European Parliament to Consider Proposed Regulation and Directive on Cross-Border Distribution of Collective Investment Funds


On January 24, the European Parliament updated the following procedure files:

  • The procedure file for the proposal for a Directive on the cross-border distribution of collective investment funds (2018/0041(COD)).
  • The procedure file for the proposal for a Regulation on facilitating cross-border distribution of collective investment funds (2018/0045(COD)).

The updated procedure files specify that the Parliament may consider the proposals at its plenary session between April 15-18.

The Parliament’s Economic and Monetary Affairs Committee (“ECON“) voted to adopt draft reports on the proposals on December 4, 2018. It subsequently published the reports on December 7, 2018.

The proposed Regulation envisages a harmonized framework regarding features of the cross-border distribution of funds, in respect of marketing communications and member states’ marketing requirements. The proposed Directive contains alterations to the UCITS Directive (2009/65/EC) and the Alternative Investment Fund Managers Directive (2011/61/EU) (“AIFMD“) relating to pre-marketing and the discontinuation of marketing among other things.

The procedures files can be found here and here. The UCITS Directive can found here and the AIFMD can be found here.

ESMA Statements on ICO Risks for Firms and Investors


Following the European Securities and Markets Authority‘s (“ESMA“) observation in rapid-growth initial coin offerings (“ICOs“)s, on November 13, 2017, ESMA issued two statements on ICOs.

ESMA notes in a statement for firms that where ICOs qualify as financial instruments, it is likely that the firms involved in ICOs will be conducting regulated investment activities, whereby they need to comply with the relevant legislation, including:

  • Markets in Financial Instruments Directive (2004/39/EC) (“MiFID“). Where the coin or token qualifies as a financial instrument, the process by which a coin or token is created, distributed or traded is likely to involve some MiFID activities and services, such as placing, dealing in or advising on financial instruments.
  • Alternative Investment Fund Managers Directive (2011/61/EU) (“AIFMD“). An ICO scheme could qualify as an alternative investment fund (“AIF“), to the extent that it is used to raise capital from a number of investors, with a view to investing it in accordance with a defined investment policy.
  • Prospectus Directive (2003/71/EC) requires publication of a prospectus before the offer of transferable securities to the public or the admission to trading of such securities on a regulated market situated or operating within a member state. Also, the Prospectus Directive specifies that the prospectus should contain the necessary information that is material to an investor for making an informed assessment of the facts and that the information shall be presented in an easily analyzable and comprehensible form.
  • Fourth Money Laundering Directive ((EU) 2015/849) (“MLD4“).

ESMA stresses that any failure by firms to comply with the applicable rules will constitute a breach. Firms involved in ICOs must give due consideration as to whether their activities constitute regulated activities.

A statement for investors by ESMA also alerts them of the high risk of losing all of their invested capital as ICOs are highly speculative investments. ICOs are vulnerable to the risk of fraud or money laundering.

Depending on how they are structured, ICOs may fall outside of the scope of EU law and regulations, in which case investors cannot benefit from the protection that these laws and regulations provide. Also, the price of the coin or token is typically extremely volatile, and investors may not be able to redeem them for a prolonged period.

ESMA Call for Evidence on AIFMD Passport and Third Country AIFMs

On November 7, the European Securities and Markets Authority (ESMA) published a call for evidence on the EU passport under the Alternative Investment Fund Managers Directive (AIFMD) and third country Alternative Investment Fund Managers (AIFMs).

Under the AIFMD, non-EU AIFMs and non-EU Alternative Investment Funds (AIFs) managed by EU AIFMs are subject to the national private placement regime of each of the member states where the AIFs are marketed or managed. However, the AIFMD makes provision for the passport to be potentially extended in the future.

Responses to the call for evidence from the EU and the non-EU stakeholders (as well as ongoing input ESMA is receiving from national competent authorities) will help ESMA develop the opinion and advice it is required to deliver to the European Commission.

The deadline for responses to the call for evidence is January 8, 2015.  ESMA will consider the feedback it receives to the call for evidence in the first quarter of 2015.  It is required to deliver the opinion and the advice to the Commission by July 22, 2015.  Call for Evidence.

ESMA Chair Speech on Systemic Risks and Current Policies in EU Fund Industry

On June 10, the Chair of the European Securities Markets Authority (ESMA) gave a speech on systemic risks and current policies in the EU fund industry, which considers whether asset managers can be too big to fail.

Among other topics, the speech outlined ESMA’s priorities on the Alternative Investment Fund Managers Directive (AIFMD), bearing in mind that the transitional period for full implementation comes to an end in July 2014. ESMA is looking to develop its existing Q&A document, and invites comments on any further topics stakeholders would like to see included in it.  Speech.

ESMA Publishes Speech on AIFMD and ETF Initiatives

On November 5, ESMA published a speech given by the Chair of ESMA, Steven Maijoor, at the European Fund and Asset Management Association investment management forum. The speech states that:

  • ESMA has finished its work on memoranda of understanding which relate to the AIFMD, although negotiations continue with several non-EU authorities, including those in South Africa, Russia and China.
  • ESMA is due to start drafting a report on the extension of the AIFMD passport to non-EU AIFs and AIF managers.

ESMA is examining why retail exposure to exchange traded funds (ETFs) is relatively low.  Speech.

FCA Updates AIFMD Information for Depositories

On September 23, the FCA provided updated information on its dedicated AIFMD webpage for firms applying for authorization (or variation of permission) to act as a depository or trustee of an alternative investment fund.

The guidance highlights rule 3.11.26 in the FCA’s Investment Funds sourcebook (FUND), which states that a depository cannot delegate its functions to a third party (except, in certain conditions, for the safekeeping of assets), which the FCA considers to be any party that is not part of the same legal entity as the applicant.  Webpage.

FCA and SEC Publish a MoU on Investment Fund Supervision

The FCA and the SEC published a memorandum of understanding (MoU) on July 19 on the supervision of the asset management industry, which came into force on July 22.

The accompanying press release states that the MoUs were concluded with 25 European Union (EU) and 3 European Economic Area (EEA) member-state regulators.  They provide a framework for supervisory cooperation and exchange of information between the SEC and the EU/EEA member state national regulators in the asset management industry, as part of a long-term strategy to improve the oversight of entities in the industry that operate across national borders.

In May 2013, the European Securities and Markets Authority (ESMA) announced that it had approved cooperation agreements between EU regulators with responsibility for supervising Alternative Investment Funds (AIFs) and 34 of their global counterparts, including the SEC.  These agreements are key in allowing the national regulators to monitor the way non-EU AIFMs comply with the AIFMD.  Memorandum of UnderstandingPress Release.

Draft Alternative Investment Fund Manages Regulations 2013 Published

On June 12, the Draft Investment Fund Managers Regulations 2013, together with an explanatory memorandum, were published. The Regulations come into force on July 22.  

The Regulations implement the majority of the Alternative Investment Fund Managers Directive (2011/61/EU) (AIFMD).  The AIFMD aims to introduce a harmonised regulatory framework across the EU for EU-established managers (AIFMs) of alternative investment funds (AIFs).

The Regulations implement the AIFMD by amending the Financial Services and Markets Act 2000 (FSMA) and other relevant legislation (in the schedules to the Regulations) so that managing an AIF, which is required to be authorised under the AIFMD, is regulated under the FSMA.  Stand-alone provisions in the main body of the Regulations (and further amendments in the schedules) also apply requirements of the AIFMD both to persons regulated under that regime and to other persons who are not required to be authorised under the AIFMD but whom the AIFMD imposes requirements on.

The UK Government will review the Regulations and publish a report setting out the conclusions of the review by July 22.  Draft Investment Fund Managers Regulations 2013Explanatory Memorandum.

Germany Toughens its Take on AIFMD

On July 20, the Federal Ministry of Finance and the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) published its draft for the implementation of the Alternative Investment Fund Managers Directive (AIFMD).

Highlights of the new ‘Capital Investment Code’ (Kapitalanlagegesetzbuch) include:

Distinction between AIF whose shares/units may be held by professional investors only (so called ‘specialised-AIF’) and AIFs whose shares may be held by non-professional investors.

  • Real estate (RE) and infrastructure funds can only be established as closed-ended funds. Existing open-ended RE/infrastructure funds would benefit from a grandfathering rule and could continue to exist in the same form as before.
  • Non-professional investors will only be permitted to invest in certain fund types, e.g. they are prohibited from directly investing into certain fund types such as hedge funds or private equity funds. Investment into these vehicles will only be allowed via fund of funds or master-feeder structures.
  • Private placements for third country funds should be abolished. Third country funds would only be allowed to market their funds in Germany if certain (extensive) requirements are met.

Interested parties have until August 17 to comment on the 500-page document.

ESMA Announces Open Hearing on AIFMD

On July 23, ESMA announced that an open hearing will take place on the draft Guidelines on sound remuneration policies under the Alternative Investment Fund Managers Directive (“AIFMD”). The draft Guidelines form the consultation process and were published on June 28. The hearing will cover the scope of the proposed Guidelines. Agenda.

The hearing will take place at ESMA’s offices in Paris on September 25 and is open to all members of the public.