any other function or activity which is already provided by the management company in relation to a UCITS that it manages in accordance with this Article, or in relation to services that it provides in accordance with this paragraph, provided that any potential conflict of interest created by the provision of that function or activity to other parties is appropriately managed;

• (c) administration of benchmarks in accordance with Regulation (EU) 2016/1011.

Management companies shall not be authorised under this Directive to provide only the services referred to in this paragraph. Management companies shall not be authorised to provide the services referred to in the first subparagraph, point (c), which are used in the UCITS that they manage.

Article 7

• (a) the management company has an initial capital of at least EUR 125 000 , taking into account the following:
• (i) when the value of the portfolios of the management company exceeds EUR 250 000 000 , the management company must be required to provide an additional amount of own funds which is equal to 0,02 % of the amount by which the value of the portfolios of the management company exceeds EUR 250 000 000 but the required total of the initial capital and the additional amount must not, however, exceed EUR 10 000 000 ;
• (ii) for the purposes of this paragraph, the following portfolios must be deemed to be the portfolios of the management company:
• — common funds managed by the management company including portfolios for which it has delegated the management function but excluding portfolios that it is managing under delegation,
• — investment companies for which the management company is the designated management company,
• — other collective investment undertakings managed by the management company including portfolios for which it has delegated the management function but excluding portfolios that it is managing under delegation;
• (iii) irrespective of the amount of those requirements, the own funds of the management company must at no time be less than the amount prescribed in Article 13 of Regulation (EU) 2019/2033 of the European Parliament and of the Council ([^E0007]);

• (b) the persons who effectively conduct the business of the management company are of sufficiently good repute and are sufficiently experienced also in relation to the type of UCITS managed by the management company, the names of those persons and of every person succeeding them in office are communicated forthwith to the competent authorities and the conduct of the business of a management company is decided by at least two natural persons meeting such conditions who either are employed full-time by that management company or are executive members or members of the management body of the management company committed full-time to conducting the business of that management company, and who are domiciled in the Union;

• (c) the application for authorisation is accompanied by a programme of activity setting out, at least, the organisational structure of the management company, and specifying the human and technical resources that will be used to conduct the business of the management company and information about the persons effectively conducting the business of that management company, including:
• (i) a description of the role, title and level of seniority of those persons;
• (ii) a description of the reporting lines and responsibilities of those persons within and outside the management company;
• (iii) an overview of the amount of time that each of those persons allocates to each responsibility;
• (iv) information on how the management company intends to comply with its obligations under this Directive, and with its obligations under Article 3(1), Article 6(1), point (a), and Article 13(1) of Regulation (EU) 2019/2088 of the European Parliament and of the Council ([^E0008]), and a detailed description of the appropriate human and technical resources to be used by the management company to that effect.

• (d) the head office and the registered office of the management company are located in the same Member State;

• (e) information is provided by the management company on arrangements made for the delegation and sub-delegation to third parties of functions in accordance with Article 13, comprising at least the following:
• (i) the legal name and relevant identifier of the management company;
• (ii) for each delegate:
• — its legal name and relevant identifier,
• — its jurisdiction of establishment, and
• — where relevant, its supervisory authority;
• (iii) a detailed description of the human and technical resources employed by the management company for:
• — performing day-to-day portfolio management or risk management tasks within the management company, and
• — monitoring the delegated activity;
• (iv) in respect of each of the UCITS it manages or intends to manage:
• — a brief description of the delegated portfolio management function, including whether such delegation amounts to a partial or full delegation, and
• — a brief description of the delegated risk management function, including whether such delegation amounts to a partial or full delegation;
• (v) a description of the periodic due diligence measures to be carried out by the management company to monitor the delegated activity.

For the purposes of point (a) of the first subparagraph, Member States may authorise management companies not to provide up to 50 % of the additional amount of own funds referred to in point (i) of point (a) if they benefit from a guarantee of the same amount given by a credit institution or an insurance undertaking which has its registered office in a Member State, or in a third country where it is subject to prudential rules considered by the competent authorities as equivalent to those laid down in Community law.

The competent authorities shall also refuse authorisation if the laws, regulations or administrative provisions of a third country governing one or more natural or legal persons with which the management company has close links, or difficulties involved in their enforcement, prevent the effective exercise of their supervisory functions.

The competent authorities shall require management companies to provide them with the information they require to monitor compliance with the conditions referred to in this paragraph on a continuous basis.

• (a) does not make use of the authorisation within 12 months, expressly renounces the authorisation or has ceased the activity covered by this Directive more than six months previously, unless the Member State concerned has provided for authorisation to lapse in such cases;

• (b) has obtained the authorisation by making false statements or by any other irregular means;

• (c) no longer fulfils the conditions under which authorisation was granted;

• (d) no longer complies with Directive 2006/49/EC if its authorisation also covers the discretionary portfolio management service referred to in Article 6(3)(a) of this Directive;

• (e) has seriously or systematically infringed the provisions adopted pursuant to this Directive; or

• (f) falls within any of the cases where national law provides for withdrawal.

• (a) the information to be provided to the competent authorities in the application for the authorisation of the management company, including the programme of activity;

• (b) the requirements applicable to the management company under paragraph 2 and the information for the notification provided for in paragraph 3;

• (c) the requirements applicable to shareholders and members with qualifying holdings, as well as obstacles which may prevent effective exercise of the supervisory functions of the competent authority, as provided for in Article 8(1) of this Directive and in Article 10(1) and (2) of Directive 2004/39/EC, in accordance with Article 11 of this Directive.

Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.

In order to ensure uniform conditions of application of this Article, ESMA may develop draft implementing technical standards to determine standard forms, templates and procedures for the notification or provision of information provided for in points (a) and (b) of the first subparagraph.

Power is conferred on the Commission to adopt the implementing technical standards referred to in the third subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.

Article 8

The competent authorities shall refuse authorisation if, taking into account the need to ensure the sound and prudent management of a management company, they are not satisfied as to the suitability of the shareholders or members referred to in the first subparagraph.

• (a) a subsidiary of another management company, an investment firm, a credit institution or an insurance undertaking authorised in another Member State;

• (b) a subsidiary of the parent undertaking of another management company, an investment firm, a credit institution or an insurance undertaking authorised in another Member State; or

• (c) a company controlled by the same natural or legal persons as control another management company, an investment firm, a credit institution or an insurance undertaking authorised in another Member State.

SECTION 2 Relations with third countries

Article 9

For the purposes of this Directive, the terms ‘investment firm’ and ‘investment firms’ referred to in Article 15 of Directive 2004/39/EC shall mean, respectively, ‘management company’ and ‘management companies’; the term ‘providing investment services’ referred to in Article 15(1) of Directive 2004/39/EC shall mean ‘providing services’.

The Commission shall examine such difficulties as quickly as possible in order to find an appropriate solution. ESMA shall assist it in discharging that task.

SECTION 3 Operating conditions

Article 10

The own funds of a management company shall not fall below the level specified in Article 7(1)(a). If they do, however, the competent authorities may, where the circumstances so justify, allow such firms a limited period in which to rectify their situations or cease their activities.

Article 11

Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.

In order to ensure uniform conditions of application of this Article, ESMA may develop draft implementing technical standards to establish standard forms, templates and procedures for the modalities of the consultation process between the relevant competent authorities, as provided for in this Article, with reference to Article 10(4) of Directive 2004/39/EC.

Power is conferred to the Commission to adopt the implementing technical standards referred to in the third subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.

Article 12

In particular, the competent authorities of the management company’s home Member State, having regard also to the nature of the UCITS managed by a management company, shall require that each such company:

• (a) has sound administrative and accounting procedures, control and safeguard arrangements for electronic data processing, including with regard to network and information systems that are set up and managed in accordance with Regulation (EU) 2022/2554 of the European Parliament and of the Council ([^E0009]), as well as adequate internal control mechanisms, including, in particular, rules for personal transactions by its employees or for the holding or management of investments in financial instruments in order to invest on its own account and ensuring, at least, that each transaction involving the UCITS may be reconstructed according to its origin, the parties to it, its nature, and the time and place at which it was effected and that the assets of the UCITS managed by the management company are invested according to the fund rules or the instruments of incorporation and the legal provisions in force;

• (b) is structured and organised in such a way as to minimise the risk of UCITS’ or clients’ interests being prejudiced by conflicts of interest between the company and its clients, between two of its clients, between one of its clients and a UCITS, or between two UCITS.

• (a) not be permitted to invest all or a part of the investor’s portfolio in units of collective investment undertakings it manages, unless it receives prior general approval from the client;

• (b) be subject with regard to the services referred to in Article 6(3) to the provisions laid down in Directive 97/9/EC of the European Parliament and of the Council of 3 March 1997 on investor-compensation schemes ([^E0010]).

• (a) the procedures and arrangements referred to in point (a) of the second subparagraph of paragraph 1, other than the procedures and arrangements concerning network and information systems;

• (b) the structures and organisational requirements to minimise conflicts of interests referred to in point (b) of the second subparagraph of paragraph 1.

Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.

Article 13

• (a) the management company must inform the competent authorities of its home Member State in an appropriate manner; the competent authorities of the management company’s home Member State must, without delay, transmit the information to the competent authorities of the UCITS home Member State;

• (b) the mandate must not prevent the effectiveness of supervision of the management company, and, in particular, must not prevent the management company from acting, or the UCITS from being managed, in the best interests of its investors and clients;

• (c) when the delegation concerns the investment management, the mandate must be given only to undertakings which are authorised or registered for the purpose of asset management and subject to prudential supervision; the delegation must be in accordance with investment-allocation criteria periodically laid down by the management companies;

• (d) where the mandate concerns the investment management and is given to a third-country undertaking, cooperation between the supervisory authorities concerned must be ensured;

• (e) a mandate with regard to the core function of investment management must not be given to the depositary or to any other undertaking whose interests may conflict with those of the management company or the unit-holders;

• (f) measures must exist which enable the persons who conduct the business of the management company to monitor effectively at any time the activity of the undertaking to which the mandate is given;

• (g) the mandate must not prevent the persons who conduct the business of the management company from giving further instructions to the undertaking to which functions or provision of services are delegated at any time or from withdrawing the mandate with immediate effect where to do so is in the interest of investors and clients;

• (h) having regard to the nature of the functions and provision of services to be delegated, the undertaking to which functions or provision of services are to be delegated must be qualified and capable of undertaking the functions or performing the services in question;

• (i) the UCITS’ prospectuses must list the services and functions which the management company has been allowed to delegate in accordance with this Article; and

• (j) the management company must be able to justify its entire delegation structure on objective reasons.

• (a) the conditions for fulfilling the requirements set out in paragraph 1;

• (b) the conditions under which the management company is to be deemed to have delegated its functions to the extent that it becomes a letter-box entity and can no longer be considered to be the manager of the UCITS or the provider of the services referred to in Article 6(3), as set out in paragraph 2.

Article 14

• (a) acts honestly and fairly in conducting its business activities in the best interests of the UCITS it manages and the integrity of the market;

• (b) acts with due skill, care and diligence, in the best interests of the UCITS it manages and the integrity of the market;

• (c) has and employs effectively the resources and procedures that are necessary for the proper performance of its business activities;

• (d) tries to avoid conflicts of interests and, when they cannot be avoided, ensures that the UCITS it manages are fairly treated; and

• (e) complies with all regulatory requirements applicable to the conduct of its business activities so as to promote the best interests of its investors and the integrity of the market.

• (a) establish appropriate criteria for acting honestly and fairly and with due skill, care and diligence in the best interests of the UCITS;

• (b) specify the principles required to ensure that management companies employ effectively the resources and procedures that are necessary for the proper performance of their business activities; and

• (c) define the steps that management companies might reasonably be expected to take to identify, prevent, manage or disclose conflicts of interest as well as to establish appropriate criteria for determining the types of conflicts of interest whose existence may damage the interests of the UCITS.

2a. Where a management company manages or intends to manage a UCITS at the initiative of a third party, including cases where that UCITS uses the name of a third-party initiator or where a management company appoints a third-party initiator as a delegate pursuant to Article 13, the management company shall, taking account of any conflicts of interest, submit detailed explanations and evidence of its compliance with paragraph 1, point (d), of this Article to the competent authorities of its home Member State. In particular, the management company shall specify the reasonable steps it has taken to prevent conflicts of interest arising from the relationship with the third party or, where those conflicts of interest cannot be prevented, how it identifies, manages, monitors and, where applicable, discloses, those conflicts of interest in order to prevent them from adversely affecting the interests of the UCITS and its investors.

Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.

For the purposes of that report, and in accordance with Article 35 of Regulation (EU) No 1095/2010, the competent authorities shall provide ESMA on a one-time basis with data on costs including all fees, charges and expenses which are directly or indirectly borne by the investors, or by the management company in connection with the operations of the UCITS, and that are to be directly or indirectly allocated to the UCITS. The competent authorities shall make those data available to ESMA within their powers, which include the power to require management companies to provide information as laid down in Article 98(2) of this Directive.

Article 14a

Article 14b

• (a) the remuneration policy is consistent with and promotes sound and effective risk management and does not encourage risk taking which is inconsistent with the risk profiles, rules or instruments of incorporation of the UCITS that the management company manages;

• (b) the remuneration policy is in line with the business strategy, objectives, values and interests of the management company and the UCITS that it manages and of the investors in such UCITS, and includes measures to avoid conflicts of interest;

• (c) the remuneration policy is adopted by the management body of the management company in its supervisory function, and that body adopts, and reviews at least annually, the general principles of the remuneration policy and is responsible for, and oversees, their implementation; the tasks referred to in this point shall be undertaken only by members of the management body who do not perform any executive functions in the management company concerned and who have expertise in risk management and remuneration;

• (d) the implementation of the remuneration policy is, at least annually, subject to central and independent internal review for compliance with policies and procedures for remuneration adopted by the management body in its supervisory function;

• (e) staff engaged in control functions are compensated in accordance with the achievement of the objectives linked to their functions, independently of the performance of the business areas that they control;

• (f) the remuneration of the senior officers in the risk management and compliance functions is overseen directly by the remuneration committee, where such a committee exists;

• (g) where remuneration is performance-related, the total amount of remuneration is based on a combination of the assessment as to the performance of the individual and of the business unit or UCITS concerned and as to their risks and of the overall results of the management company when assessing individual performance, taking into account financial and non-financial criteria;

• (h) the assessment of performance is set in a multi-year framework appropriate to the holding period recommended to the investors of the UCITS managed by the management company in order to ensure that the assessment process is based on the longer-term performance of the UCITS and its investment risks and that the actual payment of performance-based components of remuneration is spread over the same period;

• (i) guaranteed variable remuneration is exceptional, occurs only in the context of hiring new staff and is limited to the first year of engagement;

• (j) fixed and variable components of total remuneration are appropriately balanced and the fixed component represents a sufficiently high proportion of the total remuneration to allow the operation of a fully flexible policy on variable remuneration components, including the possibility to pay no variable remuneration component;

• (k) payments relating to the early termination of a contract reflect performance achieved over time and are designed in a way that does not reward failure;

• (l) the measurement of performance used to calculate variable remuneration components or pools of variable remuneration components includes a comprehensive adjustment mechanism to integrate all relevant types of current and future risks;

• (m) subject to the legal structure of the UCITS and its fund rules or instruments of incorporation, a substantial portion, and in any event at least 50 %, of any variable remuneration component consists of units of the UCITS concerned, equivalent ownership interests, or share-linked instruments or equivalent non-cash instruments with equally effective incentives as any of the instruments referred to in this point, unless the management of UCITS accounts for less than 50 % of the total portfolio managed by the management company, in which case the minimum of 50 % does not apply. The instruments referred to in this point shall be subject to an appropriate retention policy designed to align incentives with the interests of the management company and the UCITS that it manages and the investors of such UCITS. Member States or their competent authorities may place restrictions on the types and designs of those instruments or ban certain instruments as appropriate. This point shall apply to both the portion of the variable remuneration component deferred in line with point (n) and the portion of the variable remuneration component not deferred;

• (n) a substantial portion, and in any event at least 40 %, of the variable remuneration component, is deferred over a period which is appropriate in view of the holding period recommended to the investors of the UCITS concerned and is correctly aligned with the nature of the risks of the UCITS in question. The period referred to in this point shall be at least three years; remuneration payable under deferral arrangements vests no faster than on a pro-rata basis; in the case of a variable remuneration component of a particularly high amount, at least 60 % of the amount shall be deferred;

• (o) the variable remuneration, including the deferred portion, is paid or vests only if it is sustainable according to the financial situation of the management company as a whole, and justified according to the performance of the business unit, the UCITS and the individual concerned. The total variable remuneration shall generally be considerably contracted where subdued or negative financial performance of the management company or of the UCITS concerned occurs, taking into account both current compensation and reductions in payouts of amounts previously earned, including through malus or clawback arrangements;

• (p) the pension policy is in line with the business strategy, objectives, values and long-term interests of the management company and the UCITS that it manages. If the employee leaves the management company before retirement, discretionary pension benefits shall be held by the management company for a period of five years in the form of instruments referred to in point (m). In the case of an employee reaching retirement, discretionary pension benefits shall be paid to the employee in the form of instruments referred to in point (m), subject to a five-year retention period;

• (q) staff are required to undertake not to use personal hedging strategies or remuneration- and liability-related insurance to undermine the risk alignment effects embedded in their remuneration arrangements;

• (r) variable remuneration is not paid through vehicles or methods that facilitate the avoidance of the requirements laid down in this Directive.

ESMA shall, in close cooperation with EBA, include in its guidelines on remuneration policies provisions on how different sectoral remuneration principles, such as those set out in Directive 2011/61/EU of the European Parliament and of the Council ([^E0014]) and in Directive 2013/36/EU of the European Parliament and of the Council ([^E0015]), are to be applied where employees or other categories of personnel perform services subject to different sectoral remuneration principles.

The remuneration committee that is, where appropriate, set up in accordance with the ESMA guidelines referred to in Article 14a(4) shall be responsible for the preparation of decisions regarding remuneration, including those which have implications for the risk and risk management of the management company or the UCITS concerned and which are to be taken by the management body in its supervisory function. The remuneration committee shall be chaired by a member of the management body who does not perform any executive functions in the management company concerned. The members of the remuneration committee shall be members of the management body who do not perform any executive functions in the management company concerned.

If employee representation on the management body is provided for by national law, the remuneration committee shall include one or more employee representatives. When preparing its decisions, the remuneration committee shall take into account the long-term interest of investors and other stakeholders and the public interest.

Article 15

Management companies or, where relevant, investment companies shall take measures in accordance with Article 92 and establish appropriate procedures and arrangements to ensure that they deal properly with investor complaints and that there are no restrictions on investors exercising their rights in the event that the management company is authorised in a Member State other than the UCITS home Member State. Those measures shall allow investors to file complaints in the official language or one of the official languages of their Member State.

Management companies shall also establish appropriate procedures and arrangements to make information available at the request of the public or the competent authorities of the UCITS home Member State.

SECTION 4 Freedom of establishment and freedom to provide services

Article 16

Where a management company so authorised proposes, without establishing a branch, only to market the units of the UCITS it manages as provided for in Annex II in a Member State other than the UCITS home Member State, without proposing to pursue any other activities or services, such marketing shall be subject only to the requirements of Chapter XI.

• (a) Article 17 or Article 18; and

• (b) Articles 19 and 20.

Article 17

• (a) the Member State within the territory of which the management company plans to establish a branch;

• (b) a programme of operations setting out the activities and services according to Article 6(2) and (3) envisaged and the organisational structure of the branch, which shall include a description of the risk management process put in place by the management company. It shall also include a description of the procedures and arrangements taken in accordance with Article 15;

• (c) the address in the management company’s host Member State from which documents may be obtained; and

• (d) the names of those responsible for the management of the branch.

Where the competent authorities of the management company’s home Member State refuse to communicate the information referred to in paragraph 2 to the competent authorities of the management company’s host Member State, they shall give reasons for such refusal to the management company concerned within two months of receiving all the information. The refusal or any failure to reply shall be subject to the right to apply to the courts in the management company’s home Member State.

Where a management company wishes to pursue the activity of collective portfolio management referred to in Annex II, the competent authorities of the management company’s home Member State shall enclose with the documentation sent to the competent authorities of the management company’s host Member State an attestation that the management company has been authorised pursuant to the provisions of this Directive, a description of the scope of the management company’s authorisation and details of any restriction on the types of UCITS that the management company is authorised to manage.

Where, pursuant to a change as referred to in the first subparagraph, the management company would no longer comply with this Directive, the competent authorities of the management company's home Member State shall inform the management company within 15 working days of receipt of all the information referred to in the first subparagraph that it is not to implement that change. In that case, the competent authorities of the management company's home Member State shall inform the competent authorities of the management company's host Member State accordingly.

Where a change referred to in the first subparagraph is implemented after information has been transmitted in accordance with the second subparagraph and pursuant to that change the management company no longer complies with this Directive, the competent authorities of the management company's home Member State shall take all appropriate measures in accordance with Article 98 and shall notify the competent authorities of the management company's host Member State without undue delay of the measures taken.

The competent authorities of the management company’s home Member State shall update the information contained in the attestation referred to in the third subparagraph of paragraph 3 and inform the competent authorities of the management company’s host Member State whenever there is a change in the scope of the management company’s authorisation or in the details of any restriction on the types of UCITS that the management company is authorised to manage.

Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.

In order to ensure uniform conditions of application of this Article, ESMA may develop draft implementing technical standards to establish standard forms, templates and procedures for the transmission of information in accordance with paragraphs 3 and 9.

Power is conferred on the Commission to adopt the implementing technical standards referred to in the third subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.

Article 18

• (a) the Member State within the territory of which the management company intends to operate; and

• (b) a programme of operations stating the activities and services referred to in Article 6(2) and (3) envisaged which shall include a description of the risk management process put in place by the management company. It shall also include a description of the procedures and arrangements taken in accordance with Article 15.

The competent authorities of the management company’s home Member State shall also communicate details of any applicable compensation scheme intended to protect investors.