Undertakings for Collective Investment in Transferable Securities (UCITS)

Undertakings for Collective Investment in Transferable Securities are collective investment schemes, principally designed for retail investors, established and authorised under the harmonised European Union (“EU”) framework. UCITS funds in Cyprus are governed by Law No. 78(I)/2012 (the “UCI Law”), transposing the UCITS IV Directive into national law, and are regulated by the Cyprus Securities and Exchange Commission (“CySEC”)

UCITS may be structured either as a Common Fund or as a Variable Capital Investment Company (VCIC). If structured as a Common Fund, an external manager must be appointed while if a VCIC, it may be self-managed by its Board of Directors. In both cases, the assets of a UCITS must be held under custody. Umbrella Funds UCITS funds may be structured as single funds or as umbrella funds, allowing many separate compartments and different share classes.

The minimum share capital requirement for the self-managed UCITS is €300,000, whereas for the third-party managed UCITS the share capital requirement is €200,000.

The eligible asset categories for a UCITS are: Transferable Securities (TSs), Money Market Instruments (MMIs), Open-ended collective investment schemes, Deposits with eligible credit institutions and Financial derivative instruments.

UCITS Manager: The Management Company must at all the times act independently of the Depositary and it must be managed by at least two persons who satisfy the ‘Fit and Proper’ test.

Prices of UCITS

Fund Administration and Custody for UCITS

The administrator acts as an intermediary between the fund’s managers and investors and provides an additional layer of protection to investors. The administrator’s functions include accounting and bookkeeping services, as well as registrar services required with the fund’s operations, such as recordkeeping, processing of subscription and redemption requests and maintenance of the shareholder register. The administrator further calculates the Net Asset Value (“NAV”) of the fund portfolio on a daily basis, hence it is easier for investors to monitor the fund.

Every UCITS must appoint a single and independent depositary that will be acting as the custodian of the fund’s assets. The depositary must have the necessary mechanisms to protect the property of the fund under its custody and forbid the use for its own account or for the benefit of third parties, also maintaining an up-to-date record of all assets. It shall also monitor cash flow regarding investors and service providers, ensuring the fund’s cash flows are booked at eligible entities and are accurately monitored. Furthermore, the depositary shall execute oversight functions ensuring compliance with the fund’s rules and instruments of incorporation, valuation procedures and compliance with the applicable laws and regulations. The Depositary is either a Cypriot bank or a foreign bank maintaining an active branch in Cyprus, or any other entity which is entitled under its operation license to provide Depositary services. However, safekeeping duties may be subcontracted to a foreign licensed custodian acting as sub-custodian.

Marketing of UCITS

Within the EU, UCITS benefit from the EU “passport” available under the UCITS directive and are thus freely marketed on a public basis within all Member States without additional authorisation from the competent regulatory authority of each “host” Member State. This is subject to a successful completion of a “notification” process described below. Outside the EU UCITS must satisfy local regulations significantly more complex and time consuming than the notification process introduced under UCITS IV. It is important to note that the UCITS may be advertised only after the operation licence is communicated to the Management Company or the UCITS itself, as the case may be. Furthermore, distribution of UCITS funds into selective jurisdictions via private placement is becoming increasingly common as opposed to public distribution.

More info about UCITS

Visit the website of Cyprus Securities and Exchange Commission for the relevant legislation and regulatory framework.

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