UCITS in general and UCITS in particular make extensive use of reverse-pension arrangements (i.e. funds lend cash and receive guarantees on securities), with some lending their entire cash under the terms of these agreements. Repurchase agreements (i.e. funds borrow cash and deposit securities guarantees) are expected to be of great interest to funds that will have to deposit cash guarantees with clearing houses when mandatory clearing of OTC derivatives applies from next year. On 4 December 2012, the European Securities and Markets Authority (ESMA) published definitive guidelines on repo and reverse retirement transactions for UCITS funds. This is a consequence of ESMA`s publication in July 2012 of the Guidelines on ETFs and UCITS (see DechertOnPoint) (ESMA Guidelines), which included a consultation on the guidelines that has just been published. On 25 On 27 July 2012, ESMA published guidelines on ETFs and other UCITS issues, which contained in Annex IV a consultation document on the possibility of recalling pensions and reverse retirement operations. The consultation process culminated in the publication on 4 December 2012 of ESMA`s Guidelines for Pension Operations and Reverse Retirement Operations (the « Guidelines »). The stated objective of the Guidelines is to better protect investors in UCITS that use pension and reverse retreat operations.
The intention is that the use of reverse retreat and retirement operations by a UCITS should not affect the UCITS` ability to respond to withdrawal requests. In its reply of 31 January 2014, AMIC welcomes the distinction between the diversification of guarantees and the diversification of assets held by funds, as proposed by ESMA, but considers that the proposal in this consultation document is not compatible with a coherent policy for the protection of UCITS investors. Compliance with the guidelines requires verification of: « Lexology is a good barometer of a company`s expertise, because the articles show a company`s understanding of the problems related to them and the timeliness of its knowledge. This is a good one-stop solution, in which you are able to look at the same law/cases from different angles. Overall, I would consider Lexology a good service. ESMA`s previous proposals to (i) limit the maximum percentage of assets of the fund that may be subject to repurchase and reverse-pension agreements to conditions that do not allow the Fund to recover assets at any time and (ii) set a minimum number of repo counterparties have not been submitted. The official translations of ESMA`s Guidelines were published on ESMA`s website on 18 December 2012. That publication triggers a two-month period within which the central bank must either declare to ESMA that it intends to comply with ESMA`s guidelines or, on the other hand, explain why it will not do so. However, the Central Bank should fully adopt ESMA`s guidelines. The guidelines (three of which exist) are as follows: the guidelines are incorporated into the main etf guidelines.
The Guidelines shall apply together with the ETF Guidelines two months after their official publication on ESMA`s website, which is expected to take place at the end of this year or early 2013, which is a likely implementation date in February or March 2013. ESMA published in December 2013 its consultation paper on the revision of the provisions on collateral diversification contained in ESMA`s Guidelines on ETFs and other UCITS issues in response to concerns that the collateral diversification requirements contained in the Guidelines, which entered into force on 18 February 2013, have a significant negative impact on the collateral management policy of UCITS. . . .