Common use of UCITS Clause in Contracts

UCITS. Yet the host Member State also has a role to play in supervision and enforcement of UCITS. If the infringement falls within the scope of Articles 92 and 94 of UCITS, then it would be a host Member State issue.383 It is indeed necessary for host Member States to be responsible for certain forms of super- vision and enforcement given that the conduct of the regulated entity will likely affect the nationals of the host Member State. For example, host Member States may be able to supervise and enforce against a hosted UCITS in respect of issues dealing with dissemination of information such as the key investor information document, prospectuses and payments to unit holders upon redemption.384 An important aspect of the prospectus is to “inform investors of the collat- eral policy of the UCITS. This should include permitted types of collateral, level of collateral required and haircut policy”.385 As noted by ESMA, “any collateral received other than cash should be highly liquid and traded on a regulated market or multilateral trading facility with transparent pricing in order that it can be sold quickly”.386 Article 46 of the ESMA guidelines requires UCITS to have a clear haircut policy. The parameters that influence the haircut policy are decided per transaction and include factors such as counterparty risk, maturity of the security, its liquidity and potential volatility.387