The Undertakings for Collective Investment in Transferable Securities (UCITS) Directive is a set of regulations that govern the management and sale of investment funds within the European Union. For investment managers (IMs) and Depositary Banks, ensuring compliance with these regulations can be a complex and time-consuming process.
In this article, we spoke with a Funds Compliance and Oversight Expert who shared his insights on the importance of UCITS compliance and how tools like Thomas Murray's Market Eligibility Due Diligence tool can help alleviate the challenges users face.
The Role of Depository Banks
In the EU, Depositary Banks play a crucial role in ensuring that investment funds comply with relevant laws and regulations. "A depositary is a financial institution that provides fiduciary/custodian services to Investment Funds authorised to trade in any EU jurisdiction as a UCITS or Alternative Investment Fund," our expert explained.
Depositories are responsible for safekeeping the assets of the fund, overseeing the affairs of the fund, and ensuring that it complies with obligations outlined in relevant laws and the fund's constitutional documents. As such, Depository Banks must closely monitor all IM Fund launches to ensure compliance with regulations, including evidence that eligibility and sustainability research has been performed.
Current Challenges
Currently, the process of ensuring UCITS compliance can be manual and time-consuming. Our expert noted that while some Global Custodians provide reports that can help with this process, these reports may not always contain all the necessary information. In some cases, initial research of market materials may be required to pick up valid points.
The Benefits of a Market Eligibility Tool
Tools like Thomas Murray's Market Eligibility Due Diligence tool can help alleviate these issues by leveraging a centralised database of validated, relevant and up-to-date market information. This allows users to review new market requests and ongoing reviews of active markets in a timely manner, rather than having to read through each market profile supplied by Custodians.
Our expert estimated that this tool could save users a significant amount of time compared to any existing processes. "The report created can be used as evidence for any internal or external audit review of this task," he noted.
Balancing Regulatory Compliance with Operational Efficiency
When asked about the effectiveness of the tool in balancing regulatory compliance with operational efficiency, our expert stated that the reporting allows users to efficiently acquire the information they need, knowing it has already been validated by Thomas Murray. This ensures that users have a clear audit of their review, which helps enable straightforward decision-making around a market's eligibility.
Ensuring UCITS compliance is a complex process that requires significant time and effort. Tools like Thomas Murray's Market Eligibility Due Diligence tool help alleviate any challenges for users by providing a centralised database of current and validated market information. By streamlining this process, users can focus on other areas of their business, while also reducing the risk of non-compliance.
Enhance your investment strategy with Market Eligibility Due Diligence
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