The European Securities and Markets Authority has issued on March 26 a new version of its Questions and Answers document containing guidance and interpretation of the rules governing the Key Investor Information Document for UCITS funds, designed to promote common supervisory approaches and practices in the practical application of the UCITS regime through responses to questions posed by the general public and regulators themselves.

ESMA says the answers are also intended to help UCITS management companies by providing clarity as to the content of the rules rather than creating an extra layer of requirements. It will review the questions and answers to determine whether in certain areas there is a need to convert some of the material into formal guidelines and recommendations. The document will be regularly edited and updated whenever new questions are received.

The document, which was last updated in September 2012, covers the preparation of KIIDs by UCITS that are no longer marketed to the public or are in liquidation, communication of KIID to investors, the treatment of UCITS with share or unit classes, past performance issues, clarity of language, and identification of the UCITS fund.

The new content deals with past performance. It notes that Article 19(4) of the European Commission’s Level 2 regulation 583/2010 states that in the case of mergers under the UCITS IV provisions, only the past performance of the fund into which the other is merged should be referred to in the KIID. But how should this be interpreted in cases where the continuing fund is one newly established with no performance history, and it is the fund that has been absorbed that in effect ins being continued in the merged entity.

In these circumstances, ESMA says, the KIID should report on the past performance of the UCITS that has been absorbed into the merged entity, as long as the regulator can reasonably determine that the merger has no material impact on the fund’s performance. Such an impact would arise, according to the authority, were there to be a change to the fund’s investment policy or to the entities involved in investment management. The fact that the historic performance described is that of the UCITS that has been absorbed, not the surviving legal entity, must be made clear in the KIID.

ESMA’s updated Q&A document on the Key Investor Information Document for UCITS can be consulted at