We did it, so you don’t have to. Here is a compilation of the latest regulatory changes and market research in the funds and investment sector. Hopefully our summary is relevant to both managers, investors and institutions navigating the world of funds.
The pan-EU regulatory framework on cross-border fund distribution is progressing. The framework contains new fund marketing requirements, e.g. on notifications, facilities, marketing communication and new databases.
The Regulation (EU) 2019/1156 on facilitating cross-border distribution of collective investment undertakings (the Cross-border Regulation) sets requirements for fund marketing activities, including pre-marketing of EuVECA and EUSEF-funds, and is applicable to authorised AIF-managers, EuVECA/EuSEF managers and UCITS management companies. It also poses disclosing requirements on ESMA and national competent authorities, such as to publish national requirements on fund marketing and related regulatory fees. ESMA shall also keep updated on its website a central database on cross-border marketing of AIFs and UCITS.
The most of the requirements for fund managers applies as of 2nd of August 2021. ESMA shall comply with most requirements as of 2nd of February 2022.
The Directive (EU) 2019/1160 on cross-border fund distribution (the Cross-border Directive) sets requirements with regard to the marketing of UCITS and AIFs. For AIF-managers, the Cross-border Directive also regulates arrangements for pre-marketing.
The Cross-border Directive sets requirements for pre-marketing of AIFs, e.g. regarding notification to the competent authority of the AIFM’s home member state, what kind of documentation may be disclosed to potential investors and which entities that may perform pre-marketing.
The Cross-border Directive also set out conditions for cross-border marketing de-notification of AIFs and UCITS, facilities for cross-border marketing of UCITS and facilities for cross-border marketing of AIFs to non-professional investors.
The requirements should have been transposed into national law at the latest on 2nd of August 2021. The Swedish transposition is delayed and the amendments to the Swedish act on AIF-managers and UCITS management companies are proposed to enter into force on the 1st of March 2022.
Find more information on the Government Offices' website.
The Guidelines further details the marketing communications as set out in the Cross-border Regulation and applies to AIF-managers, EuVECA/EuSEF managers and UCITS management companies. The Guidelines establishes common principles on the identification of marketing communications, description of risks and rewards of purchasing interests in an AIF or UCITS, and fair, clear and not-misleading character of marketing communications.
The Guidelines shall apply as of 2nd of February 2022. However, the SFSA shall notify whether it complies or intends to comply with the Guidelines at the latest on 2nd of October 2021.
The European Commission has adopted amendments to PRIIPS KID technical standards and the transition period for UCITS has been prolonged.
The European Commission has adopted a Delegated Regulation amending Regulation (EU) 2017/653 on regulatory technical standards for PRIIPS KIDs.
The requirements are applicable to entities within the scope of PRIIPS, such as AIFs open for non-professional investors (including semi-professional investors), UCITS, insurance-based investment products and other investment vehicles where the amount repayable to the non-professional investor is subject to fluctuations because of exposure to reference values or to the performance of the underlying assets as well as their distributors.
The amendments include e.g. customized requirements for UCITS and AIFs, fund-of-funds, feeder funds as well as requirements with respect to methodologies underpinning the calculation of appropriate performance scenarios and a revised presentation of these scenarios as well as revised summary cost indicators and changes to the content and presentation of information on the costs of PRIIPs.
Further, the amendments avoid the co-existence of PRIIPS KID and UCITS KIID and prolongs the transition period of UCITS until 30 of June 2022.
The Delegated Regulation is undergoing scrutiny period before being published in the EU Official Journal. The Delegated Regulation shall apply as of 1st of July 2022.
Here you can find the Delegated Regulation on the European Commission’s website.
The EU Sustainable Finance Strategy has progressed during the summer. The European Commission has published (i) Regulations to ensure consistency with regards to sustainability risks and principal adverse impacts on sustainability factors in AIF and UCITS management; ii) the Delegated Regulation (EU) 2021/1253 introducing provisions on integrating sustainability preferences to the suitability assessment; and iii) answers to the European Supervisory Authorities’ questions on application of the Sustainable Finance Disclosure Regulation 2019/2088 (“SFDR”).
Furthermore, The Platform on Sustainable Finance has i) published draft reports on a social taxonomy and on an extended taxonomy to support economic transition; and ii) calls for feedback for technical screening criteria for the EU Taxonomy.
The Delegated Regulation (EU) 231/2013 with regard to AIF-managers general operating conditions and Directive 2010/43/EU as regards UCITS organisational requirements has been amended.
The amendments set new requirements for authorised AIF-managers and UCITS management companies with respect e.g. to handling sustainability risks when performing due diligence on investments in the risk management, organizational requirements and the senior management’s responsibilities.
The new requirements shall apply as of 1st of August 2022.
The European Commission has published the Delegated Regulation 2021/1253 that amends the existing MiFID 2 Delegated Regulation (EU) 2017/565 and introduces provisions on integrating sustainability factors, risk and preferences into certain organizational requirements. This means, e.g., requirements for investment service providers (investment firms, AIF-managers, UCITS management companies, credit institutions where MiFID portfolio management and/or investment advice is included in their license) to identify the client’s sustainability preferences when performing suitability assessments. An investment service provider shall obtain necessary information from the client whether and if so, to what extent, such financial instruments shall be integrated into client’s investment that includes a minimum proportion of sustainable investments or are considering principal adverse impacts on sustainability factors. Sustainable investments should be interpreted as defined in the Taxonomy Regulation or the SFDR.
The Delegated Regulation shall apply from 2nd of August 2022.
The European Supervisory Authorities (EBA, ESMA and EIOPA) has submitted questions to the European Commission regarding the interpretation of SFDR. ESMA has published the answers on 14th of July 2021. According to the answers, SFDR shall apply by analogy to ”sub-threshold” or “registered” EU AIF-managers and “third country” AIF-managers. The answers clarify that registered AIF-managers referred to in Article 3(2) AIFMD (sw. registrerad AIF enligt 2 kap. 1 § LAIF) need to comply with some requirements of the SFDR. The answers also clarify requirements for article 8 “light green” and article 9 “dark green” funds.
Find more information on ESMA's website.
The European Commission intends to postpone the application of the Regulatory Technical Standards under the SFDR from the 1st of January 2022 to 1st of July 2022.
Find more information on the SFSA's website and the European Commission's letter to the European Parliament and to the Council.
The Platform on Sustainable Finance has published two draft reports, with the aim of extending the scope of the Taxonomy Regulation.
The draft report on social taxonomy suggests the structure for a social taxonomy, including e.g. approaches to define “substantial social contribution”, and an assessment on the relationship between the social and environmental taxonomies and the regulatory framework. The draft report on taxonomy extension contains a proposition to include, within the scope of the Taxonomy Regulation, activities that are significantly harmful to environmental sustainability, and those that have no significant impact on it. The framework should provide companies with a range of options for accessing finance for their transition plans in the context of an extended taxonomy.
The Platform on Sustainable Finance will, after considering stakeholder input, submit final reports with their advice to the European Commission in autumn 2021.
Find more information on the European Commission's website.
The Platform on Sustainable Finance, an advisory board to the European Commission, has presented a draft report focusing on the four non-climate environmental objectives in Article 3 (3-6) of the Regulation (EU) 2020/852 (“Taxonomy Regulation”); i.e. water, circular economy, pollution prevention and biodiversity/ecosystems. A small number of economic activities and corresponding draft recommendations for technical screening criteria related to the climate mitigation and adaptation objectives has also been included. The draft report presents the background and methodology used to develop the criteria, the questions on which stakeholder feedback is sought, and the draft criteria themselves. The Platform on Sustainable Finance now seeks feedback on the proposed economic activities.
The technical screening criteria must be considered in the assessment of whether an economic activity qualifies as environmentally sustainable for the purposes of establishing the degree to which an investment is environmentally sustainable. Accordingly, the technical screening criteria has effect on AIF-managers and UCITS management companies.
The European Commission expects the technical screening criteria’s to be proposed in a delegated act to the Taxonomy Regulation. The act is expected to be submitted in the first half of 2022.
Find the draft on the European Commission's website.
Swedish Private Equity & Venture Capital Association (SVCA) published a report on the environmental, social and governance (ESG) status of the Swedish private equity industry. The report encompasses more than hundred portfolio companies based in Sweden. The report concluded that portfolio companies in private equity work efficiently with anti-corruption and performed better in terms of employment compared to public listed companies.
Find the report on SVCA's website.
The European Commission has presented an extensive package of legislative proposals to strengthen EU’s anti-money laundering and countering terrorism financing (AML/CFT) rules. The package contains among other (i) a regulation establishing a new EU AML/CFT Authority, (ii) a regulation on AML/CFT (AMLR), (iii) a new directive on AML/CFT (AMLD).
The new Anti-Money Laundering Authority (AMLA) will be the central authority, coordinating national authorities to ensure that the private sector correctly and consistently applies EU rules. The AMLA should also have the possibility to directly supervise some of the financial institutions that operate in a large number of member states or require immediate action to address imminent risks. The European Commission expects AMLA to be operational in 2024, with the proposed legislative package to become applicable around the same time.
The AMLA, together with the direct applicable AMLR, will create a Single EU Rulebook and harmonize the AML/CFT rules across the EU. The amended requirements will consider e.g., outsourcing, nominee-structures, customer due diligence, AML compliance function, integrity of employees and the risk assessment.
The package will apply to all obliged entities under AML/CTF framework, including AIF and UCITS funds and fund managers.
Find more information about the extensive AML/CFT package on the European Commission's website.
The EBA has published a public consultation on new Guidelines (EBA/CP/2021/31) on the role, tasks and responsibilities of anti-money laundering and countering the financing of terrorism (AML/CFT) compliance officers. The Guidelines specify e.g. the tasks and role of the member of the management board who is in charge of AML/CFT overall and of the AML/CFT compliance officer and which information should be included in the activity report of the AML/CFT compliance officer to the management body. The Guidelines will apply to all financial sector operators that are within the scope of the AML Directive (EU) 2015/849.
The deadline for submission of feedback ends on 2nd of November 2021.
Here you can find the Guidelines on EBA´s website.
Would you like more information? Please, contact us!
Wigge & Partners Funds & Investments Team
Frida Sander, Partner
Katja Flittner, Senior Associate
Kristina Dunér, Associate
The information provided in this newsletter is for general information only and does not constitute any legal advice.
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