Estonia will soon transpose directive 2009/65/EC of the European Parliament and of the Council, more commonly known under the name of UCITS IV. As of the date of publication of this article, it is not yet precisely known when the amendments related to UCITS IV will enter into force in Estonia. However, the directive requires Member States to apply the amendments in internal law from 1 July 2011. Failure to do so may lead to the European Commission commencing infringement proceedings and applying to the Court of Justice of the European Union (the Court) as the last instance to impose a penalty or order implementation of the directive in national law, or both. As a rule, Estonia has resolved matters related to implementation of directives during the pre-trial stage of infringement proceedings, i.e. without judicial proceedings involving the Court. In relation to the due date for transposition of UCITS IV, we discuss the feeder-master structure below.
The feeder-master structure established by UCITS IV is prescribed for achieving economies of scale: saving on management company expenses, as the directive to be transposed allows for merging UCITS (funds founded on the basis of Council directive 85/11/EEC). Each UCITS may adopt the feeder-master structure on condition that both feeder and master funds must satisfy the requirements arising from the UCITS directives. The feeder fund is intended for raising capital from investors and making payments to investors. One of the objectives of feeder funds is to allow for paying investors in the form of so-called national payments, without the maze of cross-border taxation that accompanies a situation where a feeder fund is registered in one state but payment is made to a tax resident of another state. A feeder fund, in turn, places capital raised from investors in a master fund. Investors may also directly invest in a master fund. The following drawing illustrates the relationship between feeder and master funds. The following drawing illustrates the relationship between feeder and master funds.
It should be further noted that a feeder fund must place at least 85% of its assets in a UCITS or its sub-fund. Financial supervision over feeder and master funds is exercised by the financial supervision authority of the place where the feeder fund is located. If the feeder-master fund is registered in different states, only the financial supervision authority of the country of location of the master fund checks whether the master fund complies with investment restrictions.
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UCITS IV: regulation of master-feeder funds
Estonia will soon transpose directive 2009/65/EC of the European Parliament and of the Council, more commonly known under the name of UCITS IV. As of the date of publication of this article, it is not yet precisely known when the amendments related to UCITS IV will enter into force in Estonia. However, the directive requires Member States to apply the amendments in internal law from 1 July 2011. Failure to do so may lead to the European Commission commencing infringement proceedings and applying to the Court of Justice of the European Union (the Court) as the last instance to impose a penalty or order implementation of the directive in national law, or both. As a rule, Estonia has resolved matters related to implementation of directives during the pre-trial stage of infringement proceedings, i.e. without judicial proceedings involving the Court. In relation to the due date for transposition of UCITS IV, we discuss the feeder-master structure below.
The feeder-master structure established by UCITS IV is prescribed for achieving economies of scale: saving on management company expenses, as the directive to be transposed allows for merging UCITS (funds founded on the basis of Council directive 85/11/EEC). Each UCITS may adopt the feeder-master structure on condition that both feeder and master funds must satisfy the requirements arising from the UCITS directives. The feeder fund is intended for raising capital from investors and making payments to investors. One of the objectives of feeder funds is to allow for paying investors in the form of so-called national payments, without the maze of cross-border taxation that accompanies a situation where a feeder fund is registered in one state but payment is made to a tax resident of another state. A feeder fund, in turn, places capital raised from investors in a master fund. Investors may also directly invest in a master fund. The following drawing illustrates the relationship between feeder and master funds. The following drawing illustrates the relationship between feeder and master funds.
It should be further noted that a feeder fund must place at least 85% of its assets in a UCITS or its sub-fund. Financial supervision over feeder and master funds is exercised by the financial supervision authority of the place where the feeder fund is located. If the feeder-master fund is registered in different states, only the financial supervision authority of the country of location of the master fund checks whether the master fund complies with investment restrictions.