UCITS distribution in Italy towards retail investors will have more invasive reporting obligations as of January 2019. In fact, new reporting requirements have been recently imposed that affect the ongoing maintenance of registrations for UCITS distribution in Italy towards retail investors. These requirements have been introduced via a newly released version of the Consob DEPROF operating manual and will be discharged through the Consob DEPROF operating system. The DEPROF system maintained by Consob is the environment where to report information on the UCITS distribution in Italy towards retail investors and has been in operation since June 2012.
New reporting requirements for UCITS Distribution in Italy
The bulk of the change affects the section related to the information on the offer of foreign UCITS, with the insertion of new reporting sections in the system.
The new sections pertain to a) distribution/placement fees and b) performance fees.
Whilst the requirement to disclose in the DEPROF system the distribution/placement fees is imposed exclusively on UCITS domiciled in Italy, the new reporting requirement related to disclosure of performance fees is imposed also on foreign UCITS distributed in Italy towards retail investors.
Methodology for reporting performance fees
The reporting for performance fees is broken down into different sections and options. In first instance, it is necessary to indicate whether performance fees are provided for in the fund offering documentation and, in case they are, whether these have been applied in the course of the previous financial year or not. The system allows for the users to choose from the options below:
- Not provided for in the fund offering documentation
- Provided but not applied during the course of the previous financial year
- Provided and applied during the course of the previous financial year
Of course, in the case under b) above, the fact that performance fees provided in the fund documentation of the foreign UCITS have not been applied refers to all instances where the conditions that trigger application of the said performance fees have not been met. In the case under c) instead, where performance fees have indeed been applied, the foreign UCITS will have to specify the percentage applied related to the actual amount charged in the course of the previous financial year.
When performance fees are provided for and are also applied, there is a section in the system called Note where the UCITS will have to insert wording to describe the actual calculation methodology of performance fees as specified in the key investor information document. In this section the UCITS will have to indicate whether the calculation of the performance fee is made i) individually for each investor; ii) with reference to a benchmark or a specific return objective; iii) using the high watermark methodology.
Lastly, UCITS will have to describe the frequency for crystallising the performance fee and transferring the amount earned to the manager of the UCITS. Such frequency will have to be indicated in months. The frequency for crystallising the performance fee is as defined in the guidelines issued by IOSCO on the Good Practice for Fees and Expenses of Collective Investment Schemes.