European Commission’s Market Integration and Supervision Package

On 4 December 2025, the European Commission published a set of legislative proposals under its wide-ranging Market Integration and Supervision Package, as part of the implementation of its Savings and Investments Union strategy (SIU) objectives. This ambitious initiative aims to deepen EU capital markets integration, reduce fragmentation, and enhance supervisory convergence.

The proposals could significantly reshape cross-border operations for UCITS management companies (UCITS ManCos) and EU alternative investment fund managers (AIFMs), with benefits such as faster passporting and streamlined marketing notifications, removal of “gold-plating” and national discretions, an EU depositary passport, simplified EU group delegation rules, as well as enhanced supervisory convergence.

Legislative proposals

The package comprises three legislative proposals (Proposals) that would amend existing EU financial services directives and regulations:

1. A Master Directive - amends the UCITS Directive, the Alternative Investment Fund Managers Directive (AIFMD) and the Markets in Financial Instruments Directive (MiFID)

2. A Master Regulation - amends 14 regulations, including the Cross Border Distribution of Funds Regulation (CBDR) and MiFIR

3. A regulation replacing the Settlement Finality Directive and amending the Financial Collateral Directive.   

In this insight we focus only on the key proposed amendments to the UCITS Directive, AIFMD and CBDR that are relevant to UCITS ManCos and EU AIFMs.

Timing

The Proposals will now go through the EU co-legislative process beginning with assessment by the European Parliament and the Council who may propose further amendments before agreeing the final text. The European Commission has indicated phased implementation 12-24 months after entry into force, with a start-up period from mid-2027 to mid-2029.

Key changes for fund managers

- Harmonised authorisation. Delegated acts will specify the information to be provided to national competent authorities (NCAs) for the authorisation of UCITS ManCos, AIFMs and UCITS funds and the procedures and timelines to be followed.

- EU group arrangements removed from third-party delegation rules. Currently intra-group delegation is treated like third-party delegation, requiring due diligence, monitoring and oversight activities. Under the Proposals, where an AIFM or UCITS ManCo relies on other EU authorised entities (UCITS ManCos, AIFMs, credit institutions or MiFID investment firms), the arrangement would not be deemed a delegation, except for the requirement to inform NCAs. Liability remains with the UCITS ManCo or AIFM and the prohibition on delegating so much that the entity becomes a “letter-box” entity will remain.

- Management company passport processing time reduced. Under the Proposals, home Member States must forward to host Member States the information on the UCITS Manco’s or AIFM’s intention to operate in that territory within one month if providing services under the freedom to provide services and within 15 days if establishing a branch. Host Member States may not impose additional requirements.

- EU depositary passport. AIFMs and UCITS will be able to appoint a depositary located anywhere within the EU, provided the depositary is authorised as a credit institution or as a MiFID investment firm with passporting rights to provide services in other Member States.

- ESMA annual review of large EU groups. Within 12 months from the Master Directive’s entry into force, the European Securities and Markets Authority (ESMA) must identify each large EU group of UCITS ManCos and AIFMs that meet both the following:

a). aggregate EU-wide net asset values of UCITS ManCos and AIFMs within the group exceeds €300 bn, and

b). those entities within the group are established in more than one Member State, or they manage or market UCITS funds and AIFs in more than one Member State.

ESMA’s accompanying Q&A clarifies that it will not directly supervise UCITS ManCos or AIFMs. Instead, it will carry out annual reviews of how NCAs supervise each large EU group, focusing on organisational structure and governance, resources and their allocation inside and outside the group, the functions of persons effectively conducting the business of the UCITS ManCos and, where relevant, AIFMs, and risk management systems. These reviews will draw on data, information, and documentation already available to ESMA and NCAs through existing reporting channels.

ESMA will report to NCAs where it identifies diverging, duplicative, redundant and deficient supervisory actions and may issue recommendations for corrective actions to be implemented within a reasonable time, not exceeding one year.

- Simplification of disclosure obligations for white labels. Where funds are managed by a third party, UCITS ManCos and AIFMs should disclose the relationship to their NCA at the time of authorisation and, upon request, evidence reasonable steps taken to identify, prevent, manage, monitor, or, where applicable, disclose conflicts of interest, replacing current disclosure requirements.

- Potential for guidelines for prudential and conduct requirements. Under the Proposals, ESMA may develop guidelines to specify the content of rules of conduct and prudential rules.

- Adjustments to UCITS investment limits. The 10% single issuer limit for debt securities would increase to 15% for UCITS investing in securitisations compliant with the Securitisation Regulation. The 20% issuer limit for index-tracking UCITS would extend to UCITS managed by reference to an ESMA recognised index.

Key takeaways marketing and pre-marketing

Harmonised requirements

- The Master Regulation aims to reduce national divergences and strengthen supervisory convergence by deleting UCITS Directive and AIFMD provisions on cross border marketing of UCITS funds and EU AIFs managed by EU AIFMs to professional investors and moving them into the directly applicable CBDF.

- Host Member State NCAs will not be permitted to require prior notification of marketing communications. If a host NCA considers marketing communications non-compliant with CBDF requirements or delegated acts, it can request action from the home NCA of the AIFM, EuVECA, EuSEF manager or UCITS and, if unsatisfied, refer to ESMA.

- Host Member States will be prohibited from imposing any additional requirements on marketing communications other than the requirements set out in the CBDF. The Commission is empowered to adopt delegated acts to specify the format and content of marketing communications.

Improved passporting regime

- ESMA will develop a data platform for cross-border marketing notifications and de-notifications for AIFs and UCITSs, accessible to all NCAs. Host NCAs will have immediate and direct access to the documentation in connection with the UCITS and AIFs marketed in their territory.

- Marketing notifications are streamlined, shortening processing times and removing national requirements. UCITS and AIFs may indicate their intention to market funds in host Member States and submit marketing documents at authorisation. On authorisation, the home NCA of the UCITS or AIFM will transmit that information to the ESMA data platform, and marketing can begin from the transmission date. Procedures apply to changes to the initial marketing notification, including adding or removing host Member States.

- De-notification is likewise centralised so that UCITS and AIFs will be able to notify their intention to terminate marketing activities in a host Member State to their home NCA, who will in turn notify the relevant host Member States and ESMA through the data platform.

- The rule that when an AIFM de-registers an AIF in a Member State that a fund with a similar investment strategy cannot be pre-marketed in that Member State for the next 36-months, is removed.

- ESMA will publish information on host Member State fees or charges levied and every two years will analyse whether those fees or charges are consistent with the overall cost relating to the performance of the functions of the NCAs and report to the European Commission. The Proposal envisages that ESMA would charge UCITS and AIFMs a fee when they avail of the passporting based on authorisation procedure.

Facilities

- Confirming current law, the Proposal clarifies that marketing UCITS or AIFs in a host Member State does not require any physical presence, and host Member States should not impose any form of physical local presence obligations. Facilities may be provided in the host Member State language, or with host NCA agreement, in English.

ESMA powers to resolve cross border issues

- Where ESMA identifies divergent, duplicative, redundant or deficient supervisory practices, it can implement an escalation process starting with engaging with NCAs and stakeholders, and where necessary, it can utilise its convergence and intervention powers, including suspending the right to market UCITS or AIFs on a cross-border basis. NCAs should be able to refer to ESMA any disagreement on assessments, actions, or omissions in areas where co-ordination is required.

What should fund managers do now?

The Market Integration and Supervision Package represents a significant step toward a more unified and efficient EU funds market. For fund managers, the proposals signal broad changes in authorisation, passporting, marketing, and supervisory oversight. While legislative timelines and final details will evolve, fund managers should monitor developments closely, assess potential impacts on operations and strategy, and prepare for adjustments once rules are finalised.

Our team is tracking these and other proposed changes and their implications for UCITS ManCos and AIFMs.

For further information, please contact any member of the ALG Asset Management & Investment Funds team.

Date published: 15 December 2025