Our latest Funds and asset management regulatory news supplements our General regulatory news with items specific to the funds and asset management industry. Read both to keep abreast of recent regulatory developments.

Contents

• Open-ended funds: FCA and BoE review survey on liquidity mismatch
• AIFMD review: ESMA highlights priority areas
• COVID-19: ESMA to update risk parameters in guidelines on stress test scenarios under MMF Regulation

Open-ended funds: FCA and BoE review survey on liquidity mismatch

On 26 August 2020, the UK Financial Conduct Authority (FCA) updated its COVID-19 webpage to announce that it has launched a joint survey with the Bank of England (BoE) to review liquidity mismatch in open-ended funds.

In Q4 2019, the Financial Policy Committee (FPC) judged that the mismatch between redemption terms and the liquidity of some funds' assets could become a systemic risk. It said there should be greater consistency between these, with specific focus on three principles:

• measures of liquidity;
• pricing; and
• redemption notice period.
• The review will consider how a framework around the above principles could be designed.

As part of the FCA's ongoing joint review with the BoE, the FPC supported an initial data collection survey in Q1 2020. This survey was postponed in March due to COVID-19. However, the FPC recently supported resuming this work.

The survey is a voluntary exercise and the data will provide an important element for the joint review. Asset managers included in the survey are being asked to respond to the questions on a best-effort basis by 30 September 2020.

AIFMD review: ESMA highlights priority areas

ESMA has published a letter (dated 18 August 2020) it has sent to the European Commission, highlighting the areas where it considers improvements could be made to the Alternative Investment Fund Managers Directive (AIFMD). The letter is written in the context of the Commission's impending review of the AIFMD.

Annex I to the letter sets out the key areas in the legislative framework where ESMA proposes that amendments are made. Annex II to the letter sets out more specifically ESMA's proposed changes to the AIFMD in relation to the reporting regime and data use. ESMA comments that, in many cases, its proposals also require consideration of changes to the current UCITS framework.

COVID-19: ESMA to update risk parameters in guidelines on stress test scenarios under MMF Regulation

On 27 August 2020, ESMA published a statement announcing that it intends to update the 2019 guidelines on stress test scenarios produced under the Money Market Funds Regulation (MMF Regulation) to modify the risk parameters to reflect recent market developments relating to COVID-19. ESMA expects to publish the 2020 update of the guidelines in Q4 2020. The updated guidelines will then be translated, and the changes will apply from two months after the publication of the translations.

ESMA confirms that the 2019 guidelines will continue to apply pending the application date for the 2020 update. This includes the existing calibrated scenarios and the internal stress test exercise to be carried out by managers of MMFs.

[View source.]