New Article 92 UCITS Directive. Turning Plans into Action  

 

New Article 92 UCITS Directive. Turning Plans into Action  

The European Commission had an ambitious plan with the Capital Markets Union. Making capital markets in Europe as vibrant as the ones in the USA. Zooming in on what that meant for the European investment fund industry, we see more sources of capital for investment managers and more avenues for savers in Europe to invest their capital. 

Fast forward nearly a decade from the introduction of the original plan, factor in some diversions and a few concessions on the long-term investment front, it is a fair conclusion that the European regulatory framework evolved to accommodate easier distribution of investment funds crossborder in Europe. The Crossborder distribution Directive, amongst other things, opened the way to digitalise the provision of local facilities with the provisions under the new article 92 UCITS directive. 

If you are reading this, it is likely that you have made up your mind already to transition to a centralised and digital European Facilities Agent service. You came already to the conclusion that the cost of providing local facilities under the old regime is excessive and might likely be deemed undue. Here a few things you want to consider to make the right choice and ensure that your transition to a digitalised European Facilities Agent Service provider is smooth.   

Get in touch here with your contacts at Veneziano & Partners to learn more about our solution under the new Article 92 UCITS Directive. 

The Pros of a Centralised Digital Facilities Agent Service Solution 

The new Article 92 UCITS Directive takes stock of the digital evolution taking place in the dynamic of crossborder fund distribution at European level. As investors deal more frequently with their affairs online – investments included – the requirement to make available local physical premises, managed by licensed credit institutions, in the various domiciles of distribution gets replaced by facilities offered online and via email. That means via a website, translated in the local language of the various domiciles of distribution, where investors can download fund documents and inspect other fund information as well as receive guidance via email in their own language on how to exercise the rights ensuing their investment in the specific funds.  

One of the upsides of transitioning to this type of solution lies in that these are centralised. Managing various counterparts in the various domiciles of European distribution, each representing a separate cost centre and documentation and information channel, is replaced by one only counterpart that makes the service available across the entire spectrum of the European domiciles of distribution. This per se is already a good enough reason to consider transitioning to a solution for the facilities agent that is compliant with the new Article 92 UCITS directive.  

Not all EU Facilities Agent Service Providers are the Same 

The new version of Article 92 UCITS directive contains a list of the tasks to be offered to investors as part of the local facilities. A word of caution is required here on two of the tasks on the list – i) making payments to investors and ii) acting as a point of contact with local national competent authorities. If nothing else, some considerations on these tasks will help choosing the right partners for the provision of the digital European facilities agent service.  

For what concerns the processing of subscription, redemption and conversion orders, along with other payments to investors, the industry standard is set to entrust either the distributor(s) or the administrator of the fund with the related task. This is both permissible under the new Article 92 UCITS directive, where different tasks under the facilities can be entrusted to different entities, as well as the preferred choice for local licensing reasons under MiFID when dealing with this type of task. Beware of European facilities agent that cannot grasp the nuisances related to this particular aspect of the service.  

For what concerns acting as a point of contact with local authorities, this is an important element that in our view will dictate the choice of the right provider for the service. Here you want to strike the right balance between a provider that is used to liaise professionally with regulatory authorities and that at the same time is not necessarily a law firm. Data management firms, who started to offer the European facilities agent service, are not as well positioned to add any value in dealing with national competent authorities. At the same time, law firms offering also this service would come at a much higher price. That would go against the spirit of the provisions – reduce costs for European crossborder distribution.  

Lastly, whilst the new article 92 UCITS directive allows UCITS managers to offer the facilities themselves, we have seen that not many of them have opted so far for a do-it-yourself approach. Whilst big players, with offices located strategically across Europe, might consider to be their own facilities agent for their proprietary funds, concerns do exist surrounding the fact that these firms might not want to be seen dealing with retail investors for a variety of reasons. That is the same for what concerns dealing with national competent authorities. On this point it is worth reminding that having a website with fund documentation is not sufficient for the purposes of qualifying as a facility. The support to local investors is key for the local facilities.   

Ready, steady go 

So you found the right provider for the service of European facilities agent. Now, there is an entire process to follow for the transition to be effective at all levels. Here is a quick to do list to get the job done right. 

First step is to seek approval from the fund board to transition to a new provider for the service of European Facilities Agent under the new Article 92 UCITS directive. You may have to explain the rationale and the benefit of switching to the new provider. That should not be overly complicated if you did your homework right. Next up, after you engaged with the new service provider of choice, you will have to terminate agreements with the existing providers, where any are appointed.  

Lastly, you will have to update fund documentation, where required, and inform investors and national competent authorities of the new facilities agent appointed for the specific domiciles. Timed it right, these are all things that you can accomplish as part of the same fund documentation update and ensure to continue to be cost efficient in your fund European distribution operations.    

Get in touch here with your contacts at Veneziano & Partners to learn more about our solution under the new Article 92 UCITS Directive. 

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