The Front Page, Asset Management & Investment Funds: EU & International Developments

ESMA consultation on ELTIFs

ESMA published a consultation paper (dated 31 July 2015) on draft regulatory technical standards (RTS) under the Regulation on European Long-Term Investment Funds (ELTIF Regulation). The ELTIF Regulation was published in the Official Journal on 19 May 2015 and entered into force on 9 June. ELTIFs are designed to increase the amount of non-bank finance available for companies investing in the "real economy" of the EU. They are also intended to enable investors to put money into companies and infrastructure projects for the long-term. In accordance with the ELTIF Regulation, ESMA is consulting on draft RTS to determine the criteria for establishing the following:

  • Circumstances in which the use of financial derivative instruments solely serves hedging purposes.
  • Circumstances in which the life of an ELTIF is considered sufficient in length.
  • Criteria to be used for certain elements of the itemised schedule for the orderly disposal of the ELTIF assets.
  • Costs disclosure.
  • Facilities available to retail investors.

The deadline for responses to the consultation is 14 October 2015. Responses to the consultation paper will be taken into account by ESMA when it finalises the draft RTS, which it will submit to the European Commission for endorsement.

ESMA recommends amending EMIR

ESMA published four reports focused on how the European Markets Infrastructure Regulation (EMIR) framework has been functioning and providing input and recommendations to the European Commission’s EMIR Review. Three of the reports are required under Article 85 of EMIR, and cover non-financial counterparties (NFCs), pro-cyclicality and the segregation and portability for CCPs. The fourth report responds to the European Commission’s Review including recommendations on amending EMIR in relation to the clearing obligation, the recognition of third country CCPs and the supervision and enforcement procedures for trade repositories.

2015/1260 Press Release

2015/1251 EMIR Review Report no.1 - Review on the use of OTC derivatives by NFCs

2015/1252 EMIR Review Report no.2 - Review on the efficiency of margining requirements to limit procyclicality

2015/1253 EMIR Review Report no.3 - Review on the segregation and portability requirements

2015/1254 EMIR Review Report no.4 - ESMA input as part of the Commission consultation on the EMIR Review.

As discussed in May's edition of the Front Page, ESMA has proposed updating Articles 50(1)(g)(iii) and 52 of the UCITS IV Directive to take into account the clearing obligation of certain types of OTC financial derivative transactions required by EMIR. On 22 May 2015, ESMA published an opinion on the impact of EMIR on Articles 50(1)(g) (iii) and 52 and of the UCITS IV Directive for OTC financial derivative transactions that are centrally cleared.

European Commission reports on its exercise of powers under UCITS IV and AIFMD

The European Commission published the following documents:

  • A report on the exercise of delegation of powers to the Commission to adopt implementing measures pursuant to Article 112a of the UCITS IV Directive (2009/65/EC) (UCITS IV) (COM(2015) 384).
  • A report on the exercise of delegation of powers to the Commission to adopt delegated acts pursuant to Article 56 of the Alternative Investment Fund Managers Directive (2011/61/EU) (AIFMD) (COM(2015) 383).

Article 112a of UCITS IV and Article 56 of the AIFMD required the Commission to produce reports for the European Parliament and the Council of the EU on the Commission's use of its powers under those directives to make implementing and delegated acts. In each of the reports, the Commission lists the Articles in UCITS IV and the AIFMD giving powers to the Commission and the specific legislative acts, and the provisions within those acts, that were adopted using those powers.

The Commission has not yet exercised its powers under Articles 67(6) and 68 of the AIFMD, which relate to the application of the harmonised passport regime for non-EU alternative investment fund managers (AIFMs) performing management or marketing activities, or both, within the EU and to EU AIFMs managing non-EU AIFs. The Commission expects that it will exercise those powers in 2015 following the delivery of the report from ESMA on the application of the EU passport under the AIFMD to non- EU AIFMs and non- EU AIFs (previously discussed in July's edition of the Front Page).

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

Date published: 27 August 2015