ESMA Highlights Priorities In AIFMD Review
The European Securities and Markets Authority (ESMA), the EU’s securities markets regulator, has written to the European Commission (Commission) highlighting areas to consider during the forthcoming review of the Alternative Investment Fund Managers Directive (AIFMD).
AIFMD has provided a successful framework for alternative funds in Europe since 2011. However, ESMA and national competent authorities have through the years gathered experience with the framework and have identified areas that could be improved in the legislation to enhance the supervision of alternative fund managers in Europe. ESMA has also learned from its role in the reporting framework under AIFMD where improvements could be made.
ESMA’s letter includes recommendations for changes in 19 areas including harmonising the AIFMD and UCITS regimes; delegation and substance; liquidity management tools; leverage; the AIFMD reporting regime and data use; and the harmonisation of supervision of cross-border entities.
#ESMA has made recommendations in a letter sent to @EU_Finance highlighting areas to consider during the forthcoming review of the Alternative Investment Fund Managers Directive (#AIFMD).#ESMA's letter includes recommendations for changes in 19 areas. https://t.co/MwOXBh2Fy8 pic.twitter.com/gWakq2gfug
— ESMA – EU Securities Markets Regulator 🇪🇺 (@ESMAComms) August 19, 2020
The review of AIFMD provides the EU with an opportunity to apply these lessons learned. Policy enhancements are proposed in Annex I to the letter and reporting recommendations are made in Annex II. Many of the recommendations made also require consideration of changes to the UCITS legislative framework.
ESMA encourages the Commission to support the areas identified in the letter in order to improve the effectiveness and soundness of the AIFMD.
one to watch @ESMAComms letter to #EUCommission – greater harmonisation on AIFMs/UCITS management companies providing MiFID services with #MiFIDII – as we wrote in back in 2018 – https://t.co/JZrxeD85Q3 this could have issues for #delegation post #brexit https://t.co/NRBlbnxE4Y
— Rebecca Healey (@_RebeccaHealey) August 19, 2020
This has got everything
More prescriptive delegation rules✅
Annex 4 reporting for UCITS✅
Loan Origination regime✅
Reverse solicitation rules✅
Tighter third country rules ✅
— Sean Tuffy (@SMTuffy) August 19, 2020
Changes in delegation could lead to increased costs for investors and retaliation from other domiciles.
EU funds routinely delegate portfolio management to hubs including New York, Tokyo and Hong Kong.
Most funds are managed cross-border using passporting rights.
KPMG is researching how the alternative fund regulation has worked in practice.
The majority of hedge funds are set up in Bermuda and the Cayman Islands