Funds and asset management regulatory news, October 2020 # 4

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Our latest Funds and asset management regulatory news reports include the European Commission consultations on the AIFMD and ELTIF Regulation reviews. Also read our General regulatory news to keep abreast of regulatory developments with broader application.

Contents

  • AIFMD review: European Commission consultation
  • ELTIF Regulation review: European Commission consultation
  • Retail investors and asset management are pillars of successful CMU: ESMA speech

AIFMD review: European Commission consultation

The European Commission has launched a consultation questionnaire relating to its review of the Alternative Investment Fund Managers Directive (AIFMD).

Through the consultation, the Commission will examine how to strengthen the rules and complete the internal market for alternative investment funds (AIFs), through potential changes to the AIFMD. The aim is to achieve a more efficient, effective and competitive EU AIF market as part of a stable financial system. The Commission notes that the process may also lead it to adjust the existing EU rules on UCITS.

The deadline for responses to the consultation is 29 January 2021.

The Commission intends to put forward a legislative proposal amending the AIFMD in the form of a Directive in Q3 2021.

ELTIF Regulation review: European Commission consultation

The European Commission has launched a consultation questionnaire relating to the review of the Regulation on European long-term investment funds (ELTIF Regulation).

The deadline for responses to the consultation is 19 January 2021.

Article 37 of the ELTIF Regulation requires the Commission to produce a report on the application of the Regulation accompanied, if appropriate, by a legislative proposal. The Commission is considering making targeted amendments to the Regulation intended to improve the effectiveness of the regulatory regime for ELTIFs and their managers and alleviate the administrative burden where possible, while maintaining adequate investor protection safeguards.

Retail investors and asset management are pillars of successful CMU: ESMA speech

The European Securities and Markets Authority (ESMA) has published a speech by Steven Maijoor, ESMA Chair, in which he explains why retail investors and asset management are the pillars of a successful capital markets union (CMU). Points of interest in Mr Maijoor's speech include:

  • in 2021, ESMA will coordinate a common supervisory action exercise on investment funds' costs and fees. National competent authorities will simultaneously investigate whether market participants in their jurisdictions adhere to the key regulatory requirements on costs and fees in their day-to-day business. ESMA expects this will ultimately enhance investor protection across the EU by increasing supervisory scrutiny of the costs and fees charged to fund investors;
  • as set out in the European Commission's second CMU action plan, ESMA supports a fundamental assessment of the role of inducements in the distribution of investment products in the EU. The experience of countries that have banned the use of inducements should be carefully considered;
  • a similarly careful assessment should be carried out in relation to the Commission's proposal to reform the Markets in Financial Instruments Directive (MiFID) client categories. Adding another category of clients may increase the complexity of the framework and would risk undermining appropriate investor protection levels;
  • ESMA hopes that the Commission, together with Council of the EU and the European Parliament, can rapidly progress the draft regulatory technical standards (RTS) to improve Delegated Regulation 2017/653 on key information documents (KIDs) for packaged retail and insurance-based investment products (PRIIPs) that were adopted by the European Supervisory Authorities in July 2020. ESMA considers this would help to bring UCITS within the scope of the PRIIPs Regulation. However, if past performance information will not become part of a revised PRIIPs KID, Mr Maijoor would no longer support bringing UCITS within the scope of the PRIIPs Regulation, because this would be detrimental to retail investors; and
  • in relation to the MiFID research unbundling rules, Mr Maijoor does not see how undoing these provisions can improve research availability for SMEs. He also notes their significant investor protection benefits.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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