Asset Management & Investment Funds: EU & International Developments – March 2024

PRIIPs KID

The ESAs published an updated set of consolidated Q&As on the key information document (KID) requirements for packaged retail and insurance-based investment products (PRIIPs).

Q&As have been added in relation to topics including the following:

  • Section I. General topics.
    • Q&A 12 (clarifying the term "PRIIPs open to subscription").
  • Section II. ‘What is this product?’.
    • Q&A 7 (distinction between a benchmark/and a proxy for past performance disclosures).
    • Q&A 8 (the requirements of new wording in Article 2(2a) (b) of the ‘What is this product?’ section as against Article 6(b) in the “How long should I hold it and can I take money out early?” section, which requires “a description of the disinvestment procedure and when disinvestment is possible”.
    • Q&A 9 (right to terminate the PRIIP unilaterally).
  • Section III. Market risk assessment.  
    • Q&A 20 (SRI calculations where adequate history for the SRI calculation is not available to cover 5 years of data for a daily share class).
    • Q&A 21 (use of synthetic or artificial proxies for price data).
  • Section V. Summary risk indicators.
    • Q&A 5 (currency risk for investment funds that are denominated in a currency other than the official currency of the Member State where the PRIIP is being marketed.)
  • Section VI. Performance scenarios.
    • Q&A 23 (performance and cost disclosures where a PRIIP does not allow exit before the end of the recommended holding period).
  • Section VII Past performance.
    • Q&A 8. This new Q&A notes that:
    • UCITS must publish updated past performance no later than 35 business days after 31 December each year (this will be included under “Other relevant information” in the PRIIPs KID by way of a link to a website, or a reference to a document, where the information about past performance published by the PRIIP manufacturer is made available).
    • AIFs should publish information for each complete calendar year (covering the period January to December each year), once available. A deadline is not specified for updating the information on past performance. The ESAs expect that this would be within 35 business days after 31 December.
    • As past performance information is not published within the KID itself, ESMA notes that “it may not be necessary for the PRIIP manufacturer to review and revise the KID at the same time as publishing the updated information on past performance”.
  • Section XIII - Methodology for the calculation of costs, sub-section (F) Presentation of costs.
    • Q&A 12 (alignment of costs disclosed in table 1 (cost over time) and table 2 (total cost) for year 1.

Money Market Funds

ESMA’s 2023 guidelines on stress test scenarios apply from 6 May 2024.

On 6 March 2024, ESMA published the official translations, including the English language version, of its 2023 guidelines on stress test scenarios under Article 28 of the Regulation on money market funds (MMF Regulation).

The parts of the guidelines shown in red text will apply from 6 May 2024 (which is two months after publication of the translations). The other parts of the guidelines already apply under the MMF regulation.

ESMA published the final version of the guidelines in December 2023. The guidelines are updated at least every year to take into account the latest market developments. The new 2023 parameters set out in the updated guidelines and the revised methodology will have to be used for the first reporting period following 6 May 2024. 

The Financial Stability Board (FSB) published a thematic peer review report on money market fund (MMF) reforms, following the FSB’s policy proposals of October 2021. The main MMF vulnerability identified by jurisdictions was the mismatch between the liquidity of fund asset holdings and the redemption terms offered to investors, which makes MMFs susceptible to runs from sudden and disruptive redemptions.

AML/CFT/FS

EU list of high-risk third countries

The European Commission adopted a delegated regulation amending the list of high-risk third countries under 4AMLD to:

  • add Kenya and Namibia to the list of high-risk third countries under 4AMLD
  • delete Barbados, Gibraltar, Panama, Uganda and the United Arab Emirates from that list

The delegated regulation will be submitted to the Council of the EU and the European Parliament for scrutiny. If neither objects, it will enter into force 20 days after it is published in the Official Journal of the European Union. This reflects  outcomes of FATF February 2024 plenary meeting.

RTS and guidelines under AMLA Regulation, AML Regulation and 6AMLD

On 12 March 2024, the European Banking Authority (EBA) published a call for advice from the European Commission regarding regulatory technical standards (RTS) and guidelines under the future AML/CFT framework. The request for advice is provisional as the new framework has not yet entered into force. The EBA is to deliver its advice by 31 October 2025.

The FATF published updated guidance on beneficial ownership and transparency of legal arrangements. This follows the February 2023 revisions to FATF recommendation 25 on beneficial ownership and transparency of legal arrangements.

Directive harmonising penalties for breaches of financial sanctions obligations

A Directive setting new rules to harmonise criminal offences and penalties for the violation of EU restrictive measures (financial sanctions) is currently completing the EU legislative process. It will have a 12 month transposition deadline after it is published in the Official Journal.

For more information on these topics please contact any member of A&L Goodbody's Asset Management & Investment Funds team.

Date published: 26 March 2024