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ESMA consults on implementing technical standards to facilitate cross-border distribution of funds

  • United Kingdom
  • Financial services and markets regulation
  • Financial services

17-04-2020

Our client briefing, “The final AIFMD cross-border fund distribution package: mapping the changes” published on 22 July 2019, provided a summary of the main changes introduced by Regulation (EU) 2019/1156 on facilitating cross-border distribution of collective investment undertakings (the Regulation). The Regulation, along with the directive on cross-border distribution of collective investment undertakings, facilitates the cross-border marketing of UCITS and AIFs, including EuSEFs and EuVECAs, throughout the EU by removing existing barriers and enhancing the protection of investors.

In this briefing, we look at the ESMA consultation paper on cross-border distribution of funds published on 31 March 2020, which represents the first stage in the development of draft implementing technical standards (ITS) and sets out the standard forms, templates and procedures that national competent authorities (NCAs) should follow to be compliant with the Regulation.

Website publication of marketing requirements

Article 5(3) of the Regulation provides that ESMA will draft ITS to determine standard forms, templates and procedures for the publication and notifications that NCAs are required to make in relation to national provisions concerning marketing requirements applicable within their jurisdiction:

  • NCAs must publish and keep up-to-date on their websites the applicable national laws, regulations and administrative provisions governing the marketing of investment funds, which should include the specific requirements for the marketing of investment funds applicable within each Member State in relation to both domestic and cross-border marketing 
  • NCAs can also make reference to other domestic law applicable when marketing to retail investors (e.g. consumer protection laws) to enhance transparency and help stakeholders understand the extent of the requirements relating to the marketing of investment funds in each Member State
  • NCA websites must publish a concise and clear summary of the applicable marketing requirements including reference to where more detailed information is available (e.g. hyperlinks to the full version of any relevant law provisions, decree, circular, guidance, etc…).

Website publication of regulatory fees and charges

Article 10(3) of the Regulation provides that ESMA will draft ITS to determine standard forms, templates and procedures for the publication and notification that NCAs are required to make in relation to national provisions concerning fees and charges levied by them in relation to the activities of AIFMs, EuVECA managers, EuSEF managers and UCITS management companies:

  • NCAs must publish and keep up-to-date on their websites information listing the fees or charges in relation to the cross-border activities of AIFMs, EuVECA managers, EuSEF managers and UCITS management companies, or, where applicable, the calculation methodologies for those fees or charges
  • All existing regulatory fees and charges levied by NCAs in relation to any cross-border activities within their jurisdiction, whether inwards or outwards, must be stated.  If no fees or charges are levied in relation to certain activities, this should be made clear
  • The publication may be in tabular form with explanatory text providing, at a minimum, the following information:
  • a detailed breakdown of regulatory fees and charges, including the amount to be paid as either a fixed fee or a percentage (and the basis for calculation)
  • the type of activity to which the fee relates (e.g. marketing by a domestic manager of a fund established in another Member State to domestic investors, etc…)
  • the legal basis for levying the fee
  • the periodicity of the fee, as applicable
  • the person or entity who is liable for paying the fee
  • All the details of the fees and charges levied for cross-border activities must be stated in a clear and comprehensive manner.  NCAs should add some explanatory text if the structure of fees and charges cannot be summarised in a table.

Central database listing funds marketed on a cross-border basis

Article 13(3) of the Regulation provides that ESMA will draft ITS to specify:

  • The information to be communicated, as well as the standard forms, templates and procedures for communication of the information by the NCAs necessary for the creation and maintenance of the central database on cross-border marketing of AIFs and UCITS referred to in Article 12 of the Regulation
  • The technical arrangements necessary for the functioning of the notification portal into which each NCA shall upload all documents necessary for the creation and maintenance of such central database
  • ESMA will publish on its website a central database listing all AIFs and UCITS, their AIFM, EuSEF manager, EuVECA manager, or UCITS management company, and the Member States in which they are marketed
  • NCAs must communicate to ESMA information regarding any notification, notification letter or information referred to in Article 93(1) and Article 93a(2) of the UCITS Directive and in Article 31(2), Article 33(2) and Article 32a(2) of the AIFMD, and any change to that information, if such changes would result in a change to the information in that central database.

Timeline and next steps

The deadline for comments on the consultation paper is 30 June 2020.  ESMA will consider the feedback by 30 June 2020 with a view to finalising the implementing technical standards for submission to the European Commission and publishing a final report by 2 February 2021.

The new provisions will therefore most likely come into force after the end of the UK’s transitional period as it exits the EU and will not automatically become part of UK law under the terms of the Withdrawal Agreement.  It is expected, however, that the UK government will replicate this particular EU law in UK legislation and regulation.

How Eversheds Sutherland can help

The Eversheds Sutherland Financial Services team acts as both a trusted legal adviser and strategic business partner. Our international network of lawyers and former regulators counsel leading corporations, funds and financial institutions on the full range of transactions, regulatory and compliance issues.

For guidance on any of the points raised in this briefing, please get in touch with Thomas Piticchio or one of the team members below.