Asset Management & Investment Funds: EU & International Developments - July 2018


The ESMA UCITS Q&A was updated on 23 July 2018 to include new Q&As on:

  • UCITS investing in other UCITS with different investment policies and restrictions. Q&A 6a – the prospectus of a UCITS should clearly disclose whether, in the case of fund of fund investments, the target fund(s) might have different investment strategies or restrictions.  Where the UCITS documents expressly rule out certain types of assets or derivative use without any reservations, the ManCo/ UCITS should carry our proportionate due diligence to ensure there is no circumvention of the investment strategies or restrictions.
  • Calculation of issuer concentration limits. Q&A 5b – only netting arrangements as set out in the Guidelines on Risk Measurement and the Calculation of Global Exposure and Counterparty Risk for UCITS may be taken into account when calculating issuer concentration limits.
  • Reuse of assets by a UCITS depositary. Q&A X1 – a depositary (or a delegated third party) should be able to act as counterparties in a transaction of assets that they hold in custody, provided that:

(i) the four conditions under Article 22(7)(a) to (d) of the UCITS Directive are complied with, and

(ii)conflicts of interest are properly managed, and

(iii)the transaction is conducted on an arm-length basis    

  • The supervision of branches of UCITS ManCos providing MiFID investment services. Q&A 7 considers where supervisory responsibility lies when MiFID services are provided through a branch in a different Member State from that of the UCITS ManCo.

 ​​​​ESMA AIFMD Q&A update

The ESMA AIFMD Q&A was updated on 23 July 2018 to include a new Q&A considering where supervisory responsibility lies when MiFID services are provided through a branch in a different Member State from that of the AIFM.

ESMA letter to the European Commission on share cancellation under MMFR

ESMA published a letter to the European Commission on the issue of the compatibility of the reverse distribution mechanism (RDM), or share cancellation, with the Money Market Funds Regulation (MMFR).

The letter notes that the European Commission provided some market participants with the text of the opinion of the Legal Service of the Commission on the compatibility of the RDM with the MMFR. The letter requests that the Commission make this interpretation available to the wider public as soon as possible, in order to ensure clarity and transparency vis-à-vis market participants and investors. The letter notes that the MMFR applies from 21 July 2018, and all newly authorised MMFs must comply with the Regulation from that date.

ESMA list of MoUs 

ESMA published its updated list of AIFMD MoUs signed by the EU authorities.

Anti-Money Laundering/Combating the Financing of Terror/Corruption

The Egmont Group issued a report on Concealment of Beneficial Ownership A new joint FATF-Egmont Group report assesses the vulnerabilities linked to the concealment of beneficial ownership in order to support further risk analysis by governments, financial institutions and other professional service providers.

The report uses over 100 case studies provided by 34 different jurisdictions (Egmont Group Members and part of the FATF Global Network), the experiences of law enforcement and other experts, private sector input, public sector input as well as open-source research and intelligence reports to identify the methods that criminals use to hide beneficial ownership. Vulnerabilities associated with beneficial ownership are analysed, with a particular focus on the involvement of professional intermediaries.

The FATF is consulting private sector stakeholders on Draft Risk-Based Approach Guidance for the Securities Sector to assist in the application of a risk-based approach to AML/CTF. Deadline for comments: 17 August 2018.

For more information please contact a member of the Asset Management & Investment Funds Team.

Date publised: 27 July 2018