Why You Need a UCITS EU Facilities Agent

Why You Need a UCITS EU Facilities Agent (and it’d Better be Us) 

The Cross-border Distribution of Investment Funds Directive marks officially the beginning of a new era for the provision of local facilities for UCITS European cross-border distribution. Governed by Article 92 UCITS directive, the UCITS EU facilities agent is essentially the main point of contact for local authorities and investors in a foreign UCITS authorised for marketing in their territories.  

As we introduce our own digital UCITS EU facilities agent service solution, we take the opportunity to discuss the evolution of the service and what to look for when deciding to outsource this function. 

 

Get in touch here with your contacts at Veneziano & Partners to see how we can help with UCITS EU Facilities Agent. 

 

The Role of Local Laws and Practices 

Until the introduction of the Cross-border Distribution of Investment Funds Directive, the requirement to offer local facilities has been interpreted in a varied manner across Europe. Authorities in the northern hemisphere have been traditionally less stringent about imposing on foreign UCITS the requirement of a brick-and-mortar local presence when marketing cross-border in their territories. In central and southern Europe, also for reasons related to dynamics of local distribution channels, the requirement has been interpreted more conservatively, with local credit institutions playing most often than not the part of the UCITS EU facilities agent. The consequence of local requirements differing significantly across Europe translated into higher costs of distribution in specific EU markets.  

The way article 92 UCITS directive was originally designed also allowed for a significant degree of gold-plating. That was because the modalities of offer of the local facilities in a host member state (e.g. in person via a physical presence) were dictated by the provisions of corresponding local laws and administrative practices. To make things more complicated, in some of the more conservative EU member states, market practice of local distribution channels dictated that the offer of local facilities comprised more tasks than the ones originally envisaged by the UCITS directive.     

 

Redefining the Concept of UCITS EU Facilities Agent 

The common belief that a local credit institution was to be appointed to act as local facilities agent has been progressively dismantled way in advance than the introduction of the Cross-border Distribution of Investment Funds Directive. The ELTIF regulation paved the way for the revolution in the space, with a new concept of local facilities, soon to be adopted also under the UCITS directive. To facilitate the distribution effort of these new retail European vehicles, the ELTIF regulation designed a new way to offer the local facilities, where physical presence in the EU host member state was no longer required. The language used for the facilities remained the only strict requirement – this had to be the one currently spoken in the EU host member state at issue or approved by the competent local authorities.  

The new version of local facilities for UCITS funds is based on the model designed under the ELTIF regulation. The current article 92 UCITS directive is not as vaguely drafted as its predecessor and contains a clear indication that regulatory authorities can no longer impose a local presence. It also contains a very detailed indication of the functions and tasks that make the local facility.  

 

The Offer of Local Facilities 

The revolution of the concept of UCITS EU Facilities Agent lies in that local facilities can now be offered electronically. In other words, the various services or tasks no longer need to be performed or provided in person and in real time, thus opening the possibility to use web interfaces and email communication instead. The local facility becomes a publicly accessible client dedicated webpage, translated in the local language of the various markets of distribution and containing the required information about funds, prices, as well as relevant contact details. All to enable a local investor to manage his or her relationship with the fund in a digital fashion. Email communication comes as a supplement to the information offered on the webpage and is used to guide investors through the steps involved with their requests.  

Also, it is possible for the UCITS to retain some of the functions and tasks and delegate the rest to the local facilities provider. Most typically, this is the case of the processing of redemptions and subscriptions, a function retained by the UCITS and performed in practice by the local distributor, appointed transfer agent, or administrator of the fund. The digital evolution in the provision of local facilities comes as a corollary to the corresponding digitalisation taking place in the fund distribution channels in certain European markets, where investors have a closer connection with their distributors and deal with them predominantly in a digital fashion.   

 

What to Look for when Appointing a UCITS EU Facilities Agent 

The UCITS EU facilities agent remains the main point of contact for foreign funds with the local authorities of the various European markets where distribution takes place. It makes sense to ensure that any third-party service provider of facilities agent services has the expertise to deal with European regulatory authorities on cross-border distribution matters and is exposed to the lifecycle of the distribution of the funds already. When considering outsourcing the function, you should look at a provider who can also offer the related service of UCITS marketing registration, just like us.   

Whilst the service is attractive already to all the UCITS managers who want to have the peace of mind of outsourcing the function, there are some other upsides in having a fully digital UCITS EU facilities agent. US fund managers, for instance, notoriously reluctant to display UCITS fund documents on their US websites will find a considerable upside in appointing a fully digital UCITS EU facilities agent. In addition to that, when submitting a marketing authorisation for a UCITS, it is required to list a website where electronic versions, including updates, are made available – that is also where a fully digital UCITS EU Facilities agent comes in handy.  

 

Get in touch here with your contacts at Veneziano & Partners to see how we can help with UCITS EU Facilities Agent