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reasonable control, the consequences of which would have been unavoidable despite all reason- able efforts to the contrary. The liability of the depositary shall not be affect- ed by any delegation and shall not be excluded or limited by agreement. Unit holders may invoke the liability of the de- positary either directly or indirectly through the management company or the investment com- pany, depending on the contractual relationships between the depositary, the management com- pany and the investors. Under UCITS V, UCITS management companies will be required to establish and apply remuner- ation policies and practices that are consistent with and promote sound and effective risk man- agement and do not encourage risk-taking which is inconsistent with the risk profiles, rules or instruments of incorporation of the UCITS under their management and do not impair compliance with the management company’s duty to act in the best interest of the UCITS. Governance The governing body of the management com- pany shall establish, maintain and approve the remuneration policy, which shall be reviewed at least annually by the control functions. Significant management companies shall estab- lish a remuneration committee to exercise inde- pendent judgment on remuneration policies and practices, in particular as regards the remuner- ation of senior officers in control functions. The members of the remuneration committee shall not perform any executive functions in the man- agement company. B. NEW REMUNERATION RULES FOR MANAGERS

“identified staff” includes: (i) senior managers, (ii) risk takers, (iii) control functions and (iv) any em- ployee receiving total remuneration in the brack- et of senior managers and risk takers, whose ac- tivities have a material impact on the risk profile of the UCITS. Remuneration structure The remuneration structures for UCITS managers shall include: (i) rules for conducting performance assessment based on financial and non-finan- cial criteria; (ii) rules for deferral, retention and pament in instruments of variable remuneration; (iii) rules for guaranteed variable remuneration; (iv) rules for payments related to the termination of employ- ment; (v) rules on pension benefits. Third parties in scope In the event of delegations, the same remuneration rules shall apply, in a proportionate manner, to any third party making investment decisions that af- fect the risk profile of the UCITS (see recital 2 of the Directive). Proportionality UCITS managers benefit from flexibility as regards the application of the UCITS V remuneration rules. They apply in proportion to the size, internal or- ganisation and the nature, scale and complexity of the activities carried out by the manager and the fund(s). C. NEW ADMINISTRATIVE SANCTIONS UCITS V harmonises the framework of administra- tive sanctions to be imposed by the EU Member States in the event of infringement of the nation- al provisions transposing the UCITS V Directive. These sanctions will include public statements, suspension or withdrawal of the management company authorisation and maximum administra- tive pecuniary sanctions. Fines will amount to at least twice the benefit deriving from the breach

or: for legal persons up to at least EUR 5 million or 10% of their annual turnover and at least EUR 1 million for natural persons. The Member States may also apply criminal penalties. EU regulators shall publish any sanction decision (which is no longer subject to appeal) on their of- ficial websites for a period of at least five years. Furthermore, ESMA will maintain a central data- base of sanctions communicated to it by national authorities and will publish a relevant annual re- port. ESMA will moreover make reference to any imposed sanction on the list of management com- panies available on its website. Finally, UCITS V requires the Member States to es- tablish mechanisms encouraging the reporting of potential or actual breaches of the national provi- sions transposing the Directive, including secure communication channels for the reporting of such breaches (“whistle-blowing”). What’s next? The Directive entered into force on 17 Septem- ber 2014. The EU Member States will have to transpose the Directive into their national legislation until 18 March 2016. The national laws, regulations and administrative provisions transposing the Directive will become applicable on 18 March 2016 (“Go Live”). However, investment companies or management companies acting on behalf of the UCITS they manage, having appointed (before 18 March 2016) a depositary that does not comply with the UCITS V eligibility criteria, will benefit from a transitional period ending on 18 March 2018 in order to appoint a depositary which meets those requirements.

Identified staff Under the new UCITS V regime, the definition of

THE DIRECTIVE IS AVAILABLE HERE.

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