The Front Page, Asset Management & Investment Funds: EU & International Developments
Updated ESMA Q&A on the application of AIFMD
ESMA published an updated version of its Q&A paper on the application of the Alternative Investment Fund Managers Directive. The Q&A includes a new question and answer on requirements regarding the domicile of EU Alternative Investment Funds (AIFs) which are marketed in the home Member State of the AIF Manager, as well as a new question and answer relating to the marketing of EU feeder AIFs which have a non-EU master AIF. The Q&A also contains two new questions and answers regarding the influence that committed capital can have on the calculation of the total value of assets under management and additional own funds. The latest updates are highlighted in yellow in the paper.
CMU consultation on cross-border distribution of investment funds
The European Commission published a consultation on CMU action on cross-border distribution of investment funds (UCITS, AIFs, ELTIFs, EuVECAs, EuSEFs) across the EU. The EU Commission's aim is to increase the proportion of funds marketed and sold across the EU. The consultation is part of the EU Commission's September 2015 action plan for CMU and builds on its February 2015 CMU consultation and its September 2015 call for evidence on the EU regulatory framework for financial services. The consultation period closes on 2 October 2016. The EU Commission will use the information it receives as a basis for taking action to address cross-border barriers to distribution of investment funds.
ESMA Q&A on the application of the EuSEF and EuVECA Regulations
On 31 May 2016, ESMA published an updated version of its Q&A on the application of the European Social Entrepreneurship Funds (EuSEF) Regulation and the European Venture Capital Funds (EuVECA) Regulation. The Q&A includes a new question and answer on the use of the designations of EuSEF and EuVECA funds when marketed only in their home member state; the conditions for the use of the designations EuSEF and EuVECA are linked to the compliance of their managers with qualitative requirements, and are not subject to any requirement to market the respective fund in more than one member state.
The Council of the EU published a revised version of the proposed Regulation on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of investment funds (Benchmarks Regulation).
ESMA final report on draft RTS under the ELTIF Regulation
On 8 June 2016, ESMA published a final report on the draft regulatory technical standards (RTS) under the Regulation on European Long-Term Investment Funds. The report summarises feedback received by ESMA to its July 2015 consultation on the draft RTS, and sets out the legislative mandate to develop the draft RTS, the cost-benefit analysis related to the draft RTS and the full text of the draft RTS (Annex III). The EU Commission has three months to endorse the draft RTS. ESMA also confirmed that it is postponing the delivery of its ELTIF RTS on the cost disclosure information which must be included in the ELTIF’s prospectus, in order to take into account the work being undertaken on cost disclosures for PRIIPs.
The Council of the EU issued a press release announcing that the Permanent Representatives Committee has agreed on the Council's negotiating mandate on the proposed Regulation on Money Market Funds (MMF Regulation). The Council will ask the EU Presidency to start talks with the European Parliament.
FSB consultation on recommendations to address structural vulnerabilities arising from asset management activities
The Financial Stability Board (FSB) published a consultation on proposed policy recommendations to address structural vulnerabilities from asset management activities. The paper sets out 14 proposed recommendations relating to structural vulnerabilities such as liquidity mismatch between fund investment assets and redemption provisions, leverage within funds, operational risk in transferring investment mandates or client accounts and securities lending activities.The recommendations consider stress testing for individual open-ended funds to support liquidity risk management as well as system-wide stress testing that could capture the effects of collective selling on the financial system. The consultation period closes on 1 September 2016. The FSB will then finalise the recommendations which will then be "operationalised" by the International Organization of Securities Commissions (IOSCO) and the FSB.
Anti-Money Laundering/Countering the Financing of Terror
The European Commission is expected to adopt delegated acts under the Fourth Anti-Money Laundering Directive soon which will identify third countries with strategic money laundering or terrorist financing deficiencies (the "blacklist"). The European Commission is also expected to publish a legislative proposal to amend the Fourth Anti-Money Laundering Directive as part of its terrorist financing action plan.
Joint Committee of European Supervisory Authorities (ESAs) website
On 31 May 2016, the Joint Committee of ESAs launched a new website which will present information and news about the cross-sectoral work of the three ESAs.
IOSCO statement on priorities on data gaps in the asset management industry
IOSCO issued its priorities for data gaps in the asset management industry, identifying (among other things) that data on the topics listed below should be obtained as a priority and recommending that regulators encourage the use of internationally agreed standards of entity and transaction identifiers and enhance their capacity to process and use data.
- Open-ended regulated collective investment schemes (IOSCO proposes that better data on CIS use of derivatives, of leverage and liquidity profiles would provide securities regulators with a more in-depth understanding of CIS operations and would improve risk monitoring).
- Separately managed accounts (IOSCO proposes better data on leverage and derivative exposures of separately managed accounts on a global level).
- Alternative funds (IOSCO proposes consistent definitions for fund metrics across jurisdictions, particularly regarding leverage).
Date published: 29 June 2016