Game Changer? The Potential Impact of MiFID II on UCITS Distribution

November 01, 2016

Over the past 25 years, Europe’s Undertakings for Collective Investment in Transferable Securities (UCITS) have grown to become the “gold” standard for cross-border investment funds with assets under management exceeding EUR 9.1 trillion. While UCITS are widely distributed outside of Europe, the UCITS “passport” and the product’s distribution within Europe is fundamental to its success. On January 3, 2018, the UCITS fund distribution landscape will be materially altered with the implementation of two linked pieces of legislation—a revised European Union Markets in Financial Instruments Directive (MiFID) and the Markets in Financial Instruments Regulation (MiFIR), which are collectively referred to as MiFID II. This article provides an overview of how UCITS are currently distributed in Europe and examines the key regulatory provisions of MiFID II that could be a game changer for European distribution, including: (i) the need for “retail” investors to seek advice in order to have access to any financial instrument deemed “complex”; (ii) new suitability and appropriateness requirements; and (iii) a ban on independent advisers receiving “inducements.”

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