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Asset management: overview of the regulatory framework for UCITS

Risk division rules

• A UCITS may not use more than 10% of its assets in transferable securities from the same issuer, or 15% for listed equity securities whose weighting in the benchmark stock market index exceeds 10%, or 20% for listed equity securities whose weighting in the benchmark stock market index exceeds 15%.

• The total value of the securities that a UCITS may hold with issuers in each of which it invests more than 10% of its assets may under no circumstances exceed 45% of its assets.

• A UCITS may not use in:

– negotiable debt securities issued by legal persons whose securities are not listed on the Stock Exchange;

– units in undertakings for collective investment in capital (OPCC);

– or units of securitization collective investment funds (FPCT). More than a specified percentage of its assets. This percentage is fixed by order of the Minister in charge of finance, after consulting the AMMC and it cannot exceed 20%.

Right of way rule:

• A UCITS cannot hold more than 10% of the same category of transferable securities issued by the same issuer.

Repo Transaction Rules

• A UCITS may hold in its assets the amount of receivables representing repurchase transactions that it carries out as assignee. These receivables cannot represent more than 100% of its assets.

• The exposure of the UCITS to the counterparty risk on the same contracting party resulting from the aforementioned repurchase transactions is limited to 20% of its assets. Rules relating to securities lending transactions

• A UCITS may carry out securities lending transactions within a limit which may be increased to 100% of its assets, provided that guarantees are provided.

• Securities received as collateral by a UCITS:

– Must not be issued/guaranteed by the borrower or by an entity belonging to the same group as the borrower;

– Must belong to one of the asset classes that the UCITS is authorized to hold according to its category and its investment strategy;

– Must have a market value at least equal to the market value of the securities loaned throughout the duration of the loan.

Indebtedness rules

• A UCITS may carry out cash and securities borrowing transactions within a limit not exceeding 10% of the assets of the UCITS

• When a UCITS performs:

– Repurchase transactions as assignor;

– Securities lending transactions as a borrower,

The sum of outstanding debts representing repurchase transactions, outstanding debts representing borrowed securities and cash borrowings must not exceed the aforementioned 10% limit. Rules relating to placement abroad

• UCITS collecting subscriptions in dirhams may carry out investment transactions in foreign currencies within the limit of 10% of the value of their net assets made up of securities denominated in dirhams.

• All the prudential rules to which Moroccan UCITS are subject remain applicable to investment abroad.

Valuation rules

• UCITS are, by regulation, required to apply precise valuation methods which make it possible to reflect the market value of their investments. In the event of difficulty in valuing its investments (illiquid financial instrument, financial difficulties of an issuer, absence of market references, etc.), a UCITS may, after a favorable opinion from the auditor and approval from the AMMC, propose the modification of the aforementioned valuation methods.

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