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9.11.2023
PR_COD_1consamCom
PROVISIONAL AGREEMENT RESULTING FROM INTERINSTITUTIONAL NEGOTIATIONS
Symbols for procedures
Subject: Proposal for a directive of the European Parliament and of the Council Amending Directives 2011/61/EU and 2009/65/EC as regards delegation arrangements, liquidity risk management, supervisory reporting, provision of depositary and custody services and loan origination by alternative investment funds
* Consultation procedure
*** Consent procedure
***I Ordinary legislative procedure (first reading)
***II Ordinary legislative procedure (second reading)
***III Ordinary legislative procedure (third reading)
(The type of procedure depends on the legal basis proposed by the draft act.)
Amendments to a draft act
Amendments by Parliament set out in two columns
Deletions are indicated in bold italics in the left-hand column. Replacements are indicated in bold italics in both columns. New text is indicated in bold italics in the right-hand column.
The first and second lines of the header of each amendment identify the relevant part of the draft act under consideration. If an amendment pertains to an existing act that the draft act is seeking to amend, the amendment heading includes a third line identifying the existing act and a fourth line identifying the provision in that act that Parliament wishes to amend.
Amendments by Parliament in the form of a consolidated text
New text is highlighted in bold italics. Deletions are indicated using either the ▌symbol or strikeout. Replacements are indicated by highlighting the new text in bold italics and by deleting or striking out the text that has been replaced.
By way of exception, purely technical changes made by the drafting departments in preparing the final text are not highlighted.
DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION
on the proposal for a directive of the European Parliament and of the Council amending Directives 2011/61/EU and 2009/65/EC as regards delegation arrangements, liquidity risk management, supervisory reporting, provision of depositary and custody services and loan origination by alternative investment funds
(COM(2021)0721 – C90439/2021 – 2021/0376(COD))
The interinstitutional negotiations on the aforementioned proposal for a directive have led to a compromise. In accordance with Rule 74(4) of the Rules of Procedure, the provisional agreement, reproduced below, is submitted as a whole to the Committee on Economic and Monetary Affairs for decision by way of a single vote.
– having regard to the Commission proposal to Parliament and the Council (COM(2021)0721),
PE-CONS …/… – 2021/0376(COD)
– having regard to Article 294(2) and Article 53(1) of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C90439/2021),
DIRECTIVE (EU) 2023/… OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
– having regard to the opinion of the Committee on Legal Affairs on the use of delegated acts,
of …
– having regard to Article 294(3) of the Treaty on the Functioning of the European Union,
– having regard to the opinion of the European Central Bank of 3 October 2022,
– having regard to Rules 59 and 41 of its Rules of Procedure,
– having regard to the report of the Committee on Economic and Monetary Affairs (A9-0020/2023),
1. Adopts its position at first reading hereinafter set out;
2. Approves its statement annexed to this resolution;
3. Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;
4. Instructs its President to forward its position to the Council, the Commission and the national parliaments.
Amendment 1
AMENDMENTS BY THE EUROPEAN PARLIAMENT*
to the Commission proposal
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DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL
amending Directives 2011/61/EU and 2009/65/EC as regards delegation arrangements, liquidity risk management, supervisory reporting, provision of depositary and custody services and loan origination by alternative investment funds
Whereas:
(1) In accordance with Article 69 of Directive 2011/61/EU of the European Parliament and of the Council, the Commission has reviewed the application and the scope of that Directive and concluded that the objectives of integrating the Union market for alternative investment funds (‘AIF’), ensuring a high level of investor protection and protecting financial stability have mostly been met. However, in that review the Commission also concluded that there is a need to harmonise rules for the managers of alternative investment funds (‘AIFMs’) managing ▌ AIFs which originateloan-originating loans,AIFs, to clarify standards applicable to AIFMs that delegate their functions to third parties, to ensure equal treatment of custodians, to improve cross-border access to depositary services, to optimise supervisory data collection and to facilitate the use of liquidity management tools (LMTs) across the Union. Therefore, amendments are necessary to address those regulatory gaps to improve the functioning of Directive 2011/61/EU.
(2) A robust delegation regime, an equal treatment of custodians, coherence of supervisory reporting, in particularreporting through the removal of duplications and redundant requirements,requirements and a harmonised approach to the use of LMTs are equally necessary for the management of undertakings for collective investment in transferable securities (‘UCITS’). Therefore, it is appropriate to also amend Directive 2009/65/EC of the European Parliament and of the Council, which lays down rules regarding the authorisation and operation of UCITS and their management companies,UCITS, in the areas of delegation, asset safekeeping, supervisory reporting and liquidity risk management.
(2a) The alternative asset industry hascollectively reachedinvests over EUR 6,81,5 trillion in net asset value (NAV) at the end ofEurope. 2022.Union Professionalinstitutional investors account for around 86 % of the NAV of AIFs managed or marketed by authorisedinvest AIFMsover andEUR sub-threshold370 AIFMsbillion in thealternative Union.assets managers. The Union alternative asset industry provides over EUR 250 billion to European businesses in private credit,credit and European investors are responsible for 30 % of global capital allocated to the whole industry. The size of the aggregated Union market for AIFs has continued to expand, increasing by over 15 % between 2020 and 2022, and AIFs accounted for one-third of the EEA30 fund industry at the end of 2020. Nonethelessbut there is still room for the industry to grow by providing European institutional investors with greater choice and enhancing the competitiveness of the Union’sEurope’s capital markets.
(3) To increase the efficiency of AIFM activities, the list of ▌ ancillary services set out in Article 6(4) of Directive 2011/61/EU should be extended to include the tasks carried out by an administrator in accordance with Regulation (EU) 2016/1011 of the European Parliament and of the Council (‘administration of benchmarks’) and credit servicing governed by Directive (EU) 2021/2167 of the European Parliament and of the Council. For the sake of completeness, it should also be clarified that, when undertaking the tasks carried out by an administrator of benchmarks or when providing credit servicing activities, the AIFM should be subject to the abovementioned acts.
(2b) The size of EU AIFs has continued to expand, increasing by 8 % between 2019 and 2022, and AIFs accounted for one-third of the EEA30 fund industry at the end of 2020. Professional investors own most of the shares of AIFs, yet retail investor share is significant at 14 % of the net asset value (NAV).
(3a) In order to enhance legal certainty, it should be clarified that the management of AIFs can also comprise the activities of originating loans on behalf of an AIF and servicing securitisation special purpose entities.
(3) To increase the efficiency of AIFM activities, the list of authorised ancillary services set out in Article 6(4) of Directive 2011/61/EU should be extended to include benchmark administration governed by Regulation (EU) 2016/1011 of the European Parliament and of the Council and credit servicing governed by Directive 2021/…./EU of the European Parliament and of the Council.
(3b) In order to enhance legal certainty for AIFMs and UCITS management companies regarding the services they can provide to third parties, it should be clarified that AIFMs and UCITS management companies are allowed to perform for the benefit of third parties the same functions and activities that they already perform in relation to the AIFs and UCITS they manage, provided that any potential conflict of interest created by the provision of that function or activity to other parties is appropriately managed. Such functions and activities include, for example, corporate services such as human resources and information technology (IT), as well as IT services for portfolio and risk management. That possibility would also support the international competitiveness of EU AIFMs and UCITS management companies by enabling economies of scale and would help diversify revenue sources.
(3a) In order to enhance legal certainty, it should be clarified that the management of AIFs also comprises the activities of originating loans on behalf of an AIF and servicing securitisation special purpose vehicles referred to in points 3 and 4 ofAnnex I of Directive 2011/61/EU.
(4) To ensure legal certaintycertainly it should be clarified that AIFMs providing ancillary services involving financial instruments are subject to the rules laid down in Directive 2014/65/EU of the European Parliament and of the Council. With regard to other assets, which are not financial instruments, AIFMs should be required to comply with the requirements of Directive 2011/61/EU.
(5) To ensure the uniform application of the requirements laid down in Articles 7 and 8 of Directive 2011/61/EU for the necessary human resources of AIFMs, it should be clarified that at the time of application for an authorisation, an AIFMAIFMs should provide the competent authorities with information about the human and technical resources that the AIFM will employ to carry out its functions and, where applicable, to supervise its delegates. At least two natural personssenior whomanagers areshould onbe aemployed full-timeor basisconduct eitherthe employedbusiness byof the AIFM oron executivea membersfull-time or membersa offull-time theequivalent governingbasis bodyand ofbe resident in the AIFMUnion. andTo whoensure arethat domiciled,AIFMs incomply with the senserequirements ofregarding havingconflict theirof habitualinterest residence,and acting in the Union.best Regardlessinterest of this statutorythe minimum,AIFs moreand resourcestheir mayinvestors, beAIFMs necessaryshould dependingensure onthat theat sizeleast andone complexitymember of thetheir AIF.governing body is a non-executive director.
(5a) Some Member States have requirements in national law or industry standards concerning the degree of independence of one or more members of the governing body of the AIFM or of the UCITS management company or investment company. It is appropriate to encourage AIFMs managing AIFs marketed to retail investors and UCITS management companies and investment companies to appoint as a member of their governing body at least one independent or non-executive director, where possible under national law or under the industry standards of the home Member State of the AIFM, management company or investment company, in order to protect the interests of the AIFs and UCITS and of the investors in the AIFs that the AIFM manages or in the UCITS. In making that appointment, the AIFM, management company or investment company is to ensure that that director is independent in character and in judgment and has sufficient expertise and experience to be able to assess whether the AIFM, management company or investment company is managing the AIF or UCITS in the best interest of investors.
6. ▌
(7a) The marketing of AIFs is not always conducted by the AIFM directly but by one or several distributors either on behalf of the AIFM or on their own behalf. In particular, there could be cases where an independent financial advisor markets an AIF without the AIFM’s knowledge. Most fund distributors are subject to regulatory requirements pursuant to Directive 2014/65/EU or Directive 2016/97/EU of the European Parliament and of the Council, which define the scope and extent of their responsibilities towards their own clients. Directive 2011/61/EU should therefore acknowledge the diversity of distribution arrangements and distinguish between arrangements whereby a distributor acts on behalf of the AIFM, which should be considered to be a delegation arrangement, and arrangements whereby a distributor acts on its own behalf when it markets the AIF under Directive 2014/65/EU or through life-insurance based investment products in accordance with Directive 2016/97/EU, in which case the provisions of Directive 2011/61/EU regarding delegation should not apply, irrespective of any distribution agreement between the AIFM and the distributor.
7. ▌
(8) Delegation can allow for the efficient management of investment portfolios and for sourcing the necessary expertise in a particular geographic market or asset class. However, it is important that supervisors have updated information on the main elements of delegation arrangements. To develop a reliable overview of delegation activities in the Union, AIFMs should regularly provide competent authorities with information on delegation arrangements which involve the delegation of collective or discretionary portfolio management or risk management functions. AIFMs should therefore report information on the delegates, the list and description of the delegated activities, the amount and percentage of the assets of the managed AIFs that are subject to delegation arrangements concerning the portfolio management function, a description of how the AIFM oversees, monitors and controls the delegate, information on the sub-delegation arrangements and the date of commencement and expiry of the delegation and sub-delegation arrangements. For the sake of clarity, it should be specified that the data collected on the amount and percentage of the assets of the managed AIFs that are subject to delegation arrangements concerning the portfolio management functions is for the purposes of providing a greater overview of the operation of delegation, and is not on its own an evidential indicator for determining the adequacy of substance or risk management, or the effectiveness of oversight or control arrangements at the level of the manager. Such information should be communicated to the competent authorities as part of the supervisory reporting governed by Article 24 of Directive 2011/61/EU.
(7a) The marketing of AIFs is not always conducted by the AIFM directly but by one or several distributors either on behalf of the AIFM or on their own behalf. There could also be cases where an independent financial advisor markets a fund without the AIFM’s knowledge. Most fund distributors are subject to regulatory requirements pursuant to Directives 2014/65/EU or 2016/97/EU, which define the scope and extent of their responsibilities towards their own clients. Directive 2011/61/EU should therefore acknowledge the diversity of distribution arrangements and distinguish between arrangements whereby a distributor operates on behalf of the AIFM, which should be considered to be a delegation arrangement, and arrangements whereby a distributor acts on its own behalf, in which case the provisions of that Directive regarding delegation should not apply.
(8a)(8) To enhance the uniform application of Directive 2011/61/EU it should be clarified that the delegation rules laid down in Article 20 apply to all functions listed in Annex I to that Directive and to the ancillary services referred to in Article 6(4) of that Directive.
(9) Investment funds providing loans can be a source of alternative financing for the real economy. Indeed, such funds can provide critical funding for Union small and medium-sized enterprises for which traditional lending sources are more difficult to access. Moreover, it should be recognised that the existence of sources of private credit promotes investor confidence in the Union market. However, diverging national regulatory approaches hinder the establishment of an efficient internal market for loan origination byloan-originating AIFs by promoting regulatory arbitrage and varying levels of investor protection. Directive 2011/61/EU should recognise the right of AIFs to originate loans. Common rules should also be laid down to establish an efficient internal market for loan origination byloan-originating AIFs, to ensure a uniform level of investor protection in the Union, to make it possible for AIFs to develop their activities by originating loans in all Member States of the Union and to facilitate the access to finance by EU companies, a key objective of the Capital Markets Union (‘CMU’). However, given the fast-growing private credit market, it is necessary to address the potential micro-prudentialmicro risks and macro-prudentialmacro prudential risks that loan origination byoriginating AIFs could pose and spread to the broader financial system. The rules applicable to AIFMs managing AIFs which originateloan-originating loansfunds should be harmonised in order to improve risk management across the financial market and increase transparency for investors. For the sake of clarity, the provisions laid down in this Directive that are applicable to AIFMs that manage AIFs which originate loans should not prevent Member States from laying down national product frameworks that define certain categories of AIFs with more restrictive rules.
(9-a) Loan origination is not always conducted directly by the AIF. There can be cases where an AIF grants a loan indirectly through a third party or special purpose vehicle that grants the loan for or on behalf of the AIF, or for or on behalf of the AIFM in respect of the AIF, prior to gaining exposure to the loan. In order to avoid circumvention of Directive 2011/61/EU, where that AIF or AIFM is involved in structuring the loan, or defining or pre-agreeing its characteristics, such cases should be considered as loan originating activities and should be subject to that Directive.
(10) To support the professional management of AIFs and to mitigate risks to the financial stability, AIFMs that manage AIFs that engage in lending activities, including purchasing loans on the secondary market, should have effective policies, procedures and processes for the granting of loans, assessing credit risk and administering and monitoring its credit portfolio, which should be reviewed periodically.
(9a) AIFs granting loans to consumers are subject to the requirements of other instruments of Union law applicable to consumer lending, including Directive (EU) 2021/2167 on credit servicing and credit purchasing and Directive 2008/48/EC of the European Parliament and of the Council on credit agreements for consumers. Those instruments of Union law lay down the basic protections of borrowers at Union level. However, and for overriding reasons of public interest, Member States should be able to prohibit loan origination by AIFs to consumers in their territory.
(10) To support the professional management of AIFs and to mitigate risks to the financial stability, AIFMs that manage AIFs that engage in loan origination, regardless of whether those AIFs meet the definition of loan-originating AIFs, should have effective policies, procedures and processes for the granting of loans. They should also implement effective policies, procedures and processes for assessing credit risk and administering and monitoring the credit portfolio where AIFs that they manage engage in loan origination, including when those AIFs gain exposure to loans through third parties. Those policies, procedures and processes should be proportionate to the extent of loan origination and should be reviewed periodically.
(11) To contain the risk of interconnectedness among loan-originating AIFs and other financial market participants, AIFMs of those AIFs should, where a borrower is a financial institution, be required to diversify their risk and subject their exposure to specific limits.
(11a) To ensure the stability and integrity of the financial system and to introduce proportionate safeguards, loan-originating AIFs should be subject to a leverage limit that should vary depending on whether they belong to the open-ended or closed-ended type, as the stability risk is higher for open-ended AIFs, which can be subject to high redemptions. In line with the objective of preserving financial stability, the leverage limit should not depend on whether a loan-originating AIF is marketed to retail investors or only to professional investors. The commitment approach provides a comprehensive and robust framework for calculating leverage in accordance with international standards, and in particular to take into account the synthetic leverage created by derivatives. Those limits should not prevent the competent authorities of the AIFM’s home Member State from imposing stricter leverage limits where it is deemed necessary in order to ensure the stability and integrity of the financial system.
(12) In order to limit conflicts of interest, AIFMs and their staff should not receive loans from loan-originating AIFs that they manage. Similarly, the AIF’s depositary and its staff or the AIFM’s delegate and its staff and entities within the same group as the AIFM should be prohibited from receiving loans from the associated AIFs.
(12) In order to limit conflicts of interest, AIFMs and their staff should not receive loans from any AIFs that they manage. Similarly, the AIF’s depositary and the depositary's delegate, the AIFM’s delegate and its staff, and entities within the same group as the AIFM should be prohibited from receiving loans from the AIF concerned.
(13) Directive 2011/61/EU should recognise the right of AIFs to originate loans and trade those loans on the secondary market. To avert moral hazard and maintain the general credit quality of loans originated by AIF’s, such loans should be subject to risk retention requirements. AIFs should not follow an originate-to-distribute investment strategy, namely an investment strategy under which loans are originated with the sole purpose of selling them.
(13) To avert moral hazard and maintain the general credit quality of loans originated by AIFs, such loans should be subject to risk retention requirements when transferred to third parties. With the same objective, it should be prohibited for all AIFMs to manage an AIF that originates loans with the sole purpose of selling them to third parties (‘originate-to-distribute strategy’), regardless of whether those AIFs meet the definition of loan-originating AIFs. Loans should be granted for the sole purpose of investing the capital raised by the AIF in accordance with its investment strategy and regulatory constraints. However, the AIFM should be able to implement that investment strategy in the best interests of the AIF's investors. That implies that derogations to the risk retention rules are necessary and should cover cases where the retention of part of the loan is not compatible with the implementation of the AIF's investment strategy or with the regulatory requirements, including product requirements, imposed on the AIF and its AIFM. Those cases include situations where retaining part of the loan would result in the AIF exceeding its investment or diversification limits or breaching regulatory requirements, such as restrictive measures based on Article 215 of the Treaty on the Functioning of the European Union (TFEU), where the AIF is entering a period of liquidation, where the borrower’s situation has changed, for example in the event of merger or of default of the borrower if the AIF’s investment strategy is not to manage distressed assets, or where the AIF’s asset allocation is changed, resulting in the AIF no longer pursuing exposure to a specific sector or to a specific asset class. An AIFM should, at the request of the competent authorities of its home Member State, justify its decision to make use of such a derogation, and is required to comply on a continuous basis with the overarching principle of ‘originate-to-distribute strategy’ prohibition.
(14) Long-term, illiquid loans held by AIF might create liquidity mismatches if the AIFs open-ended structure allows investors to redeem their fund units or shares on a frequent basis. Therefore, where an AIFM is not able to demonstrate to the competent authorities of its home Member State that the AIF has a sound liquidity risk management system, it is necessary to mitigate risks related to maturity transformation by imposing a closed-ended structure for AIFs originating loans because close-ended funds would not be vulnerable to redemption demands and could hold originated loans to maturity. In order to ensure consistent criteria for the determination by competent authorities of whether a loan-originating AIF can maintain an open-ended structure, power should be delegated to the Commission to adopt regulatory technical standards by means of delegated acts pursuant to Article 290 of the Treaty on the Functioning of the European Union (TFEU) in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010 of the European Parliament and of the Council1a to establish those criteria. Those regulatory technical standards should be adopted on the basis of a draft developed by the European Securities and Markets Authority (ESMA).
(14) Long-term, illiquid loans held by AIFs could create liquidity mismatches if the AIF’s open-ended structure allows investors to redeem their ▌ units or shares on a frequent basis. It is therefore necessary to mitigate risks related to maturity transformation by imposing a closed-ended structure for loan-originating AIFs. It should however be possible for loan-originating AIFs to operate as open-ended, provided that certain requirements are fulfilled, including a liquidity management system that minimises liquidity mismatches and ensures fair treatment for investors, and under the supervision of the competent authorities of the home Member State of the AIFM. In order to ensure consistent criteria for the determination by competent authorities of whether a loan-originating AIF can maintain an open-ended structure, ESMA should develop draft regulatory technical standards to establish those criteria, taking due account of the nature, liquidity profile and exposures of the loan-originating AIF.
(15) It should be clarified that where an AIFM is subject to the requirements laid down in Directive 2011/61/EU in relation to its managed AIF’s lending activities and to the requirements laid down in Regulations (EU) 345/2013, (EU) 346/2013 and (EU) 2015/760 of the European Parliament and of the Council, the specific product rules laid down in Article 3 of Regulations (EU) 345/2013 and Article 3 of Regulation (EU) 346/2013, Chapter II of Regulation (EU) 2015/760, should override more general rules set out in Directive 2011/61/EU.
(15) It should be clarified that where an AIF which originates loans, or an AIFM, in relation to the lending activities of AIFs that it manages, is subject to the requirements laid down in Directive 2011/61/EU and to the requirements laid down in Regulations (EU) No 345/2013, (EU) No 346/2013 and (EU) 2015/760 of the European Parliament and of the Council, the specific product rules laid down in Article 3 of Regulations (EU) No 345/2013 and Article 3 of Regulation (EU) No 346/2013, Chapter II of Regulation (EU) 2015/760, should override more general rules set out in Directive 2011/61/EU.
(16) To support market monitoring by the supervisory authorities the information gathering and sharing through supervisory reporting could be improved. Duplicative reporting requirements that exist under Union and national legislation, in particular Regulation (EU) No 600/2014 of the European Parliament and of the Council, Regulation (EU) 2019/834 of the European Parliament and of the Council, Regulation (EU) No 1011/2012 of the European Central Bank and Regulation (EU) No 1073/2013 of the European Central Bank, could be eliminated to improve efficiency and reduce administrative burdens for AIFMs. The European supervisory authorities (‘ESAs’) and the European Central Bank (ECB), with the support of national competent authorities, where necessary, should assess the data needs of the different supervisory authorities so that the changes to the supervisory reporting template for AIFMs are effective. The reporting requirements on the obligation to report information on the assets and liabilities of investment funds to the national central bank should be aligned.
(15a) Due to the potentially illiquid and long-term nature of the assets of AIFs that originate loans, AIFMs might experience difficulty in complying with changes to regulatory requirements introduced during the life-cycle of the AIFs that they manage without affecting the trust and confidence of their investors. It is therefore necessary to provide for transitional rules for certain requirements for those AIFs that have been constituted before the adoption of this Directive. However, such AIFs and AIFMs should also be able to choose to be subject to those rules provided that the competent authorities of the home Member State of the AIFM are notified accordingly. In addition, the rules applicable to loan origination and loan-originating AIFs, with the exception of the leverage and investment limits and the obligation for loan-originating AIFs to operate as closed-ended, should only apply with respect to loans originated after the entry into force of this Directive.
(16) To support market monitoring by the supervisory authorities the information gathering and sharing through supervisory reporting should be improved. Duplicative reporting requirements that exist under Union and national legislation, in particular Regulations (EU) No 600/2014 and (EU) 2019/834 of the European Parliament and of the Council, Regulation (EU) No 1011/2012 of the European Central Bank and Regulation (EU) No 1073/2013 of the European Central Bank, could be eliminated to improve efficiency and reduce administrative burdens for AIFMs. The European supervisory authorities (‘ESAs’) and the European Central Bank (ECB), with the support of national competent authorities, where necessary, should assess the data needs of the different supervisory authorities so that the changes to the supervisory reporting template for AIFMs are effective.
(16a) To reduce duplicative reporting and related reporting burdens for AIFMs and to ensure an efficient reuse of data by authorities, data reported by AIFMs to competent authorities should be made available to other relevant competent authorities, ESMA, the other ESAs and the ESRB, whenever necessary for the purpose of carrying out their duties, as well as to the members of the ESCB for statistical purposes only.
(17) In preparation for the future changes to the supervisory reporting obligations the scope of the data that can be required from AIFMs should be widened by removing the limitations, which focus on major trades and exposures or counterparties, and by adding other categories of data to be supplied to competent authorities. If ESMA determines that a full portfolio disclosure to supervisors on a periodic basis is warranted, the provisions of Directive 2011/61/EU should accommodate the necessary broadening of the reporting scope.
(18) In order to ensure consistent harmonisation of the supervisory reporting obligations, power should be delegated to the Commission to adopt regulatory technical standards by means of delegated acts pursuant to Article 290 TFEUof the Treaty on the Functioning of the European Union (TFEU) in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010 of the European Parliament and of the Council to set out the contents, forms and procedures to standardise the supervisory reporting process by AIFMs, thus replacing the reporting template laid down in the delegated act adopted pursuant to ArticleAIFMs. XThe ofregulatory Directivetechnical 2011/61/EU,standards asshould wellset asout the reportingcontents, frequencyforms and timing. As regards informationprocedures to be reported on delegation arrangements,standardise the regulatory technical standards should remainsupervisory limitedreporting toprocess, settingthus outreplacing the appropriatereporting leveltemplate oflaid standardisationdown ofin the informationCommission toDelegated beRegulation reported.(EU) 231/2013. Those regulatory and implementing technical standards should be adopted on the basis of a draft developed by ESMA. The regulatory technical standards should not add any elements that are not provided for in Directive 2011/61/EU.
(19) To standardise the supervisory reporting process the Commission should also be empowered to adopt implementing technical standards developed by ESMA as regards the format, data standards and methodsforms and arrangementsdata forstandards, reporting byfrequency AIFMs,and replacingtiming theto reporting template laid down in the Commission Delegated Regulation (EU) Noby 231/2013.AIFMs. The Commission should adopt those implementing technical standards by means of implementing acts pursuant to Article 291 TFEU and in accordance with Article 15 of Regulation (EU) No 1095/2010.
(20) In order to ensure a more effective response to liquidity pressures in times of market stress and to protect investors better, rules should be laid down in Directive 2011/61/EU to implement the Recommendationrecommendations of the European Systemic Risk Board (ESRB).
(21) To enable AIFMsmanagers of open-ended AIFs based in any Member State to deal with redemption pressures under stressed market conditions, they should be required to select and include in the AIF's rules or instruments of incorporationchoose at least two liquidity management toolsLMTs from the harmonised list set out in Annex V to Directive 2011/61/EU, points 2 to 7. Bythe wayAnnex, ofwith derogation,the managersexception of money market funds in accordance with Regulation (EU) 2017/1131 of the European Parliament and of the Council will be requiredwhich tocan select only one liquidity management tool from that list. Those liquidity management tools should be appropriate to the investment strategy, the liquidity profile and the redemption policy of the AIF. AIFMs should activate such liquidity management tools wherein necessaryaddition to safeguard the interests of the AIF’s investors. In addition, AIFMs of open-ended AIFs should always have the possibility to temporarily suspend redemptions and subscriptions or activate side pockets in exceptional circumstances and when duly justified having regard to the interests of the AIF’s investors.redemptions. When an AIFM takes a decision to suspend redemptions and subscriptions, it should without undue delay notify the competent authorities of its home Member State. When the AIFM decides to activate or deactivate side pockets, it should notify the competent authorities of its home Membercertain StateLMTs in a reasonable timeframe prior to the activation or deactivationsituations of that liquidity management tool. An AIFM should also notify the competent authorities of its home Member State when activatingstress or deactivating any other liquidity management tool in a manner that is not in the ordinary course of business as envisagedother indefined thecircumstances, fundit rulesshould ornotify the instruments of incorporation of thesupervisory AIF.authorities. This would allow supervisory authorities to better handle potential spill-overs of liquidity tensions into the wider market.
(21a) In particular, and to strengthen investor protection, it should be specified that the use of redemption in kind is not suitable for retail investors and should therefore only be activated to meet redemption requests of professional investors, while addressing risks of inequality of treatment between redeeming investors and other unitholders or shareholders.
(22) To be able to make an investment decision in line with their risk appetite and liquidity needs, investors should be informed of the conditions for the use of LMTs.
(23) In order to ensure consistent harmonisation in the area of liquidity risk management by AIFMsthe managers of open-ended funds and to facilitate market and supervisory convergence,funds, power should be delegated to the Commission to adopt regulatory technical standards by means of delegated acts pursuant to Article 290 TFEU in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010the toTreaty specifyon the characteristicsFunctioning of the liquidity management toolsEuropean setUnion out(TFEU) in Annex V of Directive 2011/61/EU, takingaccordance duewith accountArticles of10 theto diversity14 of investment strategiesRegulation and(EU) underlyingNo assets1095/2010 of AIFs. Those regulatory technical standards should be adopted on the basis of a draft developed byEuropean ESMAParliament and should not restrictof the ability of AIFMsCouncil to usespecify anythe appropriaterules liquidityon managementdisclosure toolto forcompetent allauthorities assetand classes,investors inof allinformation jurisdictionsrelated andto inthe allselection marketand conditions.calibration Inof▌ orderLMTs to ensure a uniformfacilitate levelmarket ofand investorsupervisory protectionconvergence. inThose theregulatory Union,technical ESMAstandards should developbe guidelinesadopted on the selection and calibrationbasis of liquiditya managementdraft toolsdeveloped by AIFMs.ESMA. Those guidelinesstandards should recognise that the primary responsibility for liquidity risk management remains with the AIFM.
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(24) To ensure investor protection where there are financial stability risks, in exceptional circumstances and after consulting the manager concerned, the competent authorities should be able to request that a manager of an open-ended fund activate or deactivate the appropriate LMT.
(25) Depositaries play an important role for safeguarding the interests of investors and should be able to perform their duties regardless of the type of the custodian that safe keeps the funds’ assets. Therefore, it is necessary to include central securities depositories (CSDs) in the custody chain when they provide custody services to AIFs in order to ensure that, in all cases, there is a stable information flow between the custodian of an AIF’s asset and the depositary. To avoid superfluous efforts, the depositaries should not perform ex-ante due diligence where they intend to delegate custody to CSDs.
(26) In order to improve supervisory cooperation and effectiveness, the competent authorities of a host Member State of ancompetent AIFMauthorities should be able to address a reasoned request to the competent authorities of the home Member Stateauthority of an AIFM to take supervisory action against a particular AIFM.
(27) Furthermore, to improve supervisory cooperation, ESMA should be able to request that a competent authority presents a case before ESMA, where that case has cross-border implications and may affect investor protection or financial stability. ESMA analyses of such cases will give other competent authorities a better understanding of the discussed issues and will contribute to preventing similar instances in the future and protect the integrity of the AIF market.
(28) To support supervisory convergence in the area of delegation, ESMA should receive more complete information on the application of this Directive including in the area of appropriate oversight and control of the delegation arrangements, in all the Member States. To that end, it should draw on reporting obligations to competent authorities, and on the exercise in the area of delegation of its supervisory convergence powers, before the next reviews of Directives 2009/65/EC and 2011/61/EU take place. ESMA should provide a report that analyses market practices regarding delegation, substance requirements (such as requirements on the human and technical resources that AIFMs, management companies and their delegates employ for the purpose of carrying out their functions) and compliance with rules on delegation, before the next reviews of Directives 2009/65/EC and 2011/61/EU take place.
(28) To support supervisory convergence in the area of delegation ESMA should conduct peer review on the supervisory practices with a particular focus on preventing the creation of letter-box entities. ESMA’s analysis of the peer reviews will feed into the review of the measures adopted in this Directive and inform the European Parliament, the Council and the Commission of any additional measures that may be needed to support the effectiveness of the delegation regimes laid down in Directive 2011/61/EU.
(28b) Regulation (EU) 2019/2088 of the European Parliament and of Council lays down harmonised rules for financial market participants and financial advisers on transparency with regard to the integration of sustainability risks and the consideration of adverse sustainability impacts in their processes and the provision of sustainability related information with regard to financial products. It is important to take a horizontal approach to transparency rules on sustainability for financial market participants and financial advisers.(28a) AIFs and UCITS can make an important contribution to the objectivesdevelopment of the capital markets union.CMU. The growth of the market for AIFs and UCITS also needs to be consistent with other objectivesUnion ofobjectives theand Unionthat andmarket should therefore be steered towardsencouraged theto promotionbe ofsmart, sustainable growth. AIFMs and UCITS management companiesinclusive. shouldAIFMs beare ablerequired to demonstrate that they continuously comply with their obligations under Regulation (EU) 2019/2088. Consequently, AIFMs and UCITS management companies should integrate environmental, social and governance parameters into the governance and risk management rules used to support their investment decisions. AIFMs2019/2088 and UCITS management companies should also apply governance and risk‐management rulesensure tothat their investment decisions andremuneration topolicies theirare assessmentconsistent ofwith relevantlong-term risks, including environmental, social and governance risks.risks That(ESG risks) and sustainability goals. This is even more important where AIFMs and UCITS management companies make claims as to the sustainable investment policies of the AIFs and UCITS that they manage. Those investment decisions and risk assessments should be made in the best interests of the investors of the AIFs and UCITS. ESMA should update its guidelines on sound remuneration policies under DirectivesDirective 2011/61/EU and 2009/65/EC as regards aligning incentives with ESG risks in remuneration policies.
(28c)(28b) The marketing of UCITS is not always conducted by the management company directly but by one or several distributors either on behalf of the management company or on their own behalf. In particular, thereThere could also be cases where an independent financial advisor markets a UCITSfund without the management company'scompany’s knowledge. Most fund distributors are subject to regulatory requirements pursuant to Directive 2014/65/EU or 2016/97/EU, which define the scope and extent of their responsibilities towards their own clients. Directive 2009/65/EC should therefore acknowledge the diversity of distribution arrangements and distinguish between arrangements whereby a distributor actsoperates on behalf of the management company, which should be considered to be a delegation arrangement, and arrangements whereby a distributor acts on its own behalf, when it markets the UCITS under Directive 2014/65/EU or through life-insurance based investment products in accordance with Directive 2016/97/EU, in which case the provisions of Directivethat 2009/65/ECDirective regarding delegation should not apply, irrespective of any distribution agreement between the management company and the distributor.apply.
(29) Some concentrated markets lack a competitive supply of depositary services. To address this shortage of service providers that can lead to increased costs for AIFMs and a less efficient AIF market, Member States should be able to entitleauthorise, theiron competenta authoritiescase-by-case tobasis, allowAIFMs theor appointmentAIFs ofto aprocure depositary establishedservices located in anotherother Member State. That possibilityStates shouldwhile onlythe beCommission usedassesses, whenin the conditionscontext laidof downits inreview thisof Directive are fulfilled and with the2011/61/EU, priorwhether approvalit ofwould thebe competentappropriate authoritiesto ofpropose themeasures AIF.to Sinceachieve thea decisionmore tointegrated allowmarket. theAs appointmentpart of athat depositaryreview, establishedthe inCommission anothershould Membercarry Stateout shoulda notcomprehensive bestudy automatic,on eventhe whenpotential thosebenefits conditionsand arerisks fulfilled,of theintroducing competenta authoritiesUnion shoulddepositary takepassport, thatin decisionparticular basedin onterms aof case-by-casereducing assessmentcosts, onallowing the lackchoice of relevantmore competitive depositary services in thefrom homeother Member State of theStates AIF,and givenextending the investment strategychoices ofavailable thatto AIF.managers.
(29a) As part of its review of Directive 2011/61/EU, the Commission should carry out an assessment of the functioning of the derogation allowing the appointment of a depositary in another Member State and the potential benefits and risks, including the impact on investor protection, on financial stability, on supervisory efficiency and on the availability of market choices, of amending the scope of that derogation, in line with the objectives of the Capital Markets Union.
(30) Opening up the possibility to appoint a depositary in another Member State should be accessible on a case-by-case basis accompanied by increased supervisory reach. Therefore, the depositary should be required to cooperate not only with its competent authorities but also with the competent authorities of the AIF that has appointed it and to the competent authorities of the AIFM that manages the AIF, if those competent authorities are located in a different Member State than that of the depositary.
(30) Opening up the possibility to appoint a depositary in another Member State should be accompanied by increased supervisory reach. Therefore, the depositary should be required to cooperate not only with its competent authorities but also with the competent authorities of the AIF that has appointed it and to the competent authorities of the home Member State of the AIFM that manages the AIF, if those competent authorities are located in a different Member State than that of the depositary.
(31) In order to better protect investors, the information flow from AIFMs to AIF investors should be increased. To allow an AIFs investors to better track the investment fund’s expenses, AIFMs should identify fees that will be borne by the AIFM or its affiliates as well as periodically report on all fees and charges that are directly or indirectly allocated to the AIF or to any of its investments. AIFMs should also be required to report to investors on the portfolio composition of originated loans.
(31) In order to better protect investors, the information flow from AIFMs to AIF investors should be increased. To allow AIF investors to better track the AIF’s expenses, AIFMs should identify fees, charges and expenses that are borne by the AIFM and that are subsequently directly or indirectly allocated to the AIF or to any of its investments. AIFMs should periodically report on all such fees, charges and expenses. AIFMs should also be required to report to investors on the portfolio composition of originated loans.
(32) To increase market transparency and effectively employ available AIF market data, ESMA should be permitted to disclose the market data at its disposal in an aggregate or summary form and therefore the confidentiality standard should be relaxed to permit such data use.
(33) The requirements for third-country entities with access to the internal market should be aligned to the standards laid down in Directive (EU) 2015/849 of the Europeanlast Parliamentupdated andversion of the Council. They should also be aligned to the standards set out in the common actionCouncil undertakenconclusions by▌on the Memberrevised StatesEU aslist regardson non-cooperative jurisdictions for tax purposes, reflectedpurposes inand theDirective Council(EU) conclusions2015/849 onof the revisedEuropean EUParliament listand of non-cooperative jurisdictions for taxthe purposes.Council. In particular,addition, non-EU AIFs,AIFs or non-EU AIFMs that are active insubject individualto Membernational Statesrules and depositariesthat establishedare active in aindividual thirdMember countryStates should not be located in a high risk thirdsatisfy countrythe pursuantrequirement tothat Directivethey (EU)are 2015/849,not norlocated in a third country that is deemed non-cooperativeun-cooperative in tax matters, subject in certain cases to a gracematters periodat whenthe atime countryof isthe addednotification to onecompetent authorities of thosethe lists.AIFM’s Thehome requirementsMember shouldState. alsoA ensurethird appropriatecountry andthat effectivehas exchangebeen ofcontinuously informationmentioned in taxthe mattersAnnex inII lineto withthose internationalCouncil standardsconclusions suchfor asa thoseperiod laidof downover inthree Articleyears 26should ofbe theconsidered OECDto Modelbe Taxmentioned Conventionin onthe IncomeAnnex andI onto Capital.those conclusions.
(34) Directive 2009/65/EC should ensure for the management companies of UCITS comparable conditions where there is no reason for maintaining regulatory differences for UCITS and AIFMs. This concerns delegation regime, regulatory treatment of custodians, supervisory reporting requirements and the availability and use of LMTs.
(35) To ensure the uniform application of the substance requirements for management companies of UCITS, it should be clarified that at the time of the application for ▌the authorisation, a management companycompanies should provide the competent authorities with information about the human and technical resources that itthey will employ to carry out itstheir functions and, where applicable, supervise its delegates. At least two natural personssenior whomanagers areshould onbe aemployed full-timeor basisconduct eitherthe employedbusiness byof the management company oron area executivefull-time membersbasis orand membersbe ofresident in the governingUnion. bodyTo ofensure thethat management company andcompanies whocomply arewith domiciled,the inrequirements theregarding senseconflict of having theirinterest habitualand residence,acting in the Union, should be appointed to conduct thebest businessinterest of the management company.UCITSs Regardlessand oftheir thisinvestors, statutorymanagement minimum,companies moreshould resourcesensures maythat beat necessaryleast dependingone onmember theof sizeits andgoverning complexitybody ofis thea managementnon-executive company.director.
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(36) To ensure a uniform application of Directive 2009/65/EC it should be clarified that the delegation rules laid down in Article 13 of that Directive apply to all functions listed in Annex II of that Directive and to the ancillary services referred to in Article 6(3) of that Directive.
(37) To align the legal frameworks of Directives 2011/61/EU and 2009/65/EC with regard to delegation, it should be required that UCITS management companies justify to the competent authorities the delegation of their functions and provide objective reasons for the delegation.
(38) Delegation can allow for the efficient management of investment portfolios and for sourcing the necessary expertise in a particular geographic market or asset class. However, it is important that supervisors have updated information on the main elements of delegation arrangements. To develop a reliable overview of delegation activities in the Union, management companies should regularly provide competent authorities with information on delegation arrangements, which involve the delegation of collective or discretionary portfolio management or risk management functions. Management companies should therefore report information on the delegates, the list and description of the delegated activities, the amount and percentage of the assets of the managed UCITS that are subject to delegation arrangements concerning the portfolio management function, a description of how the management company oversees, monitors and controls the delegate, information on the sub-delegation arrangements and the date of commencement and expiry of the delegation and sub-delegation arrangements. For the sake of clarity, it should be specified that the data collected on the amount and percentage of the assets of the managed UCITS that are subject to delegation arrangements concerning the portfolio management functions is for the purposes of providing a greater overview of the operation of delegation, and is not on its own an evidential indicator for determining the adequacy of substance or risk management, or the effectiveness of oversight or control arrangements at the level of the manager. Such information should be communicated to the competent authorities as part of the supervisory reporting, governed by Article 20a of Directive 2009/65/EC.
(38) ▌
(38a) To enhance the uniform application of Directive 2009/65/EC it should be clarified that the delegation rules laid down in Article 13 apply to all functions listed in Annex II to that Directive and to the ancillary services referred to in Article 6(3) of that Directive.
(39) ▌(40) In order to further align the rules on delegation applicable to AIFMs and UCITS and to achieve a more uniform application of Directives 2011/61/EU and 2009/65/EC, the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission in respect of specifying the conditions for delegation from a UCITS management company to a third party and the conditions under which a UCITS management company can be deemed a letter-box entity and therefore can no longer be considered to be the manager of the UCITS. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Inter-institutional Agreement of 13 April 2016 on Better Law-Making. In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States' experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.
(40) In order to further align the rules on delegation applicable to AIFMs and UCITS and to achieve a more uniform application of Directives 2011/61/EU and 2009/65/EC, the power to adopt acts in accordance with Article 290 TFEU should be delegated to the Commission in respect of specifying the conditions for delegation from a UCITS management company to a third party and the conditions under which a UCITS management company can be deemed a letter-box entity and therefore can no longer be considered to be the manager of the UCITS. It is of particular importance that the Commission carry out appropriate consultations during its preparatory work, including at expert level, and that those consultations be conducted in accordance with the principles laid down in the Inter-institutional Agreement of 13 April 2016 on Better Law-Making. In particular, to ensure equal participation in the preparation of delegated acts, the European Parliament and the Council receive all documents at the same time as Member States' experts, and their experts systematically have access to meetings of Commission expert groups dealing with the preparation of delegated acts.
(41) This Directive implements the ESRB recommendations to harmonise LMTs and their use by the managers of open-ended funds, which includes UCITS, to enable a more effective response to liquidity pressures in times of market stress and better protection of investors.
(42) To enable UCITS management companies based in any Member State to deal with redemption pressures under stressed market conditions, they should be required to select and include in their rules or instruments of incorporationchoose at least two liquidity management toolsLMT from the harmonised list set out in Annex IIA, points 2 to 7, of Directive 2009/65/EC. Bythe wayAnnex, ofwith derogation,the managersexception of money market funds in accordance with Regulation (EU) 2017/1131 will be requiredwhich tomay select only one liquidity management tool from that list. Those liquidity management tools should be appropriate to the investment strategy, the liquidity profile and the redemption policy of the UCITS. UCITS should activate such liquidity management tools wherein necessaryaddition to safeguard the interests of the UCITS investors. In addition, UCITS should always have the possibility to temporarily suspend redemptions and subscriptions or activate side pockets in exceptional circumstances and when duly justified having regard to the interests of the UCITS investors.redemptions. When a UCITSmanagement company takes a decision to suspend redemptions and subscriptions, it should without undue delay notify the competent authorities of its home Member State. When the UCITS decides to activate or deactivate side pockets, it should notify the competent authorities of its home Membercertain StateLMTs in a reasonable timeframe prior to the activation or deactivationsituations of that liquidity management tool. The UCITS should also notify the competent authorities of its home Member State when activatingstress or deactivating any other liquidity management tool in a manner that is not in the ordinary course of business as envisagedother indefined thecircumstances, fundit rulesshould ornotify the instruments of incorporation of thesupervisory UCITS.authorities. This would allow supervisory authorities to better handle potential spill-overs of liquidity tensions into the wider market.
(42a) In particular, and to strengthen investor protection, it should be specified that the use of redemption in kind is not suitable for retail investors and should therefore only be activated to meet redemption requests of professional investors, while addressing risks of inequality of treatment between redeeming investors and other unitholders.
(43) To be able to make an investment decision in line with their risk appetite and liquidity needs, UCITS investors should be informed of the conditions for use of LMTs.
(43) To be able to make an investment decision in line with their risk appetite and liquidity needs, UCITS investors should be informed of the conditions for the use of LMTs.
(44) To ensure investor protection if there are financial stability risks, in exceptional circumstances and after consulting the management company concerned, the competent authorities should be able to request that a UCITS management company activates or deactivates the appropriate LMT.
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(45) In order to ensure consistent harmonisation in the area of liquidity risk management by the managers of UCITS, power should be delegated to the Commission to adopt regulatory technical standards by means of delegated acts pursuant to Article 290 of the Treaty on the Functioning of the European Union (TFEU) in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010 of the European Parliament and of the Council to specify the process for choosing and using LMTs to facilitate market and supervisory convergence. Those regulatory technical standards should be adopted on the basis of a draft developed by ESMA. Those standards should recognise that the primary responsibility for liquidity risk management remains with the UCITS manager.
(45) In order to ensure consistent harmonisation in the area of liquidity risk management by UCITS and to facilitate market and supervisory convergence, power should be delegated to the Commission to adopt regulatory technical standards by means of delegated acts pursuant to Article 290 TFEU in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010 to specify the characteristics of the liquidity management tools set out in Annex IIA of Directive 2009/65/EC, taking due account of the diversity of investment strategies and underlying assets of UCITS. Those regulatory technical standards should be adopted on the basis of a draft developed by ESMA and should not restrict the ability of UCITS to use any appropriate liquidity management tool for all asset classes, in all jurisdictions and in all market conditions. In order to ensure a uniform level of investor protection in the Union, ESMA should develop guidelines on the selection and calibration of liquidity management tools by management companies. Those guidelines should recognise that the primary responsibility for liquidity risk management remains with the UCITS.
(46) To support market monitoring by the supervisory authorities, the information gathering and sharing through supervisory reporting should be improved by subjecting UCITS to supervisory reporting obligations, in particular as regards the delegation of functions. The ESAs and the ECB should be requested, with the support of national competent authorities where necessary, to assess the data needs of the different supervisory authorities considering the existing reporting requirements under other Union and national legislation, in particular Regulation (EU) No 600/2014, Regulation (EU) No 2019/834, Regulation (EU) No 1011/2012 and Regulation (EU) No 1073/2013. The outcome of this preparatory work would permit an informed policy decision as to what extent and in which form UCITS should be reporting to the competent authorities on their trades.
(46) To support market monitoring by the supervisory authorities ▌ the information gathering and sharing through supervisory reporting should be improved by subjecting UCITS to supervisory reporting obligations. Duplicative reporting requirements that exist under Union and national legislation, in particular Regulations (EU) No 600/2014 and (EU) 2019/834, Regulation (EU) No 1011/2012 and Regulation (EU) No 1073/2013, could be eliminated to improve efficiency and reduce administrative burdens for management companies. The European supervisory authorities (ESAs) and the European Central Bank (ECB), with the support of national competent authorities, where necessary, should assess the data needs of the different supervisory authorities, so as to ensure that the information to be reported under the supervisory reporting template for UCITS is sufficient.
(47) In order to ensure consistent harmonisation of the supervisory reporting obligations, power should be delegated to the Commission to adopt regulatory technical standards by means of delegated acts pursuant to Article 290 of the Treaty on the Functioning of the European Union (TFEU) in accordance with Articles 10 to 14 and Article 15 of Regulation (EU) No 1095/2010 of the European Parliament and of the Council to set out the contents, forms and procedures to standardise the supervisory reporting process by UCITS. Those regulatory technical standards should be adopted on the basis of a draft developed by ESMA.
(46a) To reduce duplicative reporting and related reporting burdens for UCITS and to ensure an efficient reuse of data by authorities, data reported by UCITS to competent authorities should be made available to other relevant competent authorities, ESMA, the other ESAs and the ESRB, whenever necessary for the purpose of carrying out their duties, as well as to the members of the ESCB for statistical purposes only.
(48) To standardise the supervisory reporting process the Commission should also be empowered to adopt implementing technical standards developed by ESMA as regards the forms and data standards, reporting frequency and timing to reporting by UCITS. The Commission should adopt those implementing technical standards by means of implementing acts pursuant to Article 291 TFEU and in accordance with Article 15 of Regulation (EU) No 1095/2010.
(47) In order to ensure consistent harmonisation of the supervisory reporting obligations, power should be delegated to the Commission to adopt regulatory technical standards by means of delegated acts pursuant to Article 290 TFEU in accordance with Articles 10 to 14 and Article 15 of Regulation (EU) No 1095/2010 to set out the contents, forms and procedures to standardise the supervisory reporting process by UCITS, thus replacing the reporting template laid down in the delegated act adopted pursuant to Article X of Directive 2009/65/EC, as well as the reporting frequency and timing. As regards information to be reported on delegation arrangements, the regulatory technical standards should remain limited to setting out the appropriate level of standardisation of the information to be reported. Those regulatory technical standards should be adopted on the basis of a draft developed by ESMA. The regulatory technical standards should not add any elements that are not provided for in Directive 2009/65/EC.
(48) To standardise the supervisory reporting process the Commission should also be empowered to adopt implementing technical standards developed by ESMA as regards the format, data standards and methods and arrangements for reporting by UCITS. The Commission should adopt those implementing technical standards by means of implementing acts pursuant to Article 291 TFEU and in accordance with Article 15 of Regulation (EU) No 1095/2010.
(49) To ensure investor protection, and in particular to ensure that in all cases there is a stable information flow between the custodian of the UCITS’ asset and the depositary, the depositary regime should be extended to include CSDs in the custody chain when they provide custody services to UCITS. To avoid superfluous efforts, the depositaries should not perform ex-ante due diligence where they intend to delegate custody to CSDs.
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(50) To support supervisory convergence in the area of delegation ESMA should conduct peer reviews on the supervisory practices particularly focusing on preventing creation of letter-box entities. ESMA’s analysis of the peer reviews would feed into the review of the measures adopted in this Directive and inform the European Parliament, the Council and the Commission what additional measures may be needed to support effectiveness of the delegation regime laid down in Directive 2009/65/EC.
(51) In order to improve supervisory cooperation and effectiveness, the competent authorities of the UCITS host Member State should be able to address a reasoned request to the competent authority of the UCITS home Member State to take supervisory action against a particular UCITS.
(52) Furthermore, to improve supervisory cooperation, ESMA should be able to request that a competent authority presents a case before the ESMA, where that case has cross-border implications and may affect investor protection or financial stability. ESMA analyses of such cases will give other competent authorities a better understanding of the discussed issues and will contribute to preventing similar instances in the future and protect the integrity of the UCITS markets.
(52a) Notwithstanding current secrecy rules applicable, information exchange between competent authorities and tax authorities should be improved. Such exchanges should be in line with national law, and, where the information originates in another Member State, it should only be disclosed with the express agreement of the relevant competent authority which has disclosed it.
(52a) Member States should require UCITS management companies and AIFMs to act honestly and fairly as regards the fees and costs charged to investors. At present, divergent market and supervisory practices exist as to what industry and supervisors might consider as ‘due’ or ‘undue’ costs and evidence has shown a disparity in the costs charged in different Member States and in the costs charged to retail investors compared to professional investors. To ensure that UCITS management companies and AIFMs do not charge undue costs to retail investors, ESMA should be required to study the reasons for high costs being charged and possible actions needed to address them. In the case of UCITS, ESMA should be able, in the light of that study, and without prejudice to other legislative or regulatory options, to develop draft regulatory technical standards stipulating criteria for the assessment of undue costs and actions national competent authorities should take in respect of inappropriate or undue costs.
(52b) Directives 2009/65/EC and 2011/61/EU require AIFMs and UCITS management companies to act with due skill, care and diligence in the best interests of the investment fund they manage and of their investors. Member States should therefore require AIFMs and UCITS management companies to act honestly and fairly as regards the fees and costs charged to investors. In 2020 ESMA developed a supervisory briefing to promote convergence on the supervision of costs in AIFs and UCITS and to develop a set of criteria to support competent authorities in assessing the notion of undue costs and in supervising the obligation to prevent undue costs being charged to investors. Those criteria are intended to provide guidance to competent authorities while promoting supervisory convergence in the context of the Capital Markets Union. However, due to the lack of a clear definition of undue costs, at present, divergent market and supervisory practices exist as to what industry and supervisors perceive as undue costs and evidence has shown a disparity in the costs charged in different Member States and in the costs charged to retail investors compared to professional investors. The proposed amendments to Directives 2009/65/EC and 2011/61/EU in the context of the EU retail investment strategy intend to tackle this issue, by requiring fund managers to establish a sound pricing process, which should comprise the identification, analysis and review of costs charged, directly or indirectly, to investment funds or their unit holders and by introducing a requirement to compensate investors where undue costs have been charged. By … [18 months after the date of entry into force of this amending Directive] ESMA should prepare a report assessing the level, reasons for and differences in the costs charged to retail investors, including differences resulting from the nature of the AIFs and UCITS concerned, and analysing whether the criteria set out in its supervisory briefing are to be complemented with regard to the notion of undue costs. In order to support competent authorities in the supervision of costs and ESMA in its analysis of cost related issues, competent authorities should collect cost data to be shared with ESMA. The one-off data collection would increase ESMA’s expertise in the area of cost reporting with a view to providing the Parliament, the Council, the Commission and competent authorities with technical advice on the collection of cost data in the context of the EU Retail Investment Strategy. Based on that report, ESMA should carry out activities under Article 29 of Regulation (EU) No 1095/2010 to help develop a common understanding of the notion of undue costs.
(52b) In carrying out its functions under Directives 2009/65/EC and 2011/61/EU, ESMA should take a risk-based approach.
(52c) The name of a UCITS and of an AIF is a distinctive element that influences investors’ choices and gives a first impression of the fund’s investment strategy and objectives. Although the name of a UCITS and of an AIF already forms part of the pre-contractual information provided to investors, it is useful to underline the importance of the name by specifically emphasising that it constitutes essential pre-contractual information in a UCITS’ key investor information and prospectus that should be provided to investors before they invest in that UCITS. In accordance with Directive (EU) 2021/2261 of the European Parliament and of the Council, as of 1 January 2023 UCITS marketed to retail investors are subject to the requirements of Regulation (EU) No 1286/2014. Since that date, the obligation of a UCITS management company or investment company to prepare a key investor information document is replaced by the obligation to prepare a key information document in accordance with Regulation (EU) No 1286/2014. In addition, AIFMs managing AIFs that are marketed to retail investors are also subject to the requirements of Regulation (EU) No 1286/2014. Hence, UCITS managers and AIFMs marketed to retail investors are required to include in the key information document the name of the fund and shall ensure that such information is accurate, fair and clear and does not convey a misleading or confusing message that would wrongly entice investors. It is therefore essential to emphasise that the name of an AIF or UCITS is considered as important as any other pre-contractual document and subject to equal standards of fairness and transparency. In order to ensure a high and uniform level of investor protection in the Union, ESMA should develop guidelines to specify situations where the name of an AIF or UCITS could be unfair, unclear or misleading to the investor. Sectoral legislation setting standards for fund names or marketing of funds takes precedence over those guidelines.
(52c) In order to give managers or management companies sufficient time to adapt to the new requirements, managers or management companies of existing AIFs or UCITS should be subject to a grandfathering clause,
(52c) In carrying out its functions under Directives 2009/65/EC and 2011/61/EU, ESMA should take a risk-based approach,
HAVE ADOPTED THIS DIRECTIVE
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Article 1
HAVE ADOPTED THIS DIRECTIVE:
Amendments to Directive 2011/61/EU
Article 1 Amendments to Directive 2011/61/EU
Directive 2011/61/EU is amended as follows:
(1) ▌in Article 4(1)4, paragraph 1 is amended as follows:
(a) point (ag) is replaced by the following:
‘(ag) “professional‘professional investor”investor’ means an investor which is considered to be a professional client or may, on request, be treated as a professional client within the meaning of Annex II to Directive 2014/65/EU;’;2014/65/EC;’
(b) the following pointspoint are(ap) is added:
‘(ap) “centralcentral securities depository”depository’ means a central securities depository as defined in Article 2(1), point (1), of Regulation (EU) No 909/2014 of the European Parliament and of the Council*;Council*
(ca) “capital of the AIF” means aggregate capital contributions and uncalled capital committed to the AIF, calculated on the basis of amounts investible after deduction of all fees, charges and expenses that are directly or indirectly borne by investors;
* Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 2014/65/EU and Regulation (EU) No 236/2012 (OJ L 257, 28.8.2014, p. 1)’;
(apa) “loan origination” or “originating a loan” means the granting of a loan directly by an AIF as the original lender or indirectly through a third party or special purpose vehicle, which originates a loan for or on behalf of the AIF, or for or on behalf of AIFM in respect of the AIF, where the AIFM or AIF is involved in structuring the loan, or defining or pre-agreeing its characteristics, prior to gaining exposure to the loan;
(c) the following points are inserted:
(apb) “shareholder loan” means a loan which is granted by an AIF to an undertaking in which it holds directly or indirectly at least 5 % of the capital or voting rights, and which cannot be sold to third-parties independently of the capital instruments held by the AIF in the same undertaking;
(apa) ‘loan origination’ means the granting of loans by an AIF as the original lender;
(apc) “loan-originating AIF” means an AIF:
(apb) ‘shareholder loan’ means a loan which is granted by an AIF to an undertaking in which it holds directly or indirectly at least 5 % of the capital or voting rights, where the loan cannot be sold to third-parties independently of the capital instruments held by the AIF in the same undertaking;
(i) whose investment strategy is mainly to originate loans; or
(apc) ‘loan-originating AIF’ means an AIF whose principal activity is to originate loans and for which the notional value of its originated loans exceeds 60 % of its net asset value;
(ii) where the notional value of the AIF's originated loans represents at least 50% of its net asset value;
(apd) ‘capital’ means aggregate capital contributions and uncalled committed capital, calculated on the basis of amounts investible after deduction of all fees, charges and expenses that are directly or indirectly borne by investors;
(ape) “leveraged‘leveraged AIF”AIF’ means an AIF whose exposures are increased by the AIFM that managesmanaging it,AIFM, whether through borrowing of cash or securities, or leverage embedded in derivative positions or by any other means.’means.
____________________
* Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 2014/65/EU and Regulation (EU) No 236/2012 (OJ L 257, 28.8.2014, p. 1).’;
(2) Article 6 is amended as follows:
(a) in paragraph 4, point (b), the following pointpoints is(c) and (d) are added:
‘(iv) any other function or activity which is already provided by the AIFM in relation to an AIF that it manages in accordance with this Article, or in relation to services that it provides in accordance with this paragraph, provided that any potential conflict of interest created by the provision of that function or activity to other parties is appropriately managed.’;
‘(c) benchmark administration in accordance with Regulation (EU) 2016/1011;
(b) in paragraph 4, the following points ▌ are added:
(d) credit servicing in accordance with of Directive 2021/… of the European Parliament and of the Council;’;
‘(c) administration of benchmarks in accordance with Regulation (EU) 2016/1011;
(b) paragraph 6 is replaced by the following:
(d) credit servicing in accordance with ▌ Directive (EU) 2021/2167 of the European Parliament and of the Council.’;
‘6. Articles 2(2), Article 15, Article 16 except for the first subparagraph of paragraph (5), and Articles 23, 24 and 25 of Directive 2014/65/EU shall apply where the services referred to in paragraph 4, points (a) and (b), are provided by AIFMs.’;
(c) paragraph 5 is amended as follows:
(i) point (b) is deleted;
(ii) the following point is added:
‘(e) administration of benchmarks which are used in the AIFs that they manage.’;
(d) paragraph 6 is replaced by the following:
‘6. ▌ Article 15, Article 16 except for the first subparagraph of paragraph 5 and Articles 23, 24 and 25 of Directive 2014/65/EU shall apply where the services referred to in paragraph 4, points (a) and (b), of this Article, concerning one or more of the instruments listed in Annex I, Section C of Directive 2014/65/EU are provided by AIFMs.’;
(3) Article 7 is amended as follows:
(a) information about the persons effectively conducting the business of the AIFM, in particular with regard to the functions referred to in Annex I, including:
(i) a ▌ description▌description of their role, title and ▌ level of seniority;
(ii) a description of their reporting lines and responsibilities in the AIFM and outside the AIFM;
(iii) an overview of thetheir time each of those persons allocatesallocated to each responsibility;
(iv) a description of the technical and human resources that support their activities;
(aa) the legal name and relevant identifier of the AIFM;
(b) information on the identities of the AIFM’s shareholders or members, whether direct or indirect, natural or legal persons, that have qualifying holdings and on the amounts of those holdings;
(c) a programme of activity setting out the organisational structure of the AIFM, including information on how the AIFM intends to comply with its obligations under Chapters II, III, IV, and, where applicable, Chapters V, VI, VII and VIII of this Directive, and with its obligations under Articles 3(1), 6(1)(a) and 13 of Regulation (EU) 2019/2088 and a detailed description of the appropriate human and technical resources that will be used by the AIFM to this effect;
(d) information on the remuneration policies and practices pursuant to Article 13;
(e) information on arrangements made for the delegation and sub-delegation to third parties of functions as referred to in Article 20 comprising at least the following:comprising:
(i) for each delegate:
(i) the legal name and relevant legal identifier of the AIFM;
–(ii) itsthe legal name and relevant identifier,legal identifier of the AIF and its investment strategy;
– its jurisdiction of establishment, and
(iii) the legal name and relevant legal identifier of each delegate, its jurisdiction of establishment and, where relevant, its supervisory authority;
– where relevant, its supervisory authority;
(iv) a brief description of the delegated risk management functions, including whether each such delegation amounts to a partial or full delegation;
(ii) a detailed description of the human and technical resources employed by the AIFM for:
(v) a brief description of the delegated portfolio management functions, by investment strategy and relevant geographies, including whether each such delegation amounts to a partial or full delegation;
– performing day-to-day portfolio or risk management tasks within the AIFM, and
(vi) a brief description of other functions listed in Annex I which the AIFM additionally performs;
– monitoring the delegated activity;
(vii) for each of the following, a description of the human and technical resources’;
(iii) in respect of each of the AIFs it manages or intends to manage:
- employed by or committed to the AIFM for performing day-to-day portfolio or risk management tasks within the AIFM;
– a brief description of the delegated portfolio management functions, including whether such delegation amounts to a partial or full delegation, and
- employed by or committed to the delegate for performing those services on a delegated basis; and
– a brief description of the delegated risk management functions, including whether each such delegation amounts to a partial or full delegation;
- employed by or committed to the AIFM for monitoring and controlling the delegate;
(iv) a description of periodic due diligence measures to be carried out by the AIFM for monitoring the delegated activity.’;
(viii) an explanation of the added value of the delegation to the investor.’
(aa) the following paragraph is inserted:
‘4a. An AIFM shall report to the competent authority any material changes that may affect the scope of the authorisation by that authority and in particular any modification on the arrangements of the delegation and sub-delegation to third parties provided at the time of authorisation.’
(b) paragraph 5 is replaced by the following:
‘5. The competent authorities shall, on a quarterly basis, inform ESMA of authorisations granted or withdrawn in accordance with this Chapter, and of any changes in the listscope of AIFsauthorisations managedby and/orthose marketedauthorities, and in particular of material changes to the Unioninformation byprovided authorisedin AIFMs.accordance with paragraphs 2 and 3 of this Article.
ESMA shall keep a central public register identifying each AIFM authorised under this Directive, a list of the AIFs managed and/or marketed in the Union by such AIFMs and the competent authoritiesauthority for each such AIFM. The register shall be made available in electronic format.
▌’;
▌
(c) paragraphs 6 and 7 are deleted;
(ba) paragraph 6 is replaced by the following:
(d) the following paragraph is added:
‘6. In order to ensure consistent harmonisation of this Article, ESMA may develop draft regulatory technical standards to specify the information to be provided to the competent authorities in the application for the authorisation of the AIFM, including the programme of activity, and to specify situations where the name of the AIFs it intends to manage could be materially deceptive or misleading to the investor.
‘9. By … [60 months after the date of entry into force of this amending directive] ESMA shall provide the European Parliament, the Council and the Commission with a report analysing market practices regarding delegation and compliance with Articles 7 and 20, based, inter alia, on the data reported to competent authorities in accordance with Article 24(2), point (d) and on the exercise of its supervisory convergence powers. That report shall also analyse compliance with substance requirements of this Directive.’;
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph of this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.’;
(bb) paragraph 7 is replaced by the following:
‘7. In order to ensure uniform conditions for the application of this Article, ESMA may develop draft implementing technical standards to determine standard forms, templates and procedures for the provision of information provided for in the first subparagraph of paragraph 6. ESMA may design such forms, templates and procedures with the objective of obtaining information which is comparable between AIFMs and between jurisdictions. ESMA may also take into account the information requirements for the provision of the report referred to in paragraph 9.
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph of this paragraph in accordance with Article 15 of Regulation (EU) No 1095/2010.’
(c) the following paragraph ▌9 is added:
▌
9. By … [24 months after the date of application of this amending directive], ESMA shall provide the European Parliament, the Council and the Commission with ▌a report, ▌analysing market practices regarding delegation▌ and compliance with Articles 7 and 20.’;
(4) in Article 8(1), point (c) is replaced by the following:
‘(c) the persons who effectively conduct the business of the AIFM are of sufficiently good repute and are sufficiently experienced also in relation to the investment strategies pursued by the AIF managed by the AIFM, the names of those persons and of every person succeeding them in the office being communicated forthwith to the competent authorities of the home Member States of the AIFM and the conduct of the business of the AIFM being decided by at least two natural persons who are either employed full-time by that AIFM or executive member or members of thewho governingare bodycommitted offull-time theor AIFMon whoa arefull-time committedequivalent full-timebasis to conduct the business of that AIFM and who are domiciledresident in the Union,Union meeting such conditions;’;conditions;
(5) in Article 12, the following paragraph is added:
(ca) where an AIFM manages an Alternative Investment Fund that is marketed to retail investors, the AIFM ensures that at least one member of its governing body is a non-executive director. The AIFM, in appointing a non-executive director of its governing body, shall determine whether such a member is independent in character and judgement and whether there are relationships or circumstances, which are likely to affect that member’s judgement. The AIFM shall take reasonable steps to ensure that any non-executive directors appointed to its governing body have sufficient expertise and experience to be able to make judgements on whether the AIFM is managing AIFs in the best interest of investors. Non-executive directors shall contribute to ensuring that the AIFM complies with the requirements regarding conflicts of interests and acting in the best interests of the AIFs and their investors, as specified in this Directive;
‘3a. For the purposes of point (f) of the first subparagraph of paragraph 1, ESMA shall by … [18 months from the date of entry into force of this amending Directive] submit a report to the European Parliament, the Council and the Commission assessing the costs charged by AIFMs to the investors of the AIFs that they manage and explaining the reasons for the level of those costs and for the differences between them, including differences resulting from the nature of the AIFs concerned. As part of that assessment, ESMA shall analyse, within the framework of Article 29 of Regulation (EU) No 1095/2010, the appropriateness and effectiveness of the criteria set out in the ESMA convergence tools on the supervision of costs.
(4a) in Article 12, the following paragraph is inserted:
For the purposes of that report and in accordance with Article 35 of Regulation (EU) No 1095/2010, competent authorities shall provide ESMA on a one-time basis with data on costs including all fees, charges and expenses which are directly or indirectly borne by the investors, or by the AIFM in connection with the operations of the AIF, and that will be directly or indirectly allocated to the AIF. Competent authorities shall make that data available to ESMA within their powers, which include the power to require AIFMs to provide information as set out in Article 46(2) of this Directive.’;
‘3a. For the purposes of point (f) of the first subparagraph of paragraph 1, ESMA shall ... [by 18 months from entry into force of this amending Directive] submit a report to the European Parliament, the Council and the Commission:
(6) in Article 14 the following paragraph is inserted:
(1) assessing the costs charged by AIFMs to investors in AIFs, and the reasons for cost levels and for differences between them;
‘2a. Where an AIFM manages or intends to manage an AIF at the initiative of a third party, including AIFs using the name of the third-party initiator or appointing the third-party initiator as a delegate pursuant to Article 20, the AIFM shall, taking account of conflicts of interest, submit detailed explanations and evidence of its compliance with paragraphs 1 and 2 of this Article to the competent authorities of its home Member State. In particular, it shall specify what reasonable steps it has taken to prevent conflicts of interest arising from the relationship or, when they cannot be prevented, how it identifies, manages and monitors and, where applicable, discloses those conflicts of interest in order to prevent them from adversely affecting the interests of the AIFs and their investors.’;
(2) proposing criteria for assessing whether the level of such costs is or is not appropriate, in particular when compared to the level of costs in other jurisdictions worldwide;
(7) Article 15 is amended as follows:
(3) proposing, if necessary, options for action by competent authorities or by legislators in respect of inappropriate or undue levels of such costs. The report shall assess the potential impact of each such option.
That report may be combined with the report required pursuant Article 14(2a) of Directive 2009/65/EC of the European Parliament and of the Council.
Competent Authorities shall have the power to require, on a one-time basis, information on costs from AIFMs insofar as that is needed for the purpose of that report. The competent authorities shall avoid duplication with existing reporting obligations.
Competent authorities shall provide data to ESMA to contribute to that report ... [by X months before the date specified in the first subparagraph].’
(4b) Article 14 is amended as follows:
(a) the following paragraph is inserted :
2a. Where an AIFM intends to manage an AIF on behalf of a third-party, including but not limited to under a mandate in accordance with Article 6(4)(a) or under a delegation in accordance with Article 20, and where the third-party is to have significant control over the AIF’s design, distribution and management, the AIFM shall employ heightened scrutiny of the potential for conflicts of interest. AIFMs engaging in such a relationship shall submit detailed explanations and evidence on their compliance with paragraphs 1 and 2 of this Article to the competent authorities of their home Member State. In particular, they shall specify how they prevent systematic conflicts of interest or any other material conflicts of interest arising from the relationship, how any existing or potential conflicts are effectively managed in the best interest of investors and how this is clearly and comprehensively disclosed to investors.
(b) the following paragraph is added:
“4a. In order to ensure uniform conditions of application of this Article, ESMA shall develop draft regulatory technical standards to specify:
(a) the types of relationship between the AIFM and a third-party when the AIFM manages an AIF on behalf of the third-party and of conflicts of interest as referred to in paragraph 2a;
(b) the criteria to be used by the relevant competent authorities to assess whether AIFMs comply with their obligations under paragraph 2a.
Power is conferred on the Commission to adopt the regulatory technical standards referred to in this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.
(5) Article 15 is amended as follows:
(a) in paragraph 3, the following point (d) is added:
‘(d) for loan originating activities, implement effective policies, procedures and processesother forthan thein grantingrespect of credit. Where they manage AIFs thatshareholder engageloans inwhere loansuch origination,loans includingdo whennot theyexceed gainin exposureaggregate to150 loans% throughof thirdthe parties,capital theyof shallthe alsoAIF, implement effective policies, procedures and processes for the granting of credit, for assessing the credit risk and for administering and monitoring their credit portfolio, keep those policies, procedures and processes up to date and effective and review them regularly and at least once a year.year.’;
Without prejudice to Article 12(1)(b), the requirements set out in the first subparagraph, point (d), of this paragraph shall not apply to origination of shareholder loans, where the notional value of such loans does not exceed in aggregate 150 % of the capital of the AIF.’;
(b) the following paragraphs 4a to 4ea are inserted between the paragraphs 4 and 5:
(b) the following paragraphs ▌ are inserted ▌ :
‘4a. An AIFM shall ensure that a loan originated to any single borrower by the AIF it manages does not exceed 20 % of the AIF’s capital where the borrower is one of the following:
‘4a. An AIFM shall ensure that when an AIF it manages originates loans, the notional value of the loans originated to any single borrower by that AIF does not exceed in aggregate 20 % of the ▌ capital of the AIF where the borrower is one of the following: ▌
(a) a financial undertaking within the meaning of Article 13(25) of Directive 2009/138/EC;
(b) an AIF; or
(b) a collective investment undertaking within the meaning of Article 4(1), point (a), of this Directive or within the meaning of Article 1(2) of Directive 2009/65/EC.’
(c) a UCITS.
The restriction set out in the first subparagraph shall be without prejudice to the thresholds, restrictions and conditions set out in Regulations (EU) 2015/760, (EU) 345/2013 and (EU) 346/2013.
The restriction set out in the first subparagraph shall be without prejudice to the thresholds, restrictions and conditions set out in Regulations (EU) 2015/760*, (EU) No 345/2013** and (EU) No 346/2013*** of the European Parliament and of the Council.
4aa. An AIFM shall ensure that the leverage of a loan-originating AIF it manages represents no more than:
(i) 175 %, where that AIF is open-ended;
(ii) 300 %, where that AIF is closed-ended.
The leverage of a loan-originating AIF shall be expressed as the ratio between the exposure of that AIF, calculated according to the commitment method as defined in the delegated acts referred to in Article 4(3), and its net asset value.
Borrowing arrangements which are fully covered by contractual capital commitments from investors in the loan-originating AIF shall not be considered to constitute exposure for the purposes of calculating that ratio.
In the event that a loan-originating AIF infringes the requirements laid down in this paragraph and the infringement is beyond the control of the AIFM, the AIFM shall, within an appropriate period of time, take such measures as are necessary to rectify the position, taking due account of the interests of the investors in the loan-originating AIF.
Without prejudice to the power of competent authorities referred to in Article 25(3), the requirements set out in the first subparagraph shall not apply to a loan-originating AIF the lending activities of which consist solely of originating shareholder loans, provided that the notional value of those loans does not exceed in aggregate 150 % of that AIF’s capital.
4b. The investment limit of 20 % laid down in paragraph 4a shall:
(a) apply by the date specified in the AIFrules rules,or instruments of incorporation or prospectus, which shall not be later than 24 months from the date of the first subscription for units or shares of the AIF;
(b) cease to apply once the AIFMAIF starts to sell assets of the AIF in order to redeem ▌investors' units or shares asafter partthe end of the liquidationlife of the AIF;
(c) be temporarily suspended wherefor theup capitalto of12 months where the AIF israises increasedadditional capital or reduced.reduces its existing capital.
The suspension referred to in point (c) of the first subparagraph shall be limited in time to the period that is strictly necessary taking due account of the interests of the investors in the AIF and, in any case, shall last no longer than 12 months.
4c. The application date referred to in paragraph 4b, point (a), shall take account of the particular features and characteristics of the assets to be invested by the AIF, and shall be no later than half the life of the AIF as indicated in the AIF’s constitutive documents. In exceptional circumstances, the competent authority of the AIFM, upon submission of a duly justified investment plan, may approve an extension of this time limit by no more than one additional year.
4c. The application date referred to in paragraph 4b, point (a), shall take account of the particular features and characteristics of the assets to be invested by the AIF ▌ . In exceptional circumstances, the competent authorities of the AIFM, upon submission of a duly justified investment plan, may approve an extension of this time limit by no more than one additional year.
4d. The AIF shall not grant loans to the following entities:
4d. The AIFM shall ensure that an AIF does not grant loans to the following entities:
(a) its AIFM or the staff of its AIFM;
(a) the AIFM or the staff of that AIFM;
(aa) an entity within the same group as the AIFM as defined in Article 2(11) of Directive 2013/34/EU of the European Parliament and the Council, except where that entity is a financial undertaking that exclusively finances borrowers that are not mentioned in points (a), (b) and (c) of this paragraph;
(b) its depositary and entities to which the depositary has delegated functions in respect of the AIF, in accordance with Article 21;
(b) its depositary and delegates of its depositary;
(c) the entity to which its AIFM has delegated functions in accordance with Article 20 and the staff of that entity;20.
(ca) an entity within the same group, as defined in Article 2(11) of Directive 2013/34/EU of the European Parliament and the Council****, as the AIFM, except where that entity is a financial undertaking that exclusively finances borrowers that are not mentioned in points (a), (b) and (c) of this paragraph.
4da. The proceeds of the loan, minus the fees for the administration of the loan, shall be attributed to the fund in full. All costs and expenses linked to the administration of the loan shall be clearly disclosed in accordance with Article 23 of this Directive.
4da. Where an AIF originates loans, the proceeds of the loans, minus any allowable fees for the administration of the loans, shall be attributed to that AIF in full. All costs and expenses linked to the administration of the loan shall be clearly disclosed in accordance with Article 23.
4e. An AIFM shall ensure that the AIF it manages retains, on an ongoing basis and until maturity, 5% of the notional value of the loans it has originated and subsequently sold on the secondary market.
4daa. Without prejudice to other instruments of Union law, a Member State may prohibit AIFs that originate loans from granting loans to consumers within the meaning of Article 3, point (a), of Directive 2008/48/EC in its territory, and may prohibit AIFs from servicing credits granted to such consumers in its territory. Such prohibition shall not affect the marketing in the Union of AIFs granting loans or servicing credits granted to consumers.
The requirement set out in the first subparagraph does not apply to the loans that the AIF has purchased on the secondary market or where one of the following applies:
4db. Member States shall prohibit AIFMs from managing AIFs that engage in loan origination and whose investment strategy or part of whose investment strategy is to originate loans, with the sole purpose of transferring those loans or exposures to third parties.
a) the sale of the loan is necessary for the AIF not to be in breach of its mandate or of one of its investment or diversification rules and such potential breach is unintentional on the part of the manager, for instance as a result of the exercise of subscription or redemption rights;
4e. An AIFM shall ensure that the AIF it manages retains ▌ 5 % of the notional value of each loan it has originated and subsequently transferred to third parties. That percentage of each loan shall be retained:
b) the disposal is necessary as a result of the Union sanctions;
(i) until maturity for those loans whose maturity is up to eight years, or for loans granted to consumers regardless of their maturity; and
c) the AIF needs to dispose of the loans in order to redeem investors' units or shares as part of the wind down of the AIF.
(ii) for a period of at least eight years for other loans.
4ea. Member States shall prohibit AIFMs from managing AIFs whose investment strategy is to originate loans with the sole purpose of transferring those loans to third parties (“originate-to-distribute”).’;
By way of derogation to the first subparagraph, the requirement set out in that subparagraph does not apply where:
(6) in Article 16, the following paragraphs 2a to 2h are inserted:
(a) the AIFM starts to sell assets of the AIF in order to redeem units or shares as part of the liquidation of the AIF;
‘2a. An AIFM shall ensure that the loan originating AIF it manages is closed-ended when the AIFM is not able to demonstrate to the competent authorities of its home Member State that the AIF has a sound liquidity risk management system that ensures the compatibility of its liquidity management system with its redemption policy.
(b) the disposal is necessary for the purposes of compliance with restrictive measures imposed by regulations based on Article 215 TFEU or with product requirements;
The requirement set out in the first subparagraph shall be without prejudice to the thresholds, restrictions or conditions set out in Regulations (EU) 345/2013, (EU) 346/2013, and (EU) 2015/760.
(c) the sale of the loan is necessary to enable the AIFM to implement the investment strategy of the AIF it manages, in the best interests of the AIF’s investors;
2aa. ESMA shall develop regulatory technical standards as regards the assessment by competent authorities whether a loan-originating AIF has a sound liquidity management system and may maintain an open-ended structure, having regard to the underlying loan exposure, average repayment time of the loans and overall granularity and composition of AIF portfolios. In drawing up those regulatory technical standards, ESMA shall consider whether that assessment should include specific liquidity management tools including those set out in points 1 and 2 of the list set out in Annex V and also whether such AIFs should be subject to any additional disclosure as regards the specificities of loan-originating funds and their use of liquidity management tools in addition to the requirements set out in paragraph 2b.
(d) the sale of the loan is due to a deterioration in the risk associated with the loan, detected by the AIFM as part of its due diligence and risk management process referred to in Article 15(3), and the purchaser is informed of that deterioration when buying the loan.
2b. After assessing the suitability in relation to the pursued investment strategy, the liquidity profile and the redemption policy, an AIFM that manages an open-ended AIF shall select at least two appropriate liquidity management tools from the list set out in Annex V, points 2 to 7, for possible use in the interest of the AIF’s investors. That selection shall not prevent an AIFM from using other tools referred to in Annex V, points 2 to 8. The AIFM shall implement detailed policies and procedures for the activation and deactivation of any selected liquidity management tool and the operational and administrative arrangements for the use of such tools.
Upon request, the AIFM shall justify that it meets the conditions for the application of the derogations of the second subparagraph to the competent authorities of its home Member State.
_________________
* Regulation (EU) 2015/760 of the European Parliament and of the Council of 29 April 2015 on European long-term investment funds (OJ L 123, 19.5.2015, p. 98).
** Regulation (EU) No 345/2013 of the European Parliament and of the Council of 17 April 2013 on European venture capital funds (OJ L 115, 25.4.2013, p. 1).
*** Regulation (EU) No 346/2013 of the European Parliament and of the Council of 17 April 2013 on European social entrepreneurship funds (OJ L 115, 25.4.2013, p. 18).
**** Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending Directive 2006/43/EC of the European Parliament and of the Council and repealing Council Directives 78/660/EEC and 83/349/EEC (OJ L 182, 29.6.2013, p. 19).’;
(6) in Article 16, the following paragraphs are inserted:
‘2a. An AIFM shall ensure that the loan-originating AIF it manages is closed-ended.
By way of derogation from the first subparagraph, a loan originating AIF may be open-ended provided that the AIFM that manages it is able to demonstrate to the competent authorities of the AIFM's home Member State that the AIF's liquidity risk management system is compatible with its investment strategy and redemption policy.
The requirement set out in the first subparagraph shall be without prejudice to the thresholds, restrictions or conditions set out in Regulations (EU) No 345/2013, (EU) No 346/2013, and (EU) 2015/760.
2b. With a view to ensuring that the AIFM complies with the obligations set out in paragraphs 1 and 2, an AIFM that manages an open-ended AIF shall select at least two appropriate liquidity management tools from the list set out in Annex V, points 2 to 7, after assessing the suitability of those tools in relation to the pursued investment strategy, the liquidity profile and the redemption policy of the AIF, and include them in the AIF's rules or instruments of incorporation for possible use in the interest of the AIF’s investors. It shall not be possible for that selection to include only the tools set out in points 5a and 5b of that list.
By way of derogation from the first subparagraph, an AIFM may select only one liquidity management tool from Annex V, points 2 to 7, for an AIF it manages, if that AIF is authorised as a money market fund in accordance with Regulation (EU) 2017/1131.
The AIFM shall implement detailed policies and procedures for the activation and deactivation of any selected liquidity management tool and the operational and administrative arrangements for the use of such tool. The selection referred to in the first subparagraph and the detailed policies and procedures for the activation and deactivation shall be communicated to the competent authorities of the home Member State of the AIFM.
2c. An AIFM that manages an open-ended AIF may, in the interest of AIF investors, temporarily suspend the repurchase or redemption of the AIF units or activate other liquidity management tools selected from the list set out in Annex V, points 2 to 8, where those tools are included in the fund rules or the instruments of incorporation of the AIFM.
Redemption in kind as referred to in Annex V, point 7, can only be activated to meet redemptions requested by professional investors and if the redemption in kind corresponds to a pro rata share of the assets held by the AIF.
The temporary suspension referred to in the first subparagraph may only be provided for in exceptional cases where circumstances so require and where suspension is justified having regard to the interests of the AIF investors.
By way of derogation from the fourth subparagraph, the redemption in kind need not correspond to a pro rata share of the assets held by the AIF if that AIF is solely marketed to professional investors, or if the aim of that AIF’s investment policy is to replicate the composition of a certain stock or debt securities index and that AIF is an exchange-traded fund as defined in Article 2, point (26), of Regulation (EU) No 600/2014.
2d. An AIFM shall, without delay, notify the competent authorities of its home Member State in any of the following circumstances:
2c. An AIFM that manages an open-ended AIF may, in the interest of AIF investors, temporarily suspend the repurchase or redemption of the AIF units or shares as referred to in point 1 of the list set out in Annex V or, where those tools are included in the AIF's rules or ▌ instruments of incorporation, activate or deactivate other liquidity management tools selected from points 2 to 7 of that list in accordance with paragraph 2b of this Article. The AIFM may also, in the interest of AIF investors, activate side pockets as referred to in point 8 of that list.
- when, in situations of liquidity stress, an AIFM activates or deactivates one of the liquidity management tools listed in Annex V, points 1 and 2 ;
An AIFM may only use suspensions or side pockets as referred to in the first subparagraph ▌ in exceptional cases where circumstances so require and where ▌ justified having regard to the interests of the AIF investors.
- when activating or deactivating side pockets as referred to in point 8 of that Annex;
2d. An AIFM shall, without delay, notify the competent authorities of its home Member State as follows:
- when activating or deactivating any other liquidity management tool in a manner that is not in the ordinary course of business as envisaged in the fund documentation.
(a) when an AIFM activates or deactivates the liquidity management tool listed in Annex V, point 1;
The competent authorities of the home Member State of the AIFM shall notify, without delay, the competent authorities of a host Member State of the AIFM and ESMA ▌of any notifications received in accordance with this paragraph. The competent authorities of the home Member State of the AIFM shall notify the ESRB if there is any potential risk to the stability and integrity of the financial system. ESMA shall have the power to share the information received in accordance with this paragraph with competent authorities.
(b) when activating or deactivating the liquidity management tool listed in Annex V, point 8, in a reasonable timeframe prior to the activation or deactivation of that liquidity management tool;
(c) when activating or deactivating any other liquidity management tool in a manner that is not in the ordinary course of business as envisaged in the fund rules or the instruments of incorporation of the AIF.
The competent authorities of the home Member State of the AIFM shall notify, without delay, the competent authorities of a host Member State of the AIFM, ESMA and, if there are potential risks to the stability and integrity of the financial system, the ESRB of any notifications received in accordance with this paragraph. ESMA shall have the power to share the information received in accordance with this paragraph with competent authorities.
2e. Member States shall ensure that at least the liquidity management tools set out in Annex V are available to AIFMs managing open-ended AIFs.
2ea. ESMA shall develop draft regulatory technical standards to determine the requirements with which a loan-originating AIF must comply in order to maintain an open-ended structure. Those requirements shall include a sound liquidity management system, the availability of liquid assets and stress testing, as well as an appropriate redemption policy given the liquidity profile of the loan-originating AIF. Those requirements shall also take due account of the underlying loan exposures, the average repayment time of the loans and the overall granularity and composition of the loan-originating AIF’s portfolios.
2f. ESMA shall develop guidelines to specify best practice as regards the characteristics of the liquidity management tools set out in Annex V taking account of the diversity of investment strategies and underlying assets.
2f. ESMA shall develop draft regulatory technical standards to specify the characteristics of the liquidity management tools set out in Annex V.
2g. By ... [12 months after entry into force of this amending Directive] ESMA shall develop draft regulatory technical standards on the disclosure to competent authorities and to investors of information related to the selection and calibration of liquidity management tools by the AIFMs for liquidity risk management and for mitigating financial stability risks. Those standards shall recognise that the primary responsibility for liquidity risk management remains with the AIFM. They shall allow adequate time for adaptation before they apply, in particular for existing AIFs.
When drafting those regulatory technical standards, ESMA shall take account of the diversity of investment strategies and underlying assets of AIFs. Those standards shall not restrict the ability of AIFMs to use any appropriate LMT for all asset classes, in all jurisdictions and in all market conditions.
2h. Power is delegated to the Commission to adopt the regulatory technical standards referred to in paragraphs 2aa and 2g of this Article in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.’;
2g. By … [12 months after the date of entry into force of this amending Directive] ESMA shall develop guidelines on the selection and calibration of liquidity management tools by AIFMs for liquidity risk management and for mitigating financial stability risks. Those guidelines shall recognise that the primary responsibility for liquidity risk management remains with the AIFM. They shall include indications on the circumstances in which side pockets can be activated. They shall allow adequate time for adaptation before they apply, in particular for existing AIFs.
2h. ESMA shall submit the draft regulatory technical standards referred to in paragraphs 2ea and 2f of this Article to the Commission by … [12 months after the date of entry into force of this amending Directive].
Power is delegated to the Commission to supplement this Directive by adopting those regulatory technical standards in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.’;
(7) Article 20 is amended as follows:
(a) in paragraph 1, the first subparagraph1 is amended as follows:
(i)(a) the introductory phrase is replaced by the following:
‘1. AIFMs, which intend to delegate to third parties the task of carrying out, on their behalf, one or more of the functions listed in Annex I or of the services referred to in Article 6(4), shall notify the competent authorities of their home Member State before the delegation arrangements become effective. The following conditions shall be met:’;
(ii)(b) point (f) is replaced by the following:
‘(f) the AIFM must be able to demonstrate that the delegate is qualified and capable of undertaking the functions and providing the services in question, that it was selected with all due care and that the AIFM is in a position to monitor effectively at any time the delegated activity, to give at any time further instructions to the delegate and to withdraw the delegation with immediate effect when this is in the interest of investors.’;
(b) paragraph 3 is replaced by the following:
‘3. The AIFM’s liability towards its clients, the AIF and its investors shall not be affected by the fact that the AIFM has delegated functions or services to a third party, or by any further sub-delegation, irrespective of the regulatory status or location of any delegate or subdelegate, nor shall the AIFM delegate theits functions or services to the extent that, in essence, it can no longer be considered to be the manager of the AIF or the provider of the services referred to in Article 6(4) and▌and to the extent that it becomes a letter-box entity.entity.’;
3a.‘3a. The AIFM shall ensure that performance of the functions in Annex I and the provisionmanagement of thefunds servicesfor referredwhich toit inis Articlethe 6(4)AIFM complycomplies with the requirements set out in this Directive. That obligation shall apply irrespective of the regulatory status or location of any delegate or subdelegate.’;subdelegate.’
(c) in paragraph 4, the introductory phrase is replaced by the following:
‘4. The third party may sub-delegate any of the functions orand provision of services delegated to it provided that the following conditions are met:’;
(d) paragraph 6 isthe replacedfollowing byparagraph theis following:inserted:
‘6. Where the sub-delegate further delegates any of the functions or services delegated to it, the conditions set out in paragraph 4 shall apply mutatis mutandis.
‘6a. By way of derogation from paragraphs 1 to 6 of this Article, where the marketing function as referred to in Annex I, paragraph 2, point (b) is performed by one or several distributors which are acting on their own behalf and which market the AIF under Directive 2014/65/EU or through insurance-based investment products in accordance with Directive 2016/97/EU, such function shall not be considered to be a delegation subject to the requirements set out in paragraphs 1 to 6 of this Article irrespective of any distribution agreement between the AIFM and the distributor.’;
6a. By way of derogation from paragraphs 1 to 6 of this Article, where the marketing function as referred to in Annex I, point 2(b), is performed by one or several distributors which are acting on their own behalf and which market the AIF under Directive 2014/65/EU or through insurance-based investment products in accordance with Directive (EU) 2016/97, such function shall not be considered to be a delegation subject to the requirements set out in paragraphs 1 to 6 of this Article irrespective of any distribution agreement between the AIFM and the distributor.’;
(8) Article 21 is amended as follows:
(a)(-a) the following paragraph is inserted:
‘5a. By way of derogation from paragraph 5, point (a), theThe home Member State of an EU AIF may entitle its national competent authorities to allowallow, following a case-by-case assessment, institutions referred to in paragraph 3, firstArticle subparagraph,21(3), point (a),(a) and established in another Member State to be appointed as a depositary, provided that the following conditions are fulfilled:
(a)(i) the competent authorities have received a motivated request by the AIFM to allowfor the appointment of a depositary in another Member State; that request shall demonstrate the lack of the relevant depositary services in the home Member State of the AIF that are able to effectively meet the needs of the AIF having regard to its investmentoperational strategy; and
(b) the aggregate amount in the national depositary market of the home Member State of the AIF of assets safekept, as referred to in paragraph 8 of this Article, on behalf of EU AIFs, authorised or registered under the applicable national law in accordance with Article 4(1), point (k)(i), and managed by an EU AIFM, does not exceed EUR 50 billion or the equivalent in any other currency. Assets safekept by depositaries acting under Article 36(1), point (a), and the own assets of depositaries shall not be taken into account for the purpose of determining whether this condition is met.
(ii) the national depositary market of the home Member State of the AIF fulfils at least one of the following conditions:
Even if the conditions laid down in the first subparagraph, points (a) and (b), are met, the competent authorities shall allow the appointment of a depositary in another Member State as referred to in the first subparagraph only after a case-by-case assessment of the lack of relevant depositary services in the home Member State of the AIF, given the investment strategy of the AIF.
- that market consists of fewer than seven depositaries providing depositary services to EU AIFs, authorised or registered under the applicable national law in accordance with Article 4, point (k), point (i) of this Directive, and managed by an EU AIFMs authorised in accordance with Article 7(1) of this Directive, and none of those depositaries has assets safekept within the meaning of Article 21(8), points (a) and (b) exceeding EUR 1 billion or the equivalent in any other currency. Assets held by a depositary acting under Article 36(1a) of this Directive and the own assets of a depositary shall be excluded from the determination whether this condition is met;
When allowing the appointment of a depositary in another Member State, the competent authorities shall notify ESMA.
- the aggregate amount in that market of assets safekept, in the meaning of Article 21(8), points (a) and (b), on behalf of EU AIFs, authorised or registered under the applicable national law in accordance with Article 4, point (k), point (i) of this Directive, and managed by an EU AIFM ,authorised in accordance with Article 7(1) of this Directive, does not exceed the amount of EUR 60 billion or the equivalent in any other currency. Assets safekept by depositaries acting under Article 36(1a) of this Directive and the own assets of depositaries shall be excluded from the determination whether this condition is met.’;
This paragraph shall be without prejudice to the full application of the other paragraphs of this Article, with the exception of paragraph 5, point (a).’;
(a) in paragraph 6, points (c) and (d) are replaced by the following:
(b) paragraph 6 is amended as follows:
‘(c) the third country where the depositary is established is not identified as a high-risk third country pursuant to Article 9(2) of Directive (EU) 2015/849 at the time of the AIFM’s application for authorisation in accordance with Article 7(1);’;
(i) in the first subparagraph, points (c) and (d) are replaced by the following:
(d) the Member States in which the units or shares of the non-EU AIF are intended to be marketed, and, in so far as different, the home Member State of the AIFM, have signed an agreement with the third country where the depositary is established which fully complies with the standards laid down in Article 26 of the OECD Model Tax Convention on Income and on Capital and ensures an effective exchange of information in tax matters including any multilateral tax agreements and the third country is not mentioned in Annex I to the relevant last updated version of the Council conclusions ▌on the revised EU list on non-cooperative jurisdictions for tax purposes;’ If a third country where the non-EU AIF is established is added to that annex after the time of the AIFM’s application for authorisation in accordance with Article 7(1), closed-ended funds shall continue to be considered to meet the criteria of this paragraph for a period of two years.
‘(c) the third country where the depositary is established is not identified as a high-risk third country pursuant to Article 9(2) of Directive (EU) 2015/849;
For the purposes of this paragraph, a third country that has been continuously mentioned in Annex II to the Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes for a period of over three years shall be considered to be mentioned in Annex I to those conclusions.’;
(d) the Member States in which the units or shares of the non-EU AIF are intended to be marketed, and, in so far as different, the home Member State of the AIFM, have signed an agreement with the third country where the depositary is established which fully complies with the standards laid down in Article 26 of the OECD Model Tax Convention on Income and on Capital and ensures an effective exchange of information in tax matters including any multilateral tax agreements and the third country is not mentioned in Annex I to the Council conclusions ▌ on the revised EU list of non-cooperative jurisdictions for tax purposes.’
(b) paragraph 11 is amended as follows:
(ii) the following subparagraph is inserted after the first subparagraph:
‘By way of derogation from the introductory part of the first subparagraph, the conditions in points (c) and (d) of that subparagraph shall apply at the time of the depositary's appointment. If a third country where a depositary is established is identified as a high-risk third country pursuant to Article 9(2) of Directive (EU) 2015/849, as referred to in the first subparagraph, point (c), or is added to Annex I to the Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes, as referred to in the first subparagraph, point (d), after the time of the appointment of the depositary, a new depositary shall be appointed within an appropriate period of time, taking due account of the interests of investors. That period shall be no longer than two years.’;
(c) paragraph 11 is amended as follows:
(i) in the second subparagraph, point (c) is replaced by the following:
‘(c) the depositary has exercised all due skill, care and diligence in the selection and the appointment of any third party to whom it wants to delegate parts of its tasks, except where that third party is a central securities depository acting in the capacity of an investorissuer CSD as defined in the delegated act adopted pursuanton tothe basis of Articles 29(3) and 48(10) of Regulation (EU) NoNo. 909/2014, and keeps exercising all due skill, care and diligence in the periodic review and ongoing monitoring of any third party to whom it has delegated parts of its tasks and of the arrangements of the third party in respect of the matters delegated to it;’;it;
▌
(ii) the fifth subparagraph is replaced by the following:
‘For the purposes of this Article,paragraph, the provision of services by a central securities depository acting in the capacity of an issuer CSD as defined in the delegated act adopted pursuanton tothe basis of Articles 29(3) and 48(10) of Regulation (EU) No 909/2014 shall not be considered a delegation of the depositary’s custody functions. For the purposes of this Article, theThe provision of services by a central securities depository acting in the capacity of an investor CSD as defined in that delegated act shall be considered a delegation of the depositary’s custody functions.’;
(d)(c) paragraph 16 is replaced by the following:
‘16. The depositary shall make available to its competent authorities, to the competent authorities of the AIF ▌that has appointed it as a depositary and to the competent authorities of the AIFM ▌that ,manages onthat request,AIF, any▌all information that it has obtained while performing its duties.duties and that may be necessary for the competent authorities of the AIF or the AIFM. If the competent authorities of the AIF or the AIFM are different from those of the depositary, the competent authorities of the depositary shall share the information received without delay with the competent authorities of the AIF and the AIFM, and the competent authorities of the AIF or the AIFM shall share without delay with the competent authorities of the depositary any information relevant for the exercise of those authorities’ supervisory powers.’;
Where the competent authorities of the AIF or the AIFM are different from those of the depositary:
(a) the competent authorities of the depositary shall share without delay with the competent authorities of the AIF and the AIFM any information relevant for the exercise of those authorities' supervisory powers; and
(b) the competent authorities of the AIF or the AIFM shall share without delay with the competent authorities of the depositary any information relevant for the exercise of the supervisory powers by the competent authorities of the depositary.’;
(e) in paragraph 17, point (c)(ii) is replaced by the following:
‘(ii) the conditions subject to which the depositary is able to exercise its custody duties over financial instruments registered with a central securities depository; and’;
(9) Article 23 is amended as follows:
(a) paragraph 1 is amended as follows:
(i) point (a)(h) is replaced by the following:
‘(a) the name of the AIF, a description of the investment strategy and objectives of the AIF, information on where any master AIF is established and where the underlying funds are established if the AIF is a fund of funds, a description of the types of assets in which the AIF may invest, the techniques it may employ and all associated risks, any applicable investment restrictions, the circumstances in which the AIF may use leverage, the types and sources of leverage permitted and the associated risks, any restrictions on the use of leverage and any collateral and asset reuse arrangements, and the maximum level of leverage which the AIFM is entitled to employ on behalf of the AIF;’;
‘(h) a description of the AIF’s liquidity risk management, including the redemption rights both in normal and in exceptional circumstances, disclosing the possibility and conditions for using liquidity management tools selected in accordance with Article 16(2b), and the existing redemption arrangements with investors.’;
(ii) point (h)(ia) is replaced by the following:inserted:
‘(h) a description of the AIF’s liquidity risk management, including the redemption rights, both in normal and in exceptional circumstances, of the existing redemption arrangements with investors, and of the possibility and conditions for using liquidity management tools selected in accordance with Article 16(2b) ▌;’;
‘(ia) a list of fees and charges that will be applied in connection with the operation of the AIF and that will be borne by the AIFM▌.’;
(iii) point (ia) is inserted:
(b) in paragraph 4, the following points (d), (e) and (f) are added:
‘(ia) a list of fees, charges and expenses that are borne by the AIFM in connection with the operation of the AIF and that will be directly or indirectly allocated to the AIF’;’
‘(d) portfolio composition of originated loans;
(b) in paragraph 4, the following points are added:
(e) on an annual basis, all direct and indirect fees and charges that were directly or indirectly charged ▌to the AIF▌;
‘(d) the composition of the originated loan portfolio;
(f) on an annual basis, any parent company, subsidiary or special purpose entity established in relation to the AIF’s investments by the AIFM▌.’;
(e) on an annual basis, all ▌ fees, charges and expenses that were directly or indirectly borne by investors;
(f) on an annual basis, any parent company, subsidiary or special purpose entity utilised in relation to the AIF’s investments by or on behalf of the AIFM ▌ .’;
(c) the following paragraph is added:
‘6a. In order to ensure a uniform application of the rules relating to the name of the AIF, ESMA shall by … [24 months after the date of entry into force of this amending Directive] develop guidelines to specify the circumstances where the name of an AIF is unfair, unclear, or misleading. Those guidelines shall take into account relevant sectoral legislation. Sectoral legislation setting standards for fund names or marketing of funds takes precedence over those guidelines.’;
(10) Article 24 is amended as follows:
(a) paragraph 1 is replaced by the following:
‘1. An AIFM shall regularly report to the competent authorities of its home Member State on the markets and instruments in which it trades on behalf of the AIFs it manages.manages, and on other relevant economic and accounting information set out in paragraph 2.
It shall, in respect of each AIF it manages,shall provide information on the instruments in which it is trading, on markets of which it is a member or where it actively trades, and on the exposures and assets of the AIF. That information shall include the identifiers that are necessary toeach connectof the data provided on assets, AIFs and AIFMs to other supervisoryit ormanages.’; publicly(b) availablein dataparagraph sources.’;2:
(b) in paragraph 2, points (c) and (d) are replaced by the following:
(i) point (d) is deleted;
‘(c) the current risk profile of the AIF, including the market risk, liquidity risk, counterparty risk, other risks including operational risk and the total amount of leverage employed by the AIF;
(ii) the following points are added:
(d) information regarding delegation arrangements concerning portfolio management or risk management functions as follows:
‘(ea) the total amount of leverage of the net asset value employed by the AIF;
(i) information on the delegates, specifying the delegates’ name and domicile, whether they have any close links with the AIFM, whether they are authorised or regulated entities for the purpose of asset management and where relevant, their supervisory authority, including the identifiers of the delegates that are necessary to connect the information provided to other supervisory or publicly available data sources;
(eb) with respect to each AIF managed or marketed in the Union by an authorised AIFM, information regarding delegation arrangements concerning portfolio management or risk management functions and in particular:
(ii) the number of full-time equivalent human resources employed by the AIFM for performing day-to-day portfolio or risk management tasks within the AIFM;
(i) information on the entities to which such functions have been delegated, namely the name and relevant legal identifier of each delegate, its jurisdiction of establishment and, where relevant, its supervisory authority;
(iia) a list(ia) andfor descriptioneach of the activities concerning riskfollowing, managementa anddescription portfolioof managementthe functionshuman whichand aretechnical delegated;resources:
(iii) where the portfolio management function is delegated, the amount and percentage of the AIF’s assets which are subject to delegation arrangements concerning the portfolio management function;
- employed by or committed to the AIFM for performing day-to-day portfolio or risk management tasks within the AIFM;
(iv) the number of full-time equivalent human resources employed by the AIFM to monitor the delegation arrangements;
- employed by or committed to the delegate for performing those services on a delegated basis; and
(v) the number and dates of periodic due diligence reviews carried out by the AIFM to monitor the delegated activity, a list of issues identified and, where relevant, the measures adopted to address those issues and the date by which those measures are to be implemented;
- employed by or committed to the AIFM for monitoring and controlling the delegate;
(vi) where sub-delegation arrangements are in place, information required in points (i), (iia) and (iii) in respect of the sub-delegates and the activities related to the portfolio and risk management functions that are sub-delegated;
(ii) information on the function delegated, the type of delegation (full or partial), and the date of the delegation agreement or contract;
(vii) the commencement and expiry dates of the delegation and sub-delegation arrangements.’;
(iii) where sub-delegation arrangements are in place, the same information in respect of the sub-delegates and the functions sub-delegated;
(c) in paragraph 2, the following point is added:
(iv) the date of conclusion and expiration of the delegation and sub-delegation arrangements;
‘(f) the list of Member States in which the units or shares of the AIF are actually marketed by the AIFM or by a distributor which is acting on behalf of that AIFM.’;
(v) confirmation that the AIFM has implemented periodic due diligence measures to oversee, monitor and control the delegate, and kept records of issues identified and, where relevant, the measures adopted to address those issues.’
(d) in paragraph 5, the second subparagraph is replaced by the following:
(c) in paragraph 5, second subparagraph is replaced by the following:‘In exceptional circumstances and where required in order to ensure the stability and integrity of the financial system, or to promote long-term sustainable growth, ESMA after consulting the ESRB may request the competent authorities of the home Member State to impose additional reporting requirements.’;
‘In exceptional circumstances and where required in order to ensure the stability and integrity of the financial system, or to promote long-term sustainable growth, ESMA after consulting the ESRB may request the competent authorities of the home Member State to impose additional reporting requirements.’;
(d) paragraph 6 is replaced by the following:
(e) paragraph 6 is replaced by the following:
‘6. ESMA shall develop draft regulatory technical standards specifying the details to be reported according to paragraphs 1 and points (a) to (ea) of paragraph 2. Those draft regulatory technical standards shall also set out the appropriate level of standardisation of the information to be reported according to paragraph 2, point (eb). In order to reduce duplication and inconsistencies between reporting frameworks in the asset management sector and other sectors of the financial industry, ESMA shall take into account:
‘6. ESMA shall develop draft regulatory technical standards specifying:
(i) other reporting requirements to which the AIFMs are subject;
(a) the details of the information to be reported according to paragraph 1 and paragraph 2, points (a) to (c) and (e) to (f);
(ii) international developments and standards agreed at Union or global level; and
(aa) the appropriate level of standardisation of the information to be reported according to paragraph 2, point (d);
(iii) the report issued in accordance with paragraph 2 of Article 69b.
(b) the reporting frequency and timing.
ESMA shall submit those draft regulatory technical standards to the Commission by [Please insert date = 36 months after the entry into force of this Directive].
When drafting the regulatory technical standards referred to in point (aa), ESMA shall not introduce reporting obligations additional to those set out in paragraph 2, point (d).
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.’;
When drafting the regulatory technical standards referred to in points (a) and (aa), ESMA shall take into consideration other reporting requirements to which the AIFMs are subject, international developments and standards, and the findings of the report issued in accordance with Article 69b(2).
(d) the following paragraph 7 is added:
ESMA shall submit those draft regulatory technical standards to the Commission by … [36 months after the date of entry into force of this amending Directive].
‘7. ESMA shall develop draft implementing technical standards specifying:
Power is delegated to the Commission to supplement this directive by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.’
(a) the format and data standards for the reports referred to in paragraphs 1 and 2, which shall include in particular relevant legal identifiers and international securities identification numbers (ISINs);
7. ESMA shall develop draft implementing technical standards specifying:
(b) the reporting frequency and timing;
(a) the format and data standards for the reports referred to in paragraphs 1 and 2;
(ba) methods and arrangements for submitting the reports referred to in paragraphs 1 and 2, including methods and arrangements to improve data standardisation and efficient sharing and use of data already reported in any Union reporting framework by any relevant competent authority, at Union or national level, taking into account the findings of the report issued in accordance with paragraph 2 of Article 69b;
(aa) the legal identifiers that are necessary to connect the data in those reports on assets, AIFs and AIFMs to other supervisory or publicly available data sources;
(bb) the reporting template that includes a minimum set of indicators that would be relevant for AIFs to provide in exceptional circumstances referred to in paragraph 5.
(ba) methods and arrangements for submitting the reports referred to in paragraphs 1When anddeveloping 2,those includingdraft methodsimplementing andtechnical arrangementsstandards, toESMA improveshall datatake standardisationinto andaccount efficientinternational sharingdevelopments and use of data already reported in any Union reporting framework by any relevant competentstandards authority,agreed at Union or national level, takingglobal intolevel accountand the findings of the report issued in accordance with Article 69b(2);69b(2).
(bb) the template, including the minimum additional reporting requirements, to be used by AIFMs in exceptional circumstances as referred to in paragraph 5.
ESMA shall submit those draft implementing technical standards to the Commission by [Please insert date = 36 months after the entry into force of this Directive].
ESMA shall submit those draft implementing technical standards to the Commission by … [36 months after the date of entry into force of this amending Directive].
Power is delegated to the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.’;
Power is conferred on the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.
(10a) in Article 25, the following paragraph is inserted:
8. The Commission shall adopt delegated acts in accordance with Article 56 and‘3a subjectLimits to the conditionslevel of Articles 57 andleverage 58referred to supplement this Directive by specifying whenin leverageparagraph is3 toshall be consideredbased toon bethe employedleverage onmeasures aspecified substantialin basisaccordance forwith theArticle purposes4(3) of paragraphthis 4.’;Directive.’;
(11)(10b) in Article 25, paragraph 231, isthe replacedfollowing byparagraph theis following:added:
‘The competent authorities of the home Member State of the AIFM shall ensure that all information gathered under Article 24 in respect of all AIFMs that they supervise and the information gathered under Article 7 is made available to other relevant competent authorities, ESMA, the other ESAs and the ESRB, whenever necessary for the purpose of carrying out their duties, by means of the procedures set out in Article 50 on supervisory cooperation.
‘6a. The provisions of this article shall not apply to AIFs constituted exclusively for the purpose of purchasing company shares and proposed to employees of these companies within the framework of employee savings schemes.’
The competent authorities of the home Member State of the AIFM shall ensure that all information gathered under Article 24 in respect of all AIFMs that they supervise is made available, for statistical purposes only, to the ESCB, by means of the procedures set out in Article 50 on supervisory cooperation.
(11) in Article 35(2), points (b) and (c) are replaced by the following:
The competent authorities of the home Member State of the AIFM shall, without delay, provide information by means of those procedures, and bilaterally to the competent authorities of other Member States directly concerned, if an AIFM under their responsibility, or AIF managed by that AIFM, could potentially constitute an important source of counterparty risk to a credit institution or other systemically relevant institutions in other Member States.’;
‘(b) the third country where the non-EU AIF is established is not identified as a high-risk third country pursuant to Article 9(2) of Directive (EU) 2015/849 at the time of the AIFM’s application for authorisation in accordance with Article 7(1);
(12) in Article 35(2), points (b) and (c) are replaced by the following:
(c) the third country where the non-EU AIF is established has signed an agreement with the home Member State of the authorised AIFM and with each other Member State in which the units or shares of the non-EU AIF are intended to be marketed, which fully complies with the standards laid down in Article 26 of the OECD Model Tax Convention on Income and on Capital and ensures an effective exchange of information in tax matters, including any multilateral tax agreements, and the third country is not mentioned in Annex I to the Council conclusions ▌on the revised EU list on non-cooperative jurisdictions for tax purposes applicable at the time of the AIFM’s application for authorisation in accordance with Article 7(1).
‘(b) the third country where the non-EU AIF is established is not identified as a high-risk third country pursuant to Article 9(2) of Directive (EU) 2015/849;
If a third country where the non-EU AIF is established is added to Annex I to the relevant last updated version of the Council conclusions on the revised EU list on non-cooperative jurisdictions for tax purposed after the AIFM’s application for authorisation in accordance with Article 7(1), closed-ended funds shall continue to be considered to meet that criterion for a period of two years.
(c)For the thirdpurposes countryof wherethis theparagraph, non-EUa AIFthird iscountry establishedthat has signed an agreement with the home Member State of the authorised AIFM and with each otherbeen Membercontinuously Statementioned in which the units or shares of the non-EU AIF areAnnex intendedII to be marketed, which fully complies with the standards laid down in ArticleCouncil 26conclusions ofon the OECD Model Taxrevised ConventionEU onlist Incomeof andnon-cooperative onjurisdictions Capitalfor andtax ensurespurposes anfor effectivea exchangeperiod of information in tax matters, including any multilateral taxover agreements,three andyears theshall thirdbe countryconsidered isto notbe mentioned in Annex I to the Council conclusions ▌ the revised EU list of non-cooperative jurisdictions for taxthose purposes.’;conclusions.’;
(13) in(12) Article 36, paragraph 136(1) is amended as follows:
(a) point (c) is replaced by the following:
‘(c) the third country where the non-EU AIF is established is not identified as a high-risk third country pursuant to Article 9(2) of Directive (EU) 2015/849;2015/849 at the time of the AIFM’s application for authorisation in accordance with Article 7(1).’;
(d) the third country where the non-EU AIF is established has signed an agreement with the home Member State of the authorised AIFM and with each other Member State in which the units or shares of the non-EU AIF are intended to be marketed, which fully complies with the standards laid down in Article 26 of the OECD Model Tax Convention on Income and on Capital and ensures an effective exchange of information in tax matters, including any multilateral tax agreements, and that third country is not mentioned in Annex I to the Council conclusions ▌ on the revised EU list of non-cooperative jurisdictions for tax purposes.’;
(b) the following point (d) is added:
(14) in Article 37, paragraph 7 is amended as follows:
‘(d) the third country where the non-EU AIF is established has signed an agreement with the home Member State of the authorised AIFM and with each other Member State in which the units or shares of the non-EU AIF are intended to be marketed, which fully complies with the standards laid down in Article 26 of the OECD Model Tax Convention on Income and on Capital and ensures an effective exchange of information in tax matters, including any multilateral tax agreements, and that third country is not mentioned in Annex I to the relevant last updated version of the Council conclusions ▌on the revised EU list on non-cooperative jurisdictions for tax purposes applicable at the time of the AIFM’s application for authorisation in accordance with Article 7(1).
(a) in the first subparagraph, points (e) and (f) are replaced by the following:
If the third country where the non-EU AIF is established is added to Annex I to the relevant last updated version of the Council conclusions on the revised EU list on non-cooperative jurisdictions for tax purposed after the time of the AIFM’s application for authorisation in accordance with Article 7(1), closed-ended funds shall continue to be considered to meet that criterion for a period of two years.
‘(e) the third country where the non-EU AIFM is established is not identified as a high-risk third country pursuant to Article 9(2) of Directive (EU) 2015/849;
For the purposes of this paragraph, a third country that has been continuously mentioned in Annex II to the Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes for a period of over three years shall be considered to be mentioned in Annex I to those conclusions.
(f) the third country where the non-EU AIFM is established has signed an agreement with the Member State of reference, which fully complies with the standards laid down in Article 26 of the OECD Model Tax Convention on Income and on Capital and ensures an effective exchange of information in tax matters, including any multilateral tax agreements and the third country is not mentioned in Annex I to the Council conclusions ▌ on the revised EU list of non-cooperative jurisdictions for tax purposes.’;
(13) in Article 37(7), points (e) and (f) are replaced by the following:
(b) the following subparagraph is inserted after the first subparagraph:
‘(e) the third country where the non-EU AIFM is established is not identified as a high-risk third country pursuant to Article 9(2) of Directive (EU) 2015/849 at the time of the AIFM’s application for authorisation in accordance with paragraph 1 of this Article;
‘If(f) the third country where the non-EU AIFM is established ishas identifiedsigned asan aagreement high-riskwith thirdthe countryMember pursuantState toof Articlereference, 9(2)which offully Directivecomplies (EU)with 2015/849,the asstandards referredlaid todown in pointArticle (c)26 of this subparagraph, orthe isOECD addedModel toTax AnnexConvention Ion toIncome theand Councilon conclusionsCapital onand theensures revisedan EUeffective listexchange of non-cooperative jurisdictionsinformation forin tax purposes, as referred to inmatters, pointincluding (f)any ofmultilateral thistax subparagraph,agreements afterand the timethird ofcountry authorisationis ofnot thementioned non-EUin AIFM,Annex theI non-EUto AIFMthe shall,Council withinconclusions an▌on appropriatethe periodrevised ofEU time,list takeon suchnon-cooperative measuresjurisdictions asfor aretax necessarypurposes toapplicable rectifyat the situation in respecttime of the AIFs thatAIFM’s itapplication manages,for takingauthorisation duein accountaccordance ofwith theparagraph interests1 of investors. That period shall be no longer than twothis years.’;Article.
If the third country where the non-EU AIF is established is added to Annex I to the relevant last updated version of the Council conclusions on the revised EU list on non-cooperative jurisdictions for tax purposes after the time of the AIFM’s application for authorisation in accordance with paragraph 1 of this Article, closed-ended funds shall continue to be considered to meet that criterion for a period of two years.;
For the purposes of this paragraph, a third country that has been continuously mentioned in Annex II to the Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes for a period of over three years shall be considered to be mentioned in Annex I to those conclusions’;
(14) the following Article 38a is inserted:
‘Article 38a
Peer review of application of the delegation regime
1. By … [12 months before the date of the review referred to in Article 69b], ESMA shall▌ conduct a one-off comprehensive peer review analysis of the supervisory activities of the competent authorities in relation to the application of Article 20. That peer review analysis shall focus on the measures taken to prevent that AIFMs, which delegate performance of portfolio management or risk management to third parties located in third countries, become letter-box entities.
2. When conducting the peer review analysis, ESMA shall use transparent methods to ensure an objective assessment and comparison between the competent authorities reviewed.’;
(15) in Article 40(2), points (b) and (c) are replaced by the following:
‘(b) the third country where the non-EU AIF is established is not identified as a high-risk third country pursuant to Article 9(2) of Directive (EU) 2015/849;2015/849 at the time of the AIFM’s application for authorisation in accordance with Article 39(1);
(c) the third country where the non-EU AIF is established has signed an agreement with the Member State of reference and with each other Member State in which the units or shares of the non-EU AIF are intended to be marketed which fully complies with the standards laid down in Article 26 of the OECD Model Tax Convention on Income and on Capital and ensures an effective exchange of information in tax matters including any multilateral tax agreements, and the third country is not mentioned in Annex I to the the relevant last updated version of the Council conclusions ▌ on▌on the revised EU list ofon non-cooperative jurisdictions for tax purposes.’;purposes applicable at the time of the AIFM’s application for authorisation in accordance with Article 39(1).
(16) in Article 42(1), point (c) is replaced by the following:
If the third-country where the non-EU AIF is established is added to Annex I to the relevant last updated version of the Council conclusions on the revised EU list on non-cooperative jurisdictions for tax purposed after the time of the AIFM’s application for authorisation in accordance with Article 39(1), closed-ended funds shall continue to be considered to meet that criterion for a period of two years.
‘(c) the third country where the non-EU AIFM or the non-EU AIF is established is not identified as a high-risk third country pursuant to Article 9(2) of Directive (EU) 2015/849;
For the purposes of this paragraph, a third country that has been continuously mentioned in Annex II to the Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes for a period of over three years shall be considered to be mentioned in Annex I to those conclusions.’;
(d) the third country where the non-EU AIF or non-EU AIFM is established has signed an agreement with the Member State in which the units or shares of the non-EU AIF are intended to be marketed, which fully complies with the standards laid down in Article 26 of the OECD Model Tax Convention on Income and on Capital and ensures an effective exchange of information in tax matters, including any multilateral tax agreements, and that third country is not mentioned in Annex I to the Council conclusions ▌ on the revised EU list of non-cooperative jurisdictions for tax purposes.’;
(16) Article 42(1) is amended as follows:
(17) in Article 43, the following paragraph is added:
(a) point (c) is replaced by the following:
‘3. Member States shall ensure that an authorised EU AIFM may market units or shares of an EU AIF, which invests predominantly in the shares of a particular company, to employees of that company or of its affiliated entities within the framework of employee savings or participation schemes, on a domestic or cross-border basis.
‘(c) the third country where the non-EU AIFM or the non-EU AIF is established is not identified as a high-risk third country pursuant to Article 9(2) of Directive (EU) 2015/849 at the time the Member State allows the non-EU AIF to be marketed to professional investors in its territory.’;
Where such an AIF is marketed to employees on a cross-border basis, the Member State where the marketing takes place shall not impose any requirements in addition to those applicable in the home Member State of the AIF.’;
(b) the following point (d) is added:
(18) in Article 46(2), point (j) is replaced by the following:
‘(d) the third country where the non-EU AIF or non-EU AIFM is established has signed an agreement with the Member State in which the units or shares of the non-EU AIF are intended to be marketed, which fully complies with the standards laid down in Article 26 of the OECD Model Tax Convention on Income and on Capital and ensures an effective exchange of information in tax matters, including any multilateral tax agreements, and that third country is not mentioned in Annex I to the relevant last updated version of the Council conclusions ▌on the revised EU list on non-cooperative jurisdictions for tax purposes applicable at the time the Member State allows the non-EU AIF to be marketed to professional investors in its territory.
‘(j) in the interest of investors, in exceptional circumstances, where there are investor protection or financial stability risks that, on a reasonable and balanced view, necessitate this requirement, and after consulting the AIFM, require AIFMs to activate or deactivate the liquidity management tool referred to in point 1 of the list set out in Annex V.’;
If the third-country where the non-EU AIF is established is added to Annex I to the relevant last updated version of the Council conclusions on the revised EU list on non-cooperative jurisdictions for tax purposes after the time the Member State allows the non-EU AIF to be marketed to professional investors in its territory, closed-ended funds shall continue to be considered to meet that criterion for a period of two years.
(19) Article 47 is amended as follows:
For the purposes of this paragraph, a third country that has been continuously mentioned in Annex II to the Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes for a period of over three years shall be considered to be mentioned in Annex I to those conclusions.’;
(a)(16a) paragraphin 2Article is43, replacedthe byfollowing theparagraph following:(3a) is added:
‘The obligation of professional secrecy shall apply to all persons who work or who have worked for ESMA, and for the competent authorities or for any other person to whom ESMA has delegated tasks, including auditors and experts contracted by ESMA. Information covered by professional secrecy shall not be disclosed to another person or authority except where such disclosure is necessary for legal proceedings or for cases covered by taxation law.’;
‘3a. This Article shall not apply to AIFs constituted exclusively for the purpose of purchasing company shares and proposed to employees of these companies within the framework of employee savings schemes.’;
(b)(17) paragraphin 3Article 46(2), point (j) is replaced by the following:
‘(j) in the interest of investors▌, in exceptional circumstances and after consulting the AIFM, and if there are reasonable and balanced investor protection or financial stability risks that necessitate this requirement, require AIFMs to activate or deactivate a liquidity management tool referred to in point 1 or 2 of Annex V▌,whichever is more suitable considering the type of open-ended AIF or group of open-ended AIFs concerned▌.’;
(18) Article 47 is amended as follows:
(a) paragraph 3 is replaced by the following:
‘3. All the information exchanged under this Directive between ESMA, the competent authorities, EBA, the European Supervisory Authority (European Insurance and Occupational Pensions Authority) established by Regulation (EU) No 1094/2010 of the European Parliament and of the Council* and the ESRB shall be considered confidential, except:
(c) where the information disclosed is used in a summary or in an aggregate form in which individual financial market participants cannot be identified.
Paragraph 2, and the first subparagraph of this paragraph, shall not preclude the exchange of information between competent authorities and tax authorities in the same Member State. Where the information originates in another Member State, it shall only be disclosed in accordance with the first sentence of this subparagraph with the express agreement of the competent authorities which have disclosed it.
*Regulation (EU) No 1094/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Insurance and Occupational Pensions Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/79/EC (OJ L 331, 15.12.2010, p. 48).’;
_________________
(b) in paragraph 4, the following point (d) is added:
* Regulation (EU) No 1094/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Insurance and Occupational Pensions Authority), amending Decision No 716/2009/EC and repealing Commission Decision 2009/79/EC (OJ L 331, 15.12.2010, p. 48).’;
‘(d) require non-EU AIFMs that are marketing in the Union AIFs that they manage or EU AIFMs managing non-EU AIFs to activate or deactivate a liquidity management tool referred to in point 1 or 2 of Annex V or selected by the AIFM, whichever is more suitable considering the type of open-ended AIF concerned and the investor protection or financial stability risks that necessitate this requirement.’;
(c) in paragraph 4, the following point is added:
(19) Article 50 is amended as follows:
‘(d) in the interest of investors, in exceptional circumstances, where there are investor protection or financial stability risks that, on a reasonable and balanced view, necessitate this requirement, and after consulting the AIFM, require non-EU AIFMs that are marketing in the Union AIFs that they manage or EU AIFMs managing non-EU AIFs to activate or deactivate the liquidity management tool referred to in point 1 of the list set out in Annex V.’;
(20) Article 50 is amended as follows:
(a) paragraph 5 is replaced by the following:
‘5. Where the competent authorities of one Member State have reasonableclear and demonstrable grounds to suspect that acts contrary to this Directive are being or have been carried out by an AIFM not subject to supervision of those competent authorities, or by an entity appointed as depositary by an AIFM, they shall notify ESMA and the competent authorities of the home and host Member States of the AIFM or those of the entity concerned thereof in as specific a manner as possible. The recipient authorities shall take appropriate action, shall inform ESMA and the notifying competent authorities of the outcome of that action and, to the extent possible, of significant interim developments. This paragraph shall be without prejudice to the competences of the notifying competent authority.authority.’;
5a. When the competent authorities of the home Member State of an AIFM exercise powers pursuant to Article 46(2), point (j), they shall notify the competent authorities of the host Member State of the AIFM and ESMA, and, if there are potential risks to the stability and integrity of the financial system, also the ESRB.
(b) the following paragraphs 5a to 5g are inserted:
5b. The‘5a.The competent authorities of the hosthome Member State of an AIFM mayshall requestnotify the competent authorities of the homehost Member State of the AIFM and ESMA ▌prior to exerciseexercising powers laid downpursuant into Article 46(2), point (j)(j), ▌or ,Article specifying47(4), thepoint reasons(d). forThe competent authorities of the requesthome andMember notifyingState ESMAof and,the AIFM shall notify ESRB if there areis any potential risksrisk to the stability and integrity of the financial system, the ESRB thereof.system.
5c. Where5b. theThe competent authoritiesauthority of the homehost Member State of thean AIFM doesmay notrequest agreethe withcompetent authority of the requesthome referredMember State of the AIFM to inexercise paragraphpowers 5b,laid theydown shallin informArticle the46(2), competentpoint authorities(j) ofor theArticle host47(4), Memberpoint State(d), ofspecifying the AIFMreasons andfor ESMA,the statingrequest theirand reasonsnotifying ESMA and, ifin therethe arecase of any potential risksrisk to the stability and integrity of the financial system, the ESRB thereof.
5d. Based5c. onWhere the informationcompetent receivedauthority inof accordancethe withhome paragraphsMember 5bState andof 5c,the ESMAAIFM shalldoes issuenot anagree opinionwith withoutthe unduerequest delayreferred to in paragraph 5b, it shall inform the competent authoritiesauthority of the homehost Member State of the AIFM on exercising powersAIFM, laidESMA downand, in Articlecase 46(2),of pointany (j).potential ESMArisk shallto communicatethe thatstability opinionand tointegrity theof competentthe authoritiesfinancial ofsystem, the hostESRB Memberthereof, State.stating its reasons.
5e. Where the competent authorities do not act in accordance or do not intend to comply with ESMA’s opinion referred to in paragraph 5d, they shall inform ESMA and the competent authorities of the host Member State, stating the reasons for the non-compliance or intention. In the event of a serious threat to investor protection, to the orderly functioning and integrity of financial markets or to the stability of the whole or part of the financial system in the Union, and unless such publication is in conflict with the legitimate interests of the unitholders or shareholders or of the public, ESMA may publish the fact that the competent authorities do not comply or intend to comply with its advice together with the reasons stated by the competent authorities for the non-compliance or intention. ESMA shall analyse whether the benefits of publication would outweigh the amplification of those threats by that publication and shall give the competent authorities advance notice of such publication.
5d. Based on the information received in accordance with paragraphs 5b and 5c, ESMA shall issue an opinion to the competent authorities of the home Member State of the AIFM on exercising powers laid down in Article 46(2), point (j) or Article 47(4), point (d). The opinion shall be communicated to the authority of the host Member State.
5f. The competent authorities of the host Member State of an AIFM may, where they have reasonable grounds for doing so, request the competent authorities of the home Member State of the AIFM to exercise, without delay, powers laid down in Article 46(2), other than point (j) of that paragraph, specifying the reasons for its request in as specific a manner as possible and notifying ESMA and, if there are potential risks to the stability and integrity of the financial system, the ESRB thereof.
5e. Where the competent authority does not act in accordance or does not intend to comply with ESMA’s opinion referred to in paragraph 5d, it shall inform ESMA and the competent authority of the host Member State, stating its reasons for the non-compliance or intention. In the event of a serious threat to investor protection, a threat to the orderly functioning and integrity of financial markets or a risk to the stability of the whole or part of the financial system in the Union, and unless such publication is in conflict with the legitimate interest of the share or unit-holders or of the public, ESMA may publish the fact that a competent authority does not comply or intend to comply with its advice, together with ▌the reasons stated by the competent authority ▌for the non-compliance or intention. ESMA shall give the competent authorities advance notice about such publication.
5f. The competent authoritiesauthority of the homehost Member State of thean AIFM shall,may, withoutwhere undueit delay,has informgood reasons to suspect that acts contrary to this Directive are being or have been carried out by the AIFM, request the competent authoritiesauthority of the hosthome Member State of the AIFM,AIFM to exercise, without delay, powers laid down in Article 46(2), specifying the reasons for its request in as specific a manner as possible and notifying ESMA and, if there are potential risks to the stability and integrity of the financial system, the ESRB of the powers exercised and of their findings.thereof.
5fa. Where a Member State has exercised the option provided for in Article 21(5a), and where the competent authorities of the home Member State of an AIF or, in case where the AIF is not regulated, the competent authorities of the home Member State of an AIFM have reasonable grounds to suspect that acts contrary to this Directive are being or have been carried out by a depositary not subject to supervision of those competent authorities, such competent authorities shall without delay notify ESMA and the competent authorities of the depositary concerned thereof in a manner as specific as possible. The recipient authorities shall take appropriate action and shall inform ESMA and the notifying competent authorities of the outcome of that action. This paragraph shall be without prejudice to the competences of the notifying competent authorities.
The competent authority of the home Member State of the AIFM shall, without undue delay, inform the competent authority of the host Member State of the AIFM, ESMA and, if there are potential risks to stability and integrity of the financial system, the ESRB of the powers exercised and its findings.
5g. ESMA may request the competent authorities to submit explanations to ESMA without undue delay in relation to specific cases ▌ which raise a serious threat to investor protection, threaten the orderly functioning and integrity of financial markets or pose risks to the stability of the whole or part of the financial system in the Union.’;
5fa. Where a Member State has exercised the option provided for in Article 21(5a) and where the competent authorities of the home Member State of an AIF have reasonable grounds to suspect that acts contrary to this Directive are being or have been carried out by a depositary not subject to supervision of those competent authorities, such competent authorities shall without delay notify ESMA and the competent authorities of the depositary concerned thereof in a manner as specific as possible. The recipient authorities shall take appropriate action and inform ESMA and the notifying competent authorities of the outcome of that action. This paragraph shall be without prejudice to the competences of the notifying competent authorities.
(b) in paragraph 6, the first subparagraph is replaced by the following:
5g. ESMA may request the competent authority to submit explanations to ESMA in a reasonable time frame in relation to specific cases, which raise a serious threat to ▌investor protection▌, threaten the orderly functioning and integrity of financial markets or pose risks to the ▌stability of the whole or part of the financial system in the Union.’;
‘In order to ensure uniform application of this Directive concerning the exchange of information, ESMA may develop draft implementing technical standards to determine the procedures for exchange of information between relevant competent authorities, ESMA, the ESRB, EBA, EIOPA and members of the ESCB, subject to the applicable provisions of this Directive.’;
(c) the following paragraph 7 is added:
(c) the following paragraph is added:
‘7. ESMA shall develop draft regulatory technical standards indicating in which situations the competent authorities may exercise the powers set out in Article 46(2), point (j) and in which situations they may put forward the requests referred to in paragraphs 5b and 5f. When developing those standards, ESMA shall consider the potential implications of such supervisory intervention for reasonable and efficient investor protection and the financial stability in another Member State or in the Union. Those standards shall recognise that the primary responsibility for liquidity risk management remains with the AIFM and that intervention by the competent authorities is a last resort.
‘7. By … [24 months after the date of entry into force of this amending Directive] ESMA shall develop guidelines providing indications to the competent authorities in their exercise of the powers set out in Article 46(2), point (j), and indications on the situations that may lead to putting forward the requests referred to in paragraphs 5b and 5f. When developing those guidelines, ESMA shall consider the potential implications of such supervisory intervention for investor protection and ▌ financial stability in another Member State or in the Union. Those guidelines shall recognise that the primary responsibility for liquidity risk management remains with the AIFM.’;
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.’;
(21) Article 60 is replaced by the following:
(20) ▌Article 61 is amended as follows:,
‘Article 60 Disclosure of derogations
(a) paragraph 5 is deleted:
Where a Member State makes use of derogation or option provided by Articles 6, 9, 15(4da), 21, 22, 28, 43 and Article 61(5), it shall inform the Commission thereof as well as of any subsequent changes. The Commission shall make the information public on a web-site or by other easily accessible means.’;
‘5.▌
(22) ▌ Article 61 is amended as follows:
(a) paragraph 5 is deleted;
(b) the following paragraph is added:
‘5a. AIFMs managingin so far as they manage AIFs that originate loans and that have been constituted before … [the... date[date of entry into force of this amending Directive] shall bemay deemedcontinue to comply withmanage Articlesuch 15(4a)AIFs towithout (4c)complying andwith Article 16(2a) of this Directive until …... [5 years + date of entry into force of this amending Directive]. By way of derogation, loan-originating AIFs constituted before ... [date of entry into force of this amending Directive] and that do not raise additional capital after the... [5 years + date of entry into force of this amending Directive].Directive] shall be deemed to comply with the above-mentioned Articles’
Until … [5 years after the date of entry into force of this amending Directive], where the notional value of the loans originated by an AIF to any single borrower, or the leverage of an AIF, is above the limits referred to in Article 15(4a) and (4aa) respectively, AIFMs managing those AIFs shall not increase that value or that leverage. Where the notional value of the loans originated by an AIF to any single borrower, or the leverage of an AIF, is below the limits referred to in Article 15(4a) and (4aa) respectively, AIFMs managing those AIFs shall not increase that value or that leverage above those limits.
(21) the following Article 69b is inserted:
AIFMs managing AIFs that originate loans, that have been constituted before … [the date of entry into force of this amending Directive] and that do not raise additional capital after … [the date of entry into force of this amending Directive] shall be deemed to comply with Article 15(4a) to (4c) and Article 16(2a) with respect to those AIFs.
‘ Article 69b
Notwithstanding the first, second and third subparagraphs of this paragraph, an AIFM managing AIFs that originate loans and that have been constituted before … [the date of entry into force of this amending Directive] may choose to be subject to Article 15(4a) to (4c) and Article 16(2a), provided that the competent authorities of the home Member State of the AIFM are notified thereof.
Review
Where AIFs originate loans before … [the date of entry into force of this amending Directive], AIFMs may continue to manage such AIFs without complying with Article 15(3)(d), (4d), (4da), (4db) and (4e) with respect to those loans.’;
1. By [Please insert date = 60 months after the entry into force of this Directive] and following the peer reviews by ESMA referred to in Article 38a and reports produced by ESMA in accordance with Article 7(9), the Commission shall initiate a review of the functioning of the rules laid down in this Directive and the experience acquired in applying them. That review shall include an assessment of the following aspects:
(23) the following Article is inserted:
‘Article 69b Review
1. By … [60 months after the date of entry into force of this amending Directive] and following the report produced by ESMA in accordance with Article 7(9), the Commission shall initiate a review of the functioning of the rules laid down in this Directive and the experience acquired in applying them. That review shall include an assessment of the following aspects:
(a) the impact on financial stability of the availability and activation of liquidity management tools by AIFMs;
(b) the effectiveness of the AIFM authorisation requirements in Articles 7 and 8 as regards theand delegation regime laid down in Article 20 of this Directive, in particularDirective with regard to preventing the creation of letter-box entities in the Union;
(c) the appropriateness of the requirements applicable to AIFMs managing AIFs which originateloan-originating loansAIFs laid down in Article 15 and Article 16(2a) and (2ea);15;
(d) the functioning of the derogation allowing the appointment of a depositary in another Member State as set out in Article 21(5a) and the potential benefits and risks, including the impact on investor protection, on financial stability, on supervisory efficiency and on the availability of market choices, of amending the scope of that derogation, in line with the objectives of the Capital Markets Union;
(d) the effectiveness and the impact on financial stability of the depositary passport.
(da) the appropriateness of the requirements applicable to AIFMs managing an AIF atAIFs theon initiativebehalf of a third party as laid down in Article 14(2a) and the need for additional safeguards to prevent circumvention of those requirements, and, in particular, whether the provisions of this Directive on conflicts of interest are effective and appropriate in order to identify, manage and monitor and, where applicable, disclose conflicts of interest arising from the relationship between the AIFM and the third-party initiator;14(2a).
(db) the appropriateness and impact on investor protection of the appointment of at least one non-executive or independent director in the governing body of the AIFM, where it manages AIFs marketed to retail investors.
1a. For the purposes of point (d) of paragraph 1, the Commission shall by ... [24 months after the entry into force of this amending Directive] carry out a comprehensive study on the potential benefits and risks of introducing an EU depositary passport.
2. By …[Please [24insert date = 24 months after the date of entry into force of this amending Directive], ESMA shall submit to the Commission a report regardingfor the development of integrated collectionan ofintegrated supervisory data ▌ ,collection, which shall focus on how to:
(a) reduce areas of duplicationduplications and inconsistencies between the reporting frameworks in the asset management sector and other sectors of the financial industry; and
(b) improve data standardisation and efficient sharing and use of data already reported within any Union reporting framework by any relevant competent authority, at Union or national level.
3. When preparing the report referred to in paragraph 2, ESMA shall work in close cooperation with the European Central Bank (ECB), the other European Supervisory Authorities and, where relevant, the national competent authorities.
4. Following the review referred to in paragraph 1, and after consulting ESMA, the Commission shall submit a report to the European Parliament and to the Council presenting the conclusions of that review.’;review.
(24) Annex I is amended as set out in Annex I to this Directive;
The Commission shall gather information for that report without broadening reporting obligations, including for AIFMs, and by using information from all relevant and reliable sources, including Union institutions, national competent authorities or internationally recognised bodies and organisations.’;
(25)(22) TheAnnex textI inis Annexamended IIas toset thisout Directivein isAnnex addedI asto Annexthis V.Directive;
Article 2 Amendments to Directive 2009/65/EC
(23) The text in Annex II to this Directive is added as Annex V.
Article 2
Amendments to Directive 2009/65/EC
Directive 2009/65/EC is amended as follows:
(1) in Article 2(1), the following point (u) is added:
‘(u) “centralcentral securities depository”depository’ means a central securities depository as defined in Article 2(1), point (1), of Regulation (EU) No 909/2014 of the European Parliament and of the Council*.Council*.’
__________________
* Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 2014/65/EU and Regulation (EU) No 236/2012 (OJ L 257, 28.8.2014, p. 1);’
* Regulation (EU) No 909/2014 of the European Parliament and of the Council of 23 July 2014 on improving securities settlement in the European Union and on central securities depositories and amending Directives 98/26/EC and 2014/65/EU and Regulation (EU) No 236/2012 (OJ L 257, 28.8.2014, p. 1).’;
(1a) in Article 5, paragraph 8 is replaced by the following:
(2) Article 6 is amended as follows:
‘(8) In order to ensure consistent harmonisation of this Article, the European Supervisory Authority (European Securities and Markets Authority) ( ESMA), established by Regulation (EU) No 1095/2010 of the European Parliament and of the Council 1▌shall develop draft regulatory technical standards to specify the information to be provided to the competent authorities in the application for authorisation of a UCITS, including the programme of activity, and situations where the name of a UCITS could be materially deceptive or misleading to the investor.’;
(a) paragraph 3 is amended as follows:
(1b) in Article 6(3), the following point is inserted:
(i) in the first subparagraph, point (b), the following points are added:
‘(ba) benchmark administration in accordance with Regulation (EU) 2016/1011.’
‘(iii) reception and transmission of orders in relation to financial instruments;
(2) Article 7(1) is amended as follows:
(iv) any other function or activity which is already provided by the management company in relation to a UCITS that it manages in accordance with this Article, or in relation to services that it provides in accordance with this paragraph, provided that any potential conflict of interest created by the provision of that function or activity to other parties is appropriately managed.’;
(a) points (b) and (c) are replaced by the following:
(ii) in the first subparagraph, the following point is added:
‘(b) the persons who effectively conduct the business of a management company are of sufficiently good repute and are sufficiently experienced also in relation to the type of UCITS managed by the management company, the names of those persons and of every person succeeding them in office being communicated forthwith to the competent authorities and the conduct of the business of a management company being decided by at least two persons who are either employed full-time or on a full-time equivalent basis by that management company or who are committed full-time to conduct the business of that management company and who are resident in the Union meeting such conditions;
‘(c) administration of benchmarks in accordance with Regulation (EU) 2016/1011;’;
(ba) the management company ensures that at least one member of its governing body is a non-executive director. The management company, in appointing a non-executive director of its governing body, shall determine whether such a member is independent in character and judgement and whether there are relationships or circumstances, which are likely to affect that member’s judgement. The management company shall take reasonable steps to ensure that any non-executive directors appointed to its governing body have sufficient expertise and experience to be able to make judgements on whether the management company is managing UCITS in the best interest of investors. Non-executive directors shall contribute to ensuring that the management company complies with the requirements regarding conflicts of interests and acting in the best interests of the UCITS and their investors, as specified in this Directive;
(iii) the last subparagraph is replaced by the following:
(c) the application for authorisation is accompanied by a programme of activity setting out, at least, the organisational structure of the management company, specifying technical and human resources that will be used to conduct the business of the management company, information about the persons effectively conducting the business of that management company, including:
‘Management companies shall not be authorised under this Directive to provide only the services referred to in this paragraph. Management companies shall not be authorised to administer benchmarks which are used in the UCITS that they manage.’;
(i) a detailed description of their role, title and level of seniority;
(b) paragraph 4 is replaced by the following:
(ii) a description of their reporting lines and responsibilities inside and outside of the management company;
‘4. Article 15, Article 16 except for the first subparagraph of paragraph 5 and Articles 23, 24 and 25 of Directive 2014/65/EU shall apply where the services referred to in paragraph 3, points (a) and (b), of this Article are provided by management companies.’;
(iii) an overview of their time allocated to each responsibility;
(3) Article 7 is amended as follows:
(iiia) information on how the management company intends to comply with its obligations under this Directive, and with its obligations under Regulation (EU) 2019/2088 and a detailed description of the appropriate human and technical resources that will be used by the management company to this effect;’
(a) in paragraph 1, the first subparagraph is amended as follows:
(b) the following point (e) is added:
(i) points (b) and (c) are replaced by the following:
‘(e) information is provided by the management company on arrangements made for the delegation to third parties of functions in accordance with Article 13, including:
‘(b) the persons who effectively conduct the business of a management company are of sufficiently good repute and are sufficiently experienced also in relation to the type of UCITS managed by the management company, the names of those persons and of every person succeeding them in office being communicated forthwith to the competent authorities and the conduct of the business of a management company being decided by at least two natural persons who are either employed full-time by that management company, or executive member or members of the governing body of the management company who are committed full-time to conduct the business of that management company and who are domiciled in the Union, meeting such conditions.
(c) the application for authorisation is accompanied by a programme of activity setting out, at least, the organisational structure of the management company, and specifying the technical and human resources that will be used to conduct the business of the management company and information about the persons effectively conducting the business of that management company, including:
(i) a detailed description of those persons' role, title and level of seniority;
(ii) a description of those persons' reporting lines and responsibilities inside and outside of the management company;
(iii) an overview of the time each of those persons allocates to each responsibility;
(iiia) information on how the management company intends to comply with its obligations under this Directive, and with obligations under Articles 3(1), 6(1), point (a), and 13(1) of Regulation (EU) 2019/2088 and a detailed description of the appropriate human and technical resources that will be used by the management company to this effect.’;
(ii) the following point is added:
‘(e) information is provided by the management company on arrangements made for the delegation to third parties of functions in accordance with Article 13, comprising at least the following:
(i) the legal name and relevant legal identifier of the management company;
(ii) for each delegate:
(ii) the legal name and relevant legal identifier of the UCITS and its investment strategy;
– its legal name and relevant identifier,
(iii) the legal name and relevant legal identifier of each delegate, its jurisdiction of establishment and, where relevant, its supervisory authority;
– its jurisdiction of establishment, and
(iv) a brief description of the delegated risk management functions, including whether each such delegation amounts to a partial or full delegation;
– where relevant, its supervisory authority;
(v) a brief description of the delegated portfolio management functions, by investment strategy and relevant geographies, including whether each such delegation amounts to a partial or full delegation;
(ii)(vi) a detailedbrief description of theother humanfunctions andlisted technicalin resourcesAnnex employedII bywhich the management company for:additionally performs; and
– performing day-to-day portfolio or risk management tasks within the management company, and
(vii) for each of the following, a detailed description of the human and technical resources:
– monitoring the delegated activity;
- employed by or committed to the management company for performing day-to-day portfolio or risk management tasks within the management company;
(iii) in respect of each of the UCITS it manages or intends to manage:
- employed by or committed to the delegate for performing those services on a delegated basis; and
– a brief description of the delegated portfolio management functions, including whether such delegation amounts to a partial or full delegation, and
- employed by or committed to the management company for monitoring and controlling the delegate;
– a brief description of the delegated risk management functions, including whether each such delegation amounts to a partial or full delegation;
(viii) an explanation of the added value of the delegation to the investor.’;
(iv) a description of periodic due diligence measures to be carried out by the management company for monitoring the delegated activity.’;
(2a) in Article 7, the following paragraph is inserted:
(b) the following paragraph is added:
‘1a. A management company shall report to the competent authority any material changes that may affect the scope of the authorisation by that authority and in particular any modification on the arrangements of the delegation and sub-delegation to third parties provided at the time of authorisation.’;
‘7. Member States shall require that management companies, before implementation, notify the competent authorities of their home Member State of any material changes to the conditions for initial authorisation, in particular material changes to the information provided in accordance with this Article.’;
(3) Article 13 is amended as follows:
(4) Article 13 is amended as follows:
(a) paragraph 1 is amended as follows:
(i) the introductory phrase is replaced by the following:
‘1. Management companies, which intend to delegate to third parties the task of carrying out, on their behalf, one or more of the functions listed in Annex II or ofand the services referred to in Article 6(3), shall notify the competent authorities of their home Member State before the delegation arrangements become effective. The following conditions shall be met:’;
(ii) point (b) is replaced by the following:
‘(b) the mandate must not prevent the effectiveness of supervision over the management company, and, in particular, must not prevent the management company from acting, or the UCITS from being managed, in the best interests of its investors and clients;’;clients.’;
(iii) points (g), (h) and (i) are replaced by the following:
‘(g) the mandate must not prevent the persons who conduct the business of the management company from giving further instructions to the undertaking to which functions or provision of services are delegated at any time or from withdrawing the mandate with immediate effect when this is in the interest of investors and clients;clients.
(h) having regard to the nature of the functions and provision of services to be delegated, the undertaking to which functions or provision of services will be delegated must be qualified and capable of undertaking the functions or performing the services in question; and
(i) the UCITS’ prospectuses must list the services and functions which the management company has been allowed to delegate in accordance with this Article;Article;’;
(j) the management company must be able to justify its entire delegation structure on objective reasons.’;
(iv) the following point (j) is added:
‘(j) the management company must be able to justify its entire delegation structure on objective reasons.’;
(b) paragraph 2 is replaced by the following:
‘2. The liability of the management company or the depositary shall not be affected by delegation to third parties of any functions or ▌of provision of services by the management company. The management company shall not delegate its functions or ▌provision of services to the extent that, in essence, it can no longer be considered to be the manager of the UCITS or the provider of the services referred to in Article 6(3) and to the extent that it becomes a letter-box entity.
2a. By way of derogation from paragraphs 1 and 2 of this Article, where the marketing function as referred to in the third indent of Annex II is performed by one or several distributors which are acting on their own behalf and which market the UCITS under Directive 2014/65/EU or through insurance-based investment products in accordance with Directive (EU) 2016/97, such function shall not be considered to be a delegation subject to the requirements set out in paragraphs 1 and 2 of this Article irrespective of any distribution agreement between the management company and the distributor.
(ba) the following paragraphs are inserted:
2b. The management company shall ensure that performance of the functions in Annex I and the provision of the services referred to in Article 6(3) comply with the requirements set out in this Directive. That obligation shall apply irrespective of the regulatory status or location of any delegate or subdelegate.
‘2a. By way of derogation from paragraphs 1 and 2, where the marketing function, as referred to in the third indent of Annex II, is performed by one or several distributors which are acting on their own behalf and which market the UCITS under Directive 2014/65/EU or through insurance-based investment products in accordance with Directive 2016/97/EU, such function shall not be considered to be a delegation that is subject to the requirements set out in paragraphs 1 and 2, irrespective of any distribution agreement between the management company and the distributor.
5. By … [60 months after the date of entry into force of this amending directive], ESMA shall provide the European Parliament, the Council and the Commission with a report analysing market practices regarding delegation and compliance with Articles 7 and 13, based, inter alia, on the data reported to competent authorities in accordance with Article 20a, point (e), and on the exercise of its supervisory convergence powers.
2b. The management company shall ensure that the management of funds for which it is the management company complies with the requirements set out in this Directive. That obligation applies irrespective of the regulatory status or location of any delegate or subdelegate.’;
4. The Commission shall adopt, by means of delegated acts in accordance with Article 112a, measures specifying:
(c) the following paragraphs 3, 4, 5 and 6 are added:
3. ▌
4. ▌
5. By … [24 months after the date of application of this amending Directive] ESMA shall provide the European Parliament, the Council and the Commission with a ▌report ▌ analysing market practices regarding delegation to entities ▌and compliance with Articles 7 and 13.
6. The Commission shall adopt, by means of delegated acts in accordance with Article 112a, measures specifying:
(a) the conditions for fulfilling the requirements set out in paragraph 1;
(b) the conditions under which the management company of the UCITS shall be deemed to have delegated its functions to the extent that it becomes a letter-box entity and can no longer be considered to be the manager of the UCITS or the provider of the services as set out in paragraph 2. ▌’;2.’;
(5) the following paragraphs are added to Article 14:
(3a) Article 14 is amended as follows:
‘3a. For the purposes of paragraph 1, point (a), ESMA shall by … [18 months from the entry into force of this amending Directive] submit a report to the European Parliament, the Council and the Commission assessing the costs charged by UCITS and management companies to the investors and explaining the reasons for the level of those costs and for the differences between them, including differences resulting from the nature of the UCITS concerned. As part of that assessment, ESMA shall analyse, within the framework of Article 29 of Regulation (EU) No 1095/2010, the appropriateness and effectiveness of the criteria set out in the ESMA convergence tools on the supervision of costs.
(a) in paragraph 1, point (a) is replaced by the following:
For the purposes of that report and in accordance with Article 35 of Regulation (EU) No 1095/2010, competent authorities shall provide ESMA on a one-time basis with data on costs including all fees, charges and expenses which are directly or indirectly borne by the investors, or by the management company in connection with the operations of the UCITS, and that will be directly or indirectly allocated to the UCITS. Competent authorities shall make that data available to ESMA within their powers, which include requiring management companies to provide information as granted under Article 98(2) of this Directive.
‘(a) acts honestly and fairly in conducting its business activities in the best interests of the UCITS it manages and the integrity of the market in particular as regards fees and costs charged to investors;’;
2a. Where a management company manages or intends to manage a UCITS at the initiative of a third party, including UCITS using the name of the third-party initiator or appointing the third-party initiator as a delegate pursuant to Article 13, the management company shall, taking account of conflicts of interest, submit detailed explanations and evidence on its compliance with paragraph 1, point (d), of this Article to the competent authorities of its home Member State. In particular, it shall specify what reasonable steps it has taken to prevent conflicts of interest arising from the relationship or, when they cannot be prevented, how it identifies, manages and monitors and, where applicable, discloses, those conflicts of interest in order to prevent them from adversely affecting the interests of the UCITS and its investors.’;
(b) the following paragraphs are inserted:
(6) the following Article is inserted:
‘2a. For the purposes of point (a) of paragraph 1, ESMA shall by ... [18 months after the entry into force of this amending Directive] submit a report to the European Parliament, the Council and the Commission:
- assessing the costs charged by management companies to investors in UCITS, and the reasons for cost levels and for differences between them;
- proposing criteria for assessing whether the level of such costs is appropriate, in particular when compared to the level of costs in other jurisdictions worldwide;
- proposing, if needed, options for action by competent authorities or by legislators in respect of inappropriate or undue levels of such costs.
The report shall assess the potential impact of each such option.
That report may be combined with the report required in accordance with Article 12(3a) [AIFMD].
Competent Authorities shall have the power to require, on a one time basis, information from UCITS management companies on costs insofar as that is needed for the purpose of that report. The competent authorities shall avoid duplication with existing reporting obligations.
Competent authorities shall provide data to ESMA to contribute to that report by ... [X months before the date specified in the first subparagraph].
2b. In the light of the report referred to in paragraph 2a, and without prejudice to other legislative or regulatory options including Commission proposals to revise this Directive or ESMA guidelines, ESMA may develop draft regulatory technical standards to specify:
(a) criteria for the assessment by competent authorities whether the level of costs charged by management companies to investors in UCITS is appropriate;
(b) actions that those authorities should take in respect of inappropriate or undue levels of such costs.
Power is conferred on the Commission to adopt the regulatory technical standards referred to in this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.’;
(c) the following paragraphs are added:
‘3a. Where a management company intends to manage a UCITS on behalf of a third party, including but not limited to under a mandate in accordance with Article 6(3)(a) or under a delegation in accordance with Article 13, and where the third party is to have significant control over the UCITS’ design, distribution and management, the management company shall employ heightened scrutiny of the potential for conflicts of interest. The management company engaging in such a relationship shall submit to the competent authorities of its home Member State detailed explanations and evidence on their compliance with paragraphs 1 and 2. In particular, it shall specify how they prevent systematic conflicts of interest or any other material conflicts of interest arising from the relationship, how any existing or potential conflicts are effectively managed in the best interest of investors and how this is clearly and comprehensively disclosed to investors.
3b. In order to ensure uniform conditions of application of this Article, ESMA shall develop draft regulatory technical standards to specify:
(a) the types of relationship between the management company and a third party when the management company manages a UCITS on behalf of the third party and of conflicts of interest as referred to in paragraph 3a;
(b) criteria to be used by the relevant competent authorities to assess whether UCITS comply with their obligations under paragraph 3a.
Power is conferred on the Commission to adopt the regulatory technical standards referred to in this paragraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.’;
(4) the following Article 18a is inserted:
‘Article 18a
1. Member States shall ensure that at least the liquidity management tools set out in Annex IIA are available to UCITS.
2. ▌AAfter UCITSassessing the suitability in relation to the pursued investment strategy, the liquidity profile and the redemption policy, a management company shall select at least twoone appropriate liquidity management toolstool from the list set out in Annex IIA, points 2 to 7, afterand assessinginclude in the suitabilityfund ofrules thoseor toolsthe ininstruments relationof toincorporation itsof pursuedthe investment strategy,company itsfor liquiditypossible profileuse andin itsthe redemptioninterest policy,of andthe includeUCITS’ theminvestors. inSubject itsto fundArticle rules84, orthis theshall instrumentsnot ofprevent incorporationa forUCITS possiblefrom useusing inother thetools interestfrom ofAnnex theIIA, UCITS’points investors.2 Itto 8. The management company shall notimplement bedetailed possiblepolicies and procedures for thatthe selectionactivation toand includedeactivation onlyof theany toolsselected setliquidity outmanagement intool pointsand 5athe operational and 5badministrative arrangements for the use of thatsuch list.tool.
By way of derogation from the first subparagraph, a UCITSmanagement company may select only one liquidity management tool from Annex IIA, points 2 to 7, ,for a UCITS that it manages, if that UCITS is authorised as money market fund in accordance with Regulation (EU) 2017/1131.
The UCITS shall implement detailed policies and procedures for the activation and deactivation of any selected liquidity management tool and the operational and administrative arrangements for the use of such tool.
3. ESMA shall develop ▌guidelines to▌ specify best practice as regards the characteristics of the liquidity management tools set out in Annex IIA.
Redemption in kind as referred to in Annex IIA, point 7, can only be activated to meet redemptions requested by professional investors and if the redemption in kind corresponds to a pro rata share of the assets held by the UCITS.
4. By ... [12 months after the entry into force of this amending Directive] ESMA shall develop draft regulatory technical standards on the disclosure to competent authorities and investors of information related to the selection and calibration of ▌liquidity management tools by the management companies for liquidity risk management ▌and for mitigating financial stability risks. Those standards shall recognise international standards for liquidity risk management for collective investment schemes from February 2018 and that the primary responsibility for liquidity risk management, including the selection and use of liquidity management tools, remains with the management company. They shall allow adequate time for adaptation before they apply, in particular for existing UCITS.
By way of derogation from the fourth subparagraph, the redemption in kind need not correspond to a pro rata share of the assets held by the UCITS if that UCITS is solely marketed to professional investors, or if the aim of that UCITS' investment policy is to replicate the composition of a certain stock or debt securities index and that UCITS is an exchange-traded fund as defined in Article 2, point (26), of Regulation (EU) No 600/2014.
5. Power is delegated to the Commission to adopt the regulatory technical standards referred to in paragraph▌ 4 in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.’;
3. ESMA shall develop draft regulatory technical standards to ▌ specify the characteristics of the liquidity management tools set out in Annex IIA.
(5) the following Articles 20a and 20b are inserted:
When drafting those regulatory technical standards, ESMA shall take account of the diversity of investment strategies and underlying assets of UCITS. Those standards shall not restrict the ability of UCITS to use any appropriate LMT for all asset classes, in all jurisdictions and in all market conditions.
4. By … [12 months after the date of entry into force of this amending Directive] ESMA shall develop guidelines on the selection and calibration of liquidity management tools by UCITS for liquidity risk management and for mitigating financial stability risks. Those guidelines shall recognise that the primary responsibility for liquidity risk management remains with the UCITS. They shall include indications on the circumstances in which side pockets can be activated. They shall allow adequate time for adaptation before they apply, in particular for existing UCITS.
5. ESMA shall submit the draft regulatory technical standards referred to in paragraph 3 of this Article to the Commission by … [12 months after the date of entry into force of this amending Directive].
Power is delegated to the Commission to supplement this Directive by adopting the regulatory technical standards referred to in paragraph 3 in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.’;
(7) the following Articles are inserted:
‘Article 20a
1. A management company shall regularly report to the competent authorities of the UCITSits home Member State on the markets and instruments in which it trades on behalf of the UCITS it manages. It shall provide the information on the assets and liabilities of investment funds which the company reports to their national central banks under Regulation (EU) No 1073/2013 of the European Central Bank as well as information on the instruments in which it is trading, on markets of which it is a member or where it actively trades, and on the exposures of each of the UCITS it manages.
It shall, in respect of1a. eachA UCITSmanagement itcompany manages,shall provideregularly informationreport onto the instruments in which it is trading, oncompetent marketsauthorities of which it is a member or where it activelyits trades,home andMember onState the exposures and assetsfollowing ofinformation eachregarding UCITS.delegation Itarrangements shallconcerning includeportfolio themanagement identifiersor thatrisk aremanagement necessaryfunctions toand connectin theparticular datawith providedrespect onto assets,each UCITS and the management company to other supervisorymanaged or publiclymarketed availablein datathe sources.Union:
1a. A management company shall, for each of the UCITS it manages, provide the following to the competent authorities of the UCITS home Member State:
(i) information on the entities to which such functions have been delegated, namely the name and relevant legal identifier of each delegate, its jurisdiction of establishment and, where relevant, its supervisory authority;
(a) the arrangements for managing the liquidity of the UCITS, including the current selection of liquidity management tools, and any activation or deactivation thereof;
(ii) for each of the following, a description of the human and technical resources:
(b) the current risk profile of the UCITS, including the market risk, liquidity risk, counterparty risk, other risks including operational risk and the total amount of leverage employed by the UCITS;
- employed by or committed to the management company for performing day-to-day portfolio or risk management tasks within the management company;
(c) the results of the stress tests performed in accordance with Article 51(1);
- employed by or committed to the delegate for performing those services on a delegated basis; and
(d) information regarding delegation arrangements concerning portfolio management or risk management functions as follows:
- employed by or committed to the management company for monitoring and controlling the delegate;
(i) information on the delegates, specifying the delegates’ name and domicile, whether they have any close links with the management company, whether they are authorised or regulated entities for the purpose of asset management and where relevant, their supervisory authority, including the identifiers of the delegates that are necessary to connect the information provided to other supervisory or publicly available data sources;
(iii) information on the function delegated, the type of delegation (full or partial), and the date of the delegation agreement or contract;
(ii) the number of full-time equivalent human resources employed by the management company for performing day-to-day portfolio or risk management tasks within that management company;
(iv) where sub-delegation arrangements are in place, the same information in respect of the sub-delegates and the functions sub-delegated;
(iia) a list and description of the activities concerning risk management and portfolio management functions which are delegated;
(v) the date of conclusion and expiration of the delegation and sub-delegation arrangements;
(iii) where the portfolio management function is delegated, the amount and percentage of the UCITS’ assets which are subject to delegation arrangements concerning the portfolio management function;
(vi) confirmation that the management company has implemented periodic due diligence measures to oversee, monitor and control the delegate, and kept records of issues identified and, where relevant, the measures adopted to address those issues.
(iv) the number of full-time equivalent human resources employed by the management company to monitor the delegation arrangements;
1b. The ECB and national authorities shall grant ESMA access to data on assets and liabilities (fund inventories) of UCITS funds provided by fund managers pursuant to Regulation (EU) No 1073/2013.
(v) the number and dates of periodic due diligence reviews carried out by the management company to monitor the delegated activity, a list of issues identified and, where relevant, the measures adopted to address those issues and the date by which those measures are to be completed;
1c. A management company shall, for each of the UCITS it manages, provide the following to the competent authorities of its home Member State:
(vi) where sub-delegation arrangements are in place, information required in points (i), (iia) and (iii) in respect of the sub-delegates and the activities related to the portfolio and risk management functions that are sub-delegated;
(a) if relevant, information on tools used for managing the liquidity of the UCITS according to Article 84(2);
(vii) the commencement and expiry date of the delegation and sub-delegation arrangements;
(b) the current risk profile of the UCITS and the risk management systems employed by the management company to manage the market risk, liquidity risk, counterparty risk and other risks including operational risk;
(e) the list of Member States in which the units of the UCITS are actually marketed by its management company or by a distributor which is acting on behalf of that management company.
(c) the results of stress tests performed.
1b. The competent authorities of the home Member State of the UCITS shall ensure that all information gathered under this Article in respect of all UCITS that they supervise and the information gathered under Article 7 is made available to other relevant competent authorities, ESMA, the other ESAs and the ESRB, whenever necessary for the purpose of carrying out their duties, by means of the procedures set out in Article 101 on supervisory cooperation.
2. ESMA shall develop draft regulatory technical standards specifying the details to be reported in accordance with paragraphs 1, 1a and 1c of this Article. ESMA shall take into account other reporting requirements to which the management companies are subject and the report issued in accordance with Article 20b. Regulatory technical standards shall set out the appropriate level of standardisation of the information to be reported.
The competent authorities of the home Member State of the UCITS shall ensure that all information gathered under this Article in respect of all UCITS that they supervise is made available, for statistical purposes only, to the ESCB, by means of the procedures set out in Article 101 on supervisory cooperation.
ESMA shall submit those draft regulatory technical standards to the Commission by [Please insert date = 36 months after the entry into force of this Directive].
They shall, without delay, also provide information by means of those procedures, and bilaterally to the competent authorities of other Member States directly concerned, if a UCITS managed by that management company could potentially constitute an important source of counterparty risk to a credit institution, other systemically relevant institutions in other Member States, or the stability of the financial system in another Member State.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.
1c.2a. Where necessary for the effective monitoring of systemic risk, the competent authorities of the home Member State may require information inadditional additionreporting to that described in paragraph 1, on a periodic or on an ad-hoc basis. The competent authorities shall inform ESMA about the additional reporting requirements.
In exceptional circumstances and where required in order to ensure the stability and integrity of the financial system, or to promoteESMA long-termafter sustainableconsulting growth,the ESMAESRB may request the competent authorities of the home Member State to impose additional reporting requirements.
2. ESMA shall develop draft regulatory technical standards specifying:
(a) the details of the information to be reported according to paragraph 1, paragraph 1a, points (a), (b), (c) and (e), and paragraph 1c;
(aa) the appropriate level of standardisation of the information to be reported according to paragraph [1a], point (d);
(b) the reporting frequency and timing.
When developing the draft regulatory technical standards referred to in point (aa), ESMA shall not introduce reporting obligations additional to those set out in paragraph 1a, point (d).
When developing the draft regulatory technical standards referred to in points (a) and (aa), ESMA shall take into consideration other reporting requirements to which the management companies are subject, international developments and standards, and the findings of the report issued in accordance with Article 20b.
ESMA shall submit those draft regulatory technical standards to the Commission by … [36 months after the date of entry into force of this amending Directive].
Power is delegated to the Commission to supplement this directive by adopting the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.
3. ESMA shall develop draft implementing technical standards specifying:
(a) the format and data standards for the reports referred to in paragraphs 1, 1a and 1c of this Article;Article which shall include in particular relevant legal identifiers;
(aa) the legal identifiers that are necessary to connect the data in those reports on assets, UCITS and management companies to other supervisory or publicly available data sources;
(b) the reporting frequency and timing;
(b)(ba) methods and arrangements for submitting the reports referred to in paragraphs 1 and 1a, including methods and arrangements to improve data standardisation and efficient sharing and use of data already reported inwithin any Union reporting framework by any relevant competent authority, at Union or national level, taking into account the findings of the report issued in accordance with Article 20b;level.
(c) the template, including the minimum additional reporting requirements, to be used by management companies in exceptional circumstances as referred to in paragraph 1c.
When developing those draft technical standards, ESMA shall take into account international developments and standards agreed at Union or global level and the findings of the report issued in accordance with Article 20b.
ESMA shall submit those draft implementing technical standards to the Commission by …[Please [36insert date = 36 months after the date of entry into force of this amending Directive].
Power is conferreddelegated onto the Commission to adopt the implementing technical standards referred to in the first subparagraph in accordance with Article 15 of Regulation (EU) No 1095/2010.
3a. The competent authorities of the home Member State of the UCITS management company shall ensure that all information gathered in accordance with paragraphs 1, 1a, 1c and 2a in respect of all UCITS management companies that they supervise is made available to competent authorities of other relevant Member States, ESMA and the ESRB by means of the procedures set out in Article 101 on supervisory cooperation.
Article 20b
1. By …[Please [24insert date = 24 months after the date of entry into force of this amending Directive], ESMA shall submit to the Commission a report regardingfor the development of ▌an integrated collection of supervisory data ▌ ,collection, which shall focus on how to:
(a) reduce areas of duplicationduplications and inconsistencies between the reporting frameworks in the asset management sector and other sectors of the financial industry;industry and
(b) improve data standardisation and efficient sharing and use of data already reported within any Union reporting framework by any relevant competent authority, at Union or national level.
In that report, ESMA shall also make a comparison of best practices of data collection in the Union with such collection in other markets for retail investment funds.
(ba) improve the cost-benefit balance of the burden of information collection for the overall benefit of UCITS and of investors;
In that report, ESMA shall also provide detailed comparison and best practices of data collection in the Union with world leading markets for retail investment funds and the impact of data collection on competitiveness.
2. When preparing the report referred to in paragraph 1, ESMA shall work in close cooperation with the European Central Bank (ECB), the other European Supervisory Authorities, and, where relevant, the national competent authorities.’;
(8)(6) Article 22a is amended as follows:
(a) in paragraph 2, point (c) is replaced by the following:
‘(c) the depositary has exercised all due skill, care and diligence in the selection and the appointment of any third party to whom it intends to delegate parts of its tasks, except where that third party is a central securities depository acting in the capacity of an investorissuer CSD as defined in the▌the delegated act adopted on the basis of Articles 29(3) and 48(10) of Regulation (EU) No 909/2014 and continues to exercise all due skill, care and diligence in the periodic review and ongoing monitoring of any third party to which it has delegated parts of its tasks and of the arrangements of the third party in respect of the matters delegated to it.’;it.;
(b) paragraph 4 is replaced by the following:
‘4. For the purposes of this Article,paragraph, the provision of services by a central securities depository acting in the capacity of an issuer CSD as defined in the▌the delegated act adopted on the basis of Articles 29(3) and 48(10) of Regulation (EU) No 909/2014 shall not be considered a delegation of the depositary’s custody functions. For the purposes of this Article, the provision of services by a central securities depositary acting in the capacity of an investor CSD as defined in that delegated act shall be considered a delegation of the depositary’s custody functions.’;
(9) in Article 29(1), second subparagraph, point (b) is replaced by the following:
For the purposes of this paragraph, the provision of services by a central securities depositary acting in the capacity of an investor CSD as defined in Article 1, point (f), of Commission Delegated Regulation (EU) 2017/392 shall be considered a delegation of the depositary’s custody functions.’;
‘(b) the directors of the investment company must be of sufficiently good repute and be sufficiently experienced also in relation to the type of business pursued by the investment company and, to that end: the names of the directors and of every person succeeding them in office must be communicated forthwith to the competent authorities; the conduct of an investment company’s business must be decided by at least two natural persons meeting those same conditions who are either employed full-time or executive member or members of the governing body of the investment company committed full-time to conduct the business of that investment company and who are domiciled in the Union; and ‘directors’ shall mean those persons who, under the law or the instruments of incorporation, represent the investment company, or who effectively determine the policy of the company.’;
(7) in Article 29(1), point (b) is replaced by the following:
(10) in Article 57, the following paragraph is added:
‘(b) the directors of the investment company must be of sufficiently good repute and be sufficiently experienced also in relation to the type of business pursued by the investment company and, to that end: the names of the directors and of every person succeeding them in office must be communicated forthwith to the competent authorities; the conduct of an investment company’s business must be decided by at least either two full-time employees or two ▌persons committed full-time or on a full-time equivalent basis to conduct the business of that management company and resident in the Union’ meeting such conditions; and ‘directors’ shall mean those persons who, under the law or the instruments of incorporation, represent the investment company, or who effectively determine the policy of the company;
‘2a. Where the UCITS management company implements side pockets referred to in Article 84(2)(a) by means of assets segregation, the segregated assets can be excluded from the calculation of limits laid down in this Chapter.’;
(ba) the investment company must ensure that at least one member of its governing body is a non-executive director. The investment company, in appointing a non-executive director of its governing body, must determine whether such a member is independent in character and judgement and whether there are relationships or circumstances, which are likely to affect that member’s judgement. The investment company must take reasonable steps to ensure that any non-executive directors appointed to its governing body have sufficient expertise and experience to be able to make judgements on whether the investment company is managing UCITS in the best interest of investors. Non-executive directors shall contribute to ensuring that the investment company complies with the requirements regarding conflicts of interests and is acting in the best interests of the UCITS and their investors, as specified in this Directive’;
(11)(7a) in Article 69,57, the following paragraph is added:
‘5a. In order to ensure a uniform application of the rules applicable to the name of the UCITS, ESMA shall by ... [24 months after the date of entry into force of this amending Directive] develop guidelines to specify the circumstances under which the name of a UCITS is unfair, unclear, or misleading. Those guidelines shall take into account relevant sectoral legislation. Sectoral legislation setting standards for fund names or marketing of funds takes precedence over those guidelines.’;
2a. Where the UCITS management company implements side pockets referred to in Article 84(2)(a) by means of assets segregation, the segregated assets can be excluded from the calculation of limits laid down in this Chapter.
(12)(8) in Article 79,84, paragraphparagraphs 12 isand 3 are replaced by the following:
‘1. Key investor information, including the name of the UCITS, shall constitute pre-contractual information. It shall be fair, clear and not misleading. It shall be consistent with the relevant parts of the prospectus.’;
(13) in Article 84, paragraphs 2 and 3 are replaced by the following:
‘2. By way of derogation from paragraph 1:
(a) a UCITS may, in the interest of its unit-holders, temporarily suspend the repurchase or redemption of its units asor referredactivate toother inliquidity pointmanagement 1tool ofselected thein listaccordance setwith outArticle in18a(2). AnnexIn IIAthe orinterest activateof orits deactivateunit-holders otherand liquidityto managementensure toolssubscriptions selectedand fromredemptions pointsare 2processed toat 7a offair thatprice, lista inUCITS accordancemay withalso Articleactivate 18a(2).side Thepockets UCITSas mayreferred also,to in theAnnex interestIIA, ofpoint its8, unit-holders,when activatethe sideUCITS pocketscannot asensure referredthe tofair inand pointaccurate 8valuation of thatsome list;assets or where some assets have become non-tradable;
(b) in the interest of investors, in exceptional circumstances, where there are reasonable and balanced investorthe protectionunit-holders or financial stabilityof risksthe thatpublic, necessitatein thisexceptional requirement,circumstances and after consulting the UCITS, the competent authorities of thea UCITS home Member State may require a UCITS to activate or deactivate thea liquidity management tool referred to in pointpoints 1 or 2 of Annex IIA▌, whichever is more suitable considering the listtype setof outUCITS inand Annexthe IIA.risks that necessitate taking this measure.
AThe UCITStemporary maysuspension onlyreferred useto suspensionsin orpoint side(a) pocketsof asthe referredfirst tosubparagraph inshall thebe firstprovided subparagraphfor only in exceptional cases where circumstances so require and where ▌suspension is justified having regard to the interests of the unit-holders.
3. The UCITS shall ▌ ,shall▌, without delay, notify the competent authorities of its▌its home Member State asand follows:the competent authorities of all Member States in which it markets its units, in any of the following circumstances:
(a)- whenwhen, thein situations of liquidity stress, a UCITS activates or deactivates one of the liquidity management tooltools listed in Annexpoints IIA,1 pointto 1;2 of Annex IIa
(b)- when activating or deactivating theside liquiditypockets managementas toolreferred listedto in Annex IIA, point 8, in a reasonable timeframe prior to the activation or deactivation8 of that liquidity managementAnnex tool;IIa,
(c)- when activating or deactivating any other liquidity management tool in a manner that is not in the ordinary course of business as envisaged in the fund rules or the instruments of incorporation of the UCITS.documentation.
The competent authorities of the UCITS home Member State of the UCITS shall inform, without delay, theESMA competent▌about authoritiesany ofnotification thereceived managementin company'saccordance homewith Memberthis State,paragraph. theThe competent authorities of a UCITS host Member State, ESMA and, if there are potential risks to the stabilityhome andMember integrityState of the financialUCITS system,shall theinform ESRB of any notification received in accordance with this paragraph.if ESMAthere shallis haveany thepotential powerrisk to share the information received in accordance withstability thisand paragraphintegrity withof competentfinancial authorities.system.
3a. When the competent authorities of the UCITS home Member State exercise powers pursuant to paragraph 2, point (b), they shall notify the competent authorities of a UCITS host Member State, the competent authorities of the management company's home Member State and ESMA, and, if there are potential risks to the stability and integrity of the financial system, also the ESRB.
ESMA shall have the power to share the information received in accordance with this paragraph with competent authorities.
3b. The3a.The competent authorities of athe UCITS hosthome Member State orshall notify the competent authorities of the management company's homeall Member StateStates mayin requestwhich the competent authorities ofUCITS themarkets UCITSits homeunits, MemberESMA State▌prior to exerciseexercising powers pursuant to paragraph 2, point (b),(b). specifyingThe thecompetent reasonsauthorities forof the requesthome andMember notifyingState ESMAof and,the UCITS shall inform ESRB if there areis any potential risksrisk to the stability and integrity of the financial system, the ESRB thereof.system.
3c.3b. WhereThe competent authority of the Member States in which a UCITS markets its units may request the competent authoritiesauthority of the UCITS home Member State doto notexercise agreepowers withlaid thedown requestin referredparagraph to2, inpoint paragraph(b), 3b,specifying theythe shallreasons informfor the requestingrequest competentand authorities,notifying ESMA and, where ESRB wasin informedcase of thatany requestpotential pursuantrisk to paragraphthe 3b,stability theand ESRB,integrity statingof the reasonsfinancial forsystem, the disagreement.ESRB thereof.
3d.3c. OnWhere the basiscompetent authority of the informationUCITS receivedhome inMember accordanceState withdoes paragraphsnot 3bagree andwith 3c,the ESMArequest shallreferred withoutto unduein delayparagraph issue3b, anit opinionshall toinform the requesting competent authoritiesauthority, ESMA and, in case of any potential risk to the UCITSstability homeand Memberintegrity Stateof onthe exercisingfinancial powerssystem, laidthe downESRB inthereof, paragraphstating 2,the pointreasons (b).for the disagreement.
3e. Where the competent authorities do not act in accordance or do not intend to comply with ESMA’s opinion referred to in paragraph 3d, they shall inform ESMA and the requesting competent authorities, stating the reasons for the non-compliance or intention. In the event of a serious threat to investor protection, to the orderly functioning and integrity of financial markets or to the stability of the whole or part of the financial system in the Union, and unless such publication is in conflict with the legitimate interests of the unit-holders or of the public, ESMA may publish the fact that the competent authorities do not comply or intend to comply with its advice together with the reasons stated by the competent authorities for the non-compliance or intention. ESMA shall give the competent authorities advance notice of such publication.
3d. On the basis of the information received in accordance with paragraphs 3b and 3c, ESMA shall issue an opinion to the competent authorities of the UCITS home Member State on exercising powers laid down in paragraph 2, point (b).
3f. By … [24 months after the date of entry into force of this amending Directive] ESMA shall develop guidelines providing indications to guide the competent authorities in their exercise of the powers set out in paragraph 2, point (b). When developing those guidelines, ESMA shall consider the potential implications of such supervisory intervention for investor protection and ▌ financial stability in another Member State or in the Union. Those guidelines shall recognise that the primary responsibility for liquidity risk management remains with the UCITS.’;
3e. Where the competent authority does not act in accordance or does not intend to comply with ESMA’s opinion referred to in paragraph 3d, it shall inform ESMA, stating the reasons for the non-compliance or intention. In the event of a serious threat to investor protection, a threat to the orderly functioning and integrity of financial markets or a risk to the stability of the whole or part of the financial system in the Union, and unless such publication is in conflict with the legitimate interest of the share or unit-holders or of the public, ESMA may publish the fact that a competent authority does not comply or intend to comply with its advice together with the reasons stated by the competent authority for the non-compliance or intention. ESMA shall give the competent authorities advance notice about such publication.’
(14) in Article 98, the following paragraphs 3 and 4 are added:
3f. ESMA shall develop draft regulatory technical standards indicating in which situations the competent authorities may exercise the powers set out in paragraph 2, point (b). When developing those standards, ESMA shall consider the potential implications of such supervisory intervention for investor protection and the financial stability in another Member State or in the Union. Those standards shall recognise that the primary responsibility for liquidity risk management remains with the UCITS and that intervention by the competent authorities is a last resort.
‘3. The competent authorities of the UCITS host Member State may, where they have reasonable grounds for doing so, request the competent authorities of the UCITS home Member State to exercise, without delay, powers laid down in paragraph 2, other than point (j) of that paragraph, specifying the reasons for their request in as specific a manner as possible and notifying ESMA and, if there are potential risks to the stability and integrity of the financial system, the ESRB thereof.
Power is delegated to the Commission to adopt the regulatory technical standards referred to in the first subparagraph in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.’;
The competent authorities of the UCITS home Member State shall, without undue delay, inform the competent authorities of the UCITS host Member State, ESMA and, if there are potential risks to the stability and integrity of the financial system, the ESRB of the powers exercised and its findings.
(9) in Article 98, the following paragraphs are added:
4. ESMA may request the competent authorities to submit explanations to ESMA without undue delay in relation to specific cases ▌ which raise a serious threat to investor protection, threaten the orderly functioning and integrity of financial markets or pose risks to the stability of the whole or part of the financial system in the Union.’;
‘3. The competent authority of the UCITS host Member State may, where it has good reasons to suspect that acts contrary to this Directive are being or have been carried out by the UCITS, request the competent authority of the UCITS home Member State to exercise, without delay, powers laid down in paragraph 2 specifying the reasons for its request in as specific a manner as possible and notifying ESMA and, if there are potential risks to the stability and integrity of the financial system, the ESRB thereof.
(15) in Article 101(1), the first subparagraph is replaced by the following:
The competent authority of the UCITS home Member State shall, without undue delay, inform the competent authority of the UCITS host Member State, ESMA and, if there are potential risks to the stability and integrity of the financial system, the ESRB of the powers exercised and its findings.’
4. ESMA may request the competent authority to submit, within a reasonable timeframe, explanations to ESMA in relation to specific cases, which pose a serious threat to investor protection, threaten the orderly functioning and integrity of financial markets or pose risks to the stability of the whole or part of of financial system.’;
(9a) in Article 101(1), the first subparagraph is replaced by the following:
‘1. The competent authorities of the Member States shall cooperate with each other and with ESMA and the ESRB whenever necessary for the purpose of carrying out their duties under this Directive or of exercising their powers under this Directive or under national law.’;
(16) in Article 101(9), the first subparagraph is replaced by the following:
(10) the following Article is inserted:
‘In order to ensure uniform conditions of application of this Article and of Article 20a, ESMA may develop draft implementing technical standards to establish common procedures for competent authorities:
‘ Article 101a
(a) to cooperate in on-the-spot verifications and investigations as referred to in paragraphs 4 and 5; and
1. By … [12 months before the date of the review referred to in Article 110a] ESMA shall ▌conduct a one-off comprehensive peer review analysis of the supervisory activities of the competent authorities in relation to the application of Article 13. That peer review analysis shall focus on the measures taken to prevent that management companies, which delegate performance of portfolio management or risk management to third parties located in third countries, become letter-box entities.
(b) to determine the procedures for exchange of information between competent authorities, the ESAs, the ESRB, and members of the ESCB.’;
2. When conducting the peer review analysis, ESMA shall use transparent methods to ensure an objective assessment and comparison between the competent authorities reviewed.’;
(17) Article 102 is amended as follows:
(11) the following Article 110a is inserted:
(a) in paragraph 1, the first subparagraph is replaced by the following:
‘ Article 110a
‘Member States shall provide that all persons who work or who have worked for the competent authorities, as well as auditors and experts instructed by the competent authorities, be bound by the obligation of professional secrecy. Such obligation implies that no confidential information which those persons receive in the course of their duties shall be divulged to any person or authority whatsoever, save in summary or aggregate form such that UCITS, management companies and depositaries (undertakings contributing towards UCITS’ business activity) cannot be individually identified, without prejudice to cases covered by criminal or taxation law.’;
By [Please insert date = 40 months after the entry into force of this Directive] and following the peer review and analysis referred to in Article 101a and the report produced by ESMA in accordance with Article 13(4), the Commission shall initiate a review of the delegation regime laid down in Article 13 with regard to preventing the creation of letter-box entities in the Union.’;
(b) in paragraph 2, the following subparagraph is added:
(12) Article 112a is amended as follows:
‘Paragraph 1 and the first and second subparagraph of this paragraph shall not preclude the exchange of information between competent authorities and tax authorities in the same Member State. Where the information originates in another Member State, it shall only be disclosed in accordance with the first sentence of this subparagraph with the express agreement of the competent authorities which have disclosed it.’;
(18) the following Article 110a is inserted:
‘Article 110a
By … [60 months after the date of entry into force of this amending Directive] and following the ▌ report produced by ESMA in accordance with Article 13(4), the Commission shall initiate a review of the functioning of the rules laid down in this Directive and the experience acquired in applying them. That review shall include an assessment of the following aspects:
(a) the effectiveness of the authorisation requirements in Articles 7 and 8 as regards the delegation regime laid down in Article 13 of this Directive, in particular with regard to preventing the creation of letter-box entities in the Union;
(b) the appropriateness and impact on investor protection of the appointment of at least one non-executive or independent director in the governing body of the UCITS management companies or investment companies;
(c) the appropriateness of the requirements applicable to management companies managing a UCITS at the initiative of a third party as laid down in Article 14(2a) and the need for additional safeguards to prevent circumvention of such requirements, and, in particular, whether the provisions of this Directive on conflicts of interest are effective and appropriate in order to identify, manage and monitor and, where applicable, disclose conflicts of interest arising from the relationship between the management company and the third-party initiator;’;
(19) Article 112a is amended as follows:
(a) in paragraph 1, the following subparagraph is added:
‘The power to adopt the delegated acts referred to in Article 13 shall be conferred on the Commission for a period of four years from …[Please [theinsert the date of entry into force of this amending Directive].’;Directive.]’;
(b) in paragraph 33, the first sentence is replaced by the following:
‘3. The‘The delegation of power referred to in Articles 12, 13, 14, ▌18a, 20a, 26b, 43, 50a, 51, 60, 61, 62, 64, 75, 78, 81, 95 and 111 may be revoked at any time by the European Parliament or by the Council. A decision to revoke shall put an end to the delegation of the power specified in that decision. It shall take effect the day following the publication of the decision in the Official Journal of the European Union or at a later date specified therein. It shall not affect the validity of any delegated acts already in force.’;
(c) in paragraph 55, the first sentence is replaced by the following:
‘5. A‘A delegated act adopted pursuant to Articles 12, 13, 14, ▌18a, 20a, 26b, 43, 50a, 51, 60, 61, 62, 64, 75, 78, 81, 95 and 111 shall enter into force only if no objection has been expressed either by the European Parliament or the Council within a period of three months of notification of that act to the European Parliament and the Council or if, before the expiry of that period, the European Parliament and the Council have both informed the Commission that they will not object. That period shall be extended by three months at the initiative of the European Parliament or of the Council.’;
(20)(13) Annex I is amended as set out in Annex III to this Directive;
(21)(14) The text in Annex IV to this Directive is added as Annex IIA.
Article 3 Transposition
1. Member States shall adopt and publish, by … [24 months after the date of entry into force of this amending Directive] at the latest, the laws, regulations and administrative provisions necessary to comply with this Directive. They shall immediately communicate ▌ the text of those measures to the Commission.
Transposition
2.1. TheyMember States shall applyadopt thoseand measurespublish, fromby …[Please [24insert date = 24 months after the date of entry into force of this amending Directive],Directive] withat the exception oflatest, the measures transposing [Art 24laws, AIFMDregulations and 20aadministrative andprovisions 20bnecessary UCITS],to whichcomply theywith shallthis applyDirective. fromThey …shall [36forthwith monthscommunicate afterto the date of entryCommission intothe forcetext of this amendingthose Directive].provisions.
3. When Member States adopt those measures, they shall contain reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made.
2. They shall apply those provisions from […].
3. When Member States adopt those provisions, they shall contain reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made.
4. Member States shall communicate to the Commission the text of the main measures of national law which they adopt in the field covered by this Directive.
Article 4 Entry into force
Entry into force
This Directive shall enter into force on the 20th day following that of its publication in the Official Journal of the European Union.
Article 5 Addressees
Addressees
This Directive is addressed to the Member States.
ANNEX I
In Annex I,I theof followingDirective points2011/61/EU, (d)the andfollowing (e)points are added to point 2:added:
‘(d) Originating loans on behalf of an AIF.
‘(ca) management of joint ventures and of mandates in respect of immovable property
(e) Servicing securitisation special purpose entities.’.
3. Originating loans.
4. Servicing securitisation special purpose entities.’
ANNEX II
In Directive 2011/61/EU, the following is added:
‘ANNEX V
LIQUIDITY MANAGEMENT TOOLS AVAILABLE TO AIFMs MANAGING OPEN-ENDED AIFs
(1) Suspension of redemptions and subscriptions: suspension of redemptions and subscriptions meansimplies temporarilythat disallowinginvestors unitholdersare ortemporarily shareholdersunable fromto redeemingredeem or purchasing thepurchase fund’s units or shares.
(2) Redemption gate:gates: a redemption gate meansis a temporary and partial restriction of the right of unitholders or shareholders to redeem their units or sharesshares. ▌This ,restriction is partial, so that investors can only redeem a certain portion of their units or shares.
(3) Extension of noticeNotice periods: the extension ofa notice periodsperiod meansrefers extendingto the period of advance notice that unitholders or shareholdersinvestors ▌mustmust give to fund managers, beyond a minimum period which is appropriate to the fund,managers when redeeming their units or shares.
(4) Redemption fee: redemption fee means a fee, within a predetermined range that takes account of the cost of liquidity, that is paid to the fund by unitholders or shareholders when redeeming units or shares, and that ensures that unitholders or shareholders who remain in the fund are not unfairly disadvantaged.
(4) Redemption fees: a redemption fee is a pre-determined fee charged to investors when redeeming their fund’s units or shares.
(5a)(5) Swing pricing: swing pricing means acan pre-determinedbe mechanismused byto whichadjust the net asset valueprice of the units or shares ofin an investment fund isso adjustedthat byit reflects the applicationcost of a factor (‘swing factor’) thatfund reflectstransactions theresulting costfrom ofinvestor liquidity.activity.
(5b) Dual pricing: dual pricing means a pre-determined mechanism by which the subscription and redemption prices of the units or shares of an investment fund are set by adjusting the net asset value per unit or share by a factor that reflects the cost of liquidity.
(6) Anti-dilution levy: an anti-dilution levy is a charge applied to individual transacting investors, payable to the fund, to protect remaining investors from bearing the costs associated with purchases or sales of assets because of large inflows or outflows. An anti-dilution levy does not involve any adjustment to the value of the fund’s shares. The levy shall be calculated taking into consideration ongoing liquidity costs and market conditions.
(6) Anti-dilution levy: ▌ anti-dilution levy means a fee that is paid to the fund by a unitholder or shareholder when purchasing or redeeming units or shares, that compensates the fund for the cost of liquidity incurred because of the size of that transaction, and that ensures that other unitholders or shareholders are not unfairly disadvantaged.
(7) Redemptions in kind: redemptions-in-kind allow the fund manager to meet a redemption request by transferring securities held by the fund, instead of cash, to the redeeming shareholders.
(7) Redemptions in kind: redemptions-in-kind means transferring assets held by the fund, instead of cash, to meet redemption requests of unitholders or shareholders.
(8) Side pockets: side pockets allow illiquid investments to be separated from remaining liquid investments of the investment fund.’
(8) Side pockets: side pockets means separating certain assets, whose economic or legal features have changed significantly or become uncertain due to exceptional circumstances, from the other assets of the ▌ fund.’
ANNEX III
In Annex I,I of Directive 2009/65/EC, Schedule A, the table, point 1.13 is replaced by the following:
1.13. Procedures and conditions for repurchase or redemption of units, and circumstances in which repurchase or redemption may be suspended or other liquidity management tools may be activated.
1.13. Procedures and conditions for repurchase or redemption of units, and circumstances in which repurchase or redemption may be suspended or other liquidity management tools may be activated. In the case of investment companies having different investment compartments, information on how a unit-holder may pass from one compartment into another and the charges applicable in such cases.
▌
ANNEX IV
In Directive 2009/65/EC, the following is inserted:
‘ANNEX IIA
LIQUIDITY MANAGEMENT TOOLS AVAILABLE TO UCITS
(1) Suspension of redemptions and subscriptions: suspension of redemptions and subscriptions meansimplies temporarilythat disallowinginvestors unitholdersare ortemporarily shareholdersunable fromto redeemingredeem or purchasing thepurchase fund’s units or shares.units.
(2) Redemption gate:gates: a redemption gate meansis a temporary and partial restriction of the right of unitholders or shareholders to redeem their units or. sharesThis ▌restriction ,is partial, so that investors can only redeem a certain portion of their units or shares.units.
(3) Extension of noticeNotice periods: the extension ofa notice periodsperiod meansrefers extendingto the period of advance notice that unitholders or shareholdersinvestors must give to fund managers, beyond a minimum period which is appropriate to the fund,managers when redeeming their units or shares.units.
(4) Redemption fee: redemption fee means a fee, within a predetermined range that takes account of the cost of liquidity, that is paid to the fund by unitholders or shareholders when redeeming units or shares, and that ensures that unitholders or shareholders who remain in the fund are not unfairly disadvantaged.
(4) Redemption fees: a redemption fee is a fee pre-determined to investors when redeeming their fund’s units.
(5a)(5) Swing pricing: swing pricing means acan pre-determinedbe mechanismused byto whichadjust the net asset valueprice of the units or shares ofin an investment fund isso adjustedthat byit reflects the applicationcost of a factor (‘swing factor’) thatfund reflectstransactions theresulting costfrom ofinvestor liquidity.activity.
(5b) Dual pricing: dual pricing means a pre-determined mechanism by which the subscription and redemption prices of the units or shares of an investment fund are set by adjusting the net asset value per unit or share by a factor that reflects the cost of liquidity.
(6) Anti-dilution levy: an anti-dilution levy is a charge applied to individual transacting investors, payable to the fund, to protect remaining investors from bearing the costs associated with purchases or sales of assets because of large inflows or outflows. An anti-dilution levy does not involve any adjustment to the value of the fund’s units.
(6) Anti-dilution levy: ▌ anti-dilution levy means a fee that is paid to the fund by a unitholder or shareholder when purchasing or redeeming units or shares, that compensates the fund for the cost of liquidity incurred because of the size of that transaction, and that ensures that other unitholders or shareholders are not unfairly disadvantaged.
(7) Redemptions in kind: redemptions-in-kind allow the fund manager to meet a redemption request by transferring securities held by the fund, instead of cash, to the redeeming unitholders.
(7) Redemptions in kind: redemptions-in-kind means transferring assets held by the fund, instead of cash, to meet redemption requests of unitholders or shareholders.
(8) Side pockets: side pockets allow illiquid investments to be separated from remaining liquid investments of the investment fund.’
(8) Side pockets: side pockets means separating certain assets, whose economic or legal features have changed significantly or become uncertain due to exceptional circumstances, from the other assets of the ▌ fund.’
PROCEDURE – COMMITTEE RESPONSIBLE
Title
Amending Directives 2011/61/EU and 2009/65/EC as regards delegation arrangements, liquidity risk management, supervisory reporting, provision of depositary and custody services and loan origination by alternative investment funds
References
COM(2021)0721 – C9-0439/2021 – 2021/0376(COD)
Date submitted to Parliament
25.11.2021
Committee responsible
Date announced in plenary
ECON
14.2.2022
Committees asked for opinions
Date announced in plenary
JURI
14.2.2022
Not delivering opinions
Date of decision
JURI
28.2.2022
Rapporteurs
Date appointed
Isabel Benjumea Benjumea
2.12.2021
Discussed in committee
14.6.2022
31.8.2022
Date adopted
24.1.2023
Result of final vote
+:
–:
0:
54
3
0
Members present for the final vote
Rasmus Andresen, Anna-Michelle Asimakopoulou, Marek Belka, Isabel Benjumea Benjumea, Stefan Berger, Gilles Boyer, Engin Eroglu, Markus Ferber, Jonás Fernández, Giuseppe Ferrandino, Frances Fitzgerald, José Manuel García-Margallo y Marfil, Valentino Grant, Claude Gruffat, José Gusmão, Eero Heinäluoma, Michiel Hoogeveen, Danuta Maria Hübner, Stasys Jakeliūnas, France Jamet, Othmar Karas, Billy Kelleher, Georgios Kyrtsos, Philippe Lamberts, Aušra Maldeikienė, Pedro Marques, Csaba Molnár, Denis Nesci, Dimitrios Papadimoulis, Piernicola Pedicini, Sirpa Pietikäinen, Eva Maria Poptcheva, Evelyn Regner, Dorien Rookmaker, Joachim Schuster, Ralf Seekatz, Paul Tang, Irene Tinagli, Ernest Urtasun, Inese Vaidere, Johan Van Overtveldt, Stéphanie Yon-Courtin, Marco Zanni
Substitutes present for the final vote
Herbert Dorfmann, Gianna Gancia, Eider Gardiazabal Rubial, Valérie Hayer, Eugen Jurzyca, Chris MacManus, Ville Niinistö, Erik Poulsen, René Repasi
Substitutes under Rule 209(7) present for the final vote
Susanna Ceccardi, Andor Deli, José Manuel Fernandes, Pierre Larrouturou, Alessandro Panza
Date tabled
2.2.2023
FINAL VOTE BY ROLL CALL IN COMMITTEE RESPONSIBLE
Key to symbols: