A UCITS ETF that invests in derivatives or structured products, such as Collateralized Loan Obligations (CLOs), would **not** be automatically considered non-complex under MiFID II. While UCITS funds are generally deemed non-complex under Article 25(4)(a)(iv) of Directive 2014/65/EU, there are specific exceptions and considerations that apply, particularly when the UCITS ETF invests in complex instruments like derivatives or structured products. Below is a detailed explanation based on the context of the "MiFID II Appropriateness – Approach to Implementation" document and the referenced regulatory framework.

### Key Points

1. **General Rule for UCITS**:
   - Under **Article 25(4)(a)(iv)** of MiFID II, shares or units in UCITS (Undertakings for Collective Investment in Transferable Securities) are generally classified as **non-complex** financial instruments, meaning they are exempt from appropriateness assessments when sold on a non-advised basis.
   - This is because UCITS funds are highly regulated, designed for retail investors, and typically have standardized, transparent structures with accessible information.

2. **Exception for Structured UCITS**:
   - The document explicitly notes that **structured UCITS**, as referred to in the second subparagraph of Article 36(1) of Regulation (EU) No 583/2010, are **excluded** from the non-complex category.
   - Structured UCITS are UCITS funds that employ complex investment strategies or structures, such as those involving derivatives or structured products, which may increase risk or make the risk profile harder for retail investors to understand.

3. **UCITS ETFs Investing in Derivatives or Structured Products (e.g., CLOs)**:
   - A UCITS ETF that invests in derivatives or structured products like CLOs may fall under the **structured UCITS** exception if its investment strategy or holdings introduce complexity that fails the criteria outlined in **Article 57** of the Commission Delegated Regulation (C(2016) 2398 final).
   - Specifically, Article 57 criteria for non-complex instruments include:
     - **No derivatives** (Article 57(a)): Instruments embedding derivatives or falling under points (4) to (11) of Section C of Annex I to Directive 2014/65/EU (e.g., options, futures, swaps, or CLOs as structured products) are complex.
     - **No clauses altering risk/payout profile** (Article 57(d)): Investments in CLOs or derivatives may include triggers or conditions that fundamentally alter the risk or return profile.
     - **No excess liability** (Article 57(c)): If the ETF’s derivative exposure could lead to losses exceeding the investment, it may be complex.
     - **Comprehensive, understandable information** (Article 57(f)): If the ETF’s investments in CLOs or derivatives result in limited or complex documentation, it may not meet this criterion.
   - CLOs, as structured products, often embed derivatives or have complex payout structures, which could cause the ETF to fail one or more Article 57 criteria, rendering it complex.

4. **Practical Implications**:
   - If a UCITS ETF invests significantly in derivatives or structured products like CLOs, it is likely to be classified as a **structured UCITS** or fail Article 57 criteria, making it **complex**. This would require an **appropriateness assessment** for non-advised sales to ensure the customer understands the risks (e.g., counterparty risk, leverage, or illiquidity associated with CLOs).
   - The document emphasizes that product manufacturers must determine and communicate whether a product is complex, referencing Article 57 criteria. Distributors rely on this classification but must perform due diligence.
   - For example, the document notes that instruments like convertible shares or those with embedded derivatives (Section 4) are complex, and a UCITS ETF with significant exposure to CLOs could be similarly treated.

5. **Regulatory Guidance**:
   - **ESMA Guidelines** (referenced in the document, ESMA/2015/1783) on complex debt instruments and structured deposits highlight that instruments embedding derivatives or with structures that are difficult to understand are complex. This applies to UCITS ETFs with significant derivative or CLO exposure.
   - The document’s flowchart (Section 5) and ESMA/FCA guidance suggest that even UCITS structures can be complex if they do not meet all Article 57 criteria.

6. **Customer Protection**:
   - The purpose of classifying such ETFs as complex is to protect retail investors by ensuring they have sufficient knowledge and experience to understand the risks of investing in products with derivative or structured exposures, as outlined in the document’s appropriateness assessment framework (Sections 6–9).

### Conclusion
A UCITS ETF that invests in derivatives or structured products like CLOs is **not automatically non-complex**. If its investment strategy or holdings (e.g., significant exposure to CLOs or derivatives) cause it to fail any of the **Article 57 criteria** or qualify it as a **structured UCITS** under Regulation (EU) No 583/2010, it will be deemed **complex**. As a result, firms must conduct an appropriateness assessment for non-advised sales to verify the customer’s understanding of the associated risks, such as those related to derivatives, counterparty exposure, or complex payout structures.

### Recommendation
Firms should:
- Review the ETF’s investment strategy and holdings against **Article 57 criteria** and the structured UCITS definition.
- Consult the manufacturer’s complexity classification and ESMA guidelines.
- Conduct appropriateness assessments if the ETF is deemed complex, using questions tailored to the specific risks (e.g., those in Section 9.2 of the document, addressing derivatives or illiquidity).

**Source References**:
- Directive 2014/65/EU: [Link](http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32014L0065&from=EN)
- Commission Delegated Regulation (C(2016) 2398 final): [Link](http://ec.europa.eu/transparency/regdoc/rep/3/2016/EN/3-2016-2398-EN-F1-1.PDF)
- Regulation (EU) No 583/2010: [Link](http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32010R0583&from=EN)
- ESMA Guidelines on Complex Debt Instruments: [Link](https://www.esma.europa.eu/sites/default/files/library/2015-1783_-_final_report_on_complex_debt_instruments_and_structured_deposits.pdf)