European Securities and Markets Authority
Regulation on the cross-border distribution of collective investment undertakings - ESMA publishes first report on marketing requirements and marketing communications - 30 June 2021
The European Securities and Markets Authority (ESMA) has published its first report (ESMA34-45-1219) providing an overview of marketing requirements and marketing communications under the Regulation on the cross-border distribution of collective investment undertakings ((EU) 2019/1156).
ESMA’s key findings include that:
- national laws, regulation and administrative provisions governing marketing requirements are usually based on the transposition of the Alternative Investment Fund Managers Directive (2011/61/EU) (AIFMD) and the Undertakings for the Collective Investments in Transferable Securities Directive (2009/65/EC) (UCITS), although national competent authority (NCA) responses identified many additional requirements imposed by member states to regulate further the marketing of UCITS or AIFs in their jurisdiction;
- in relation to the verification of marketing communications, a large number of NCAs indicated that no national rules required the ex-ante or ex-post verification of marketing communications, or that such verifications were not part of their supervisory practice; and
- it is expected that greater harmonisation of the marketing requirements will be achieved after transposition of the Directive on cross-border distribution of collective investment undertakings ((EU) 2019/1160) by the 2 August 2021 deadline.
ESMA has submitted the report to the European Parliament, the Council of the European Union and the European Commission. It intends to publish the next report in two years’ time.
Report: Marketing requirements and marketing communications under the Regulation on cross-border distribution of funds (ESMA34-45-1219)
Press release
Financial Conduct Authority
AFMs - FCA publishes multi-firm review on assessment of funds’ value - 6 July 2021
The FCA has published its findings following a review of the processes used by different authorised fund managers (AFMs) when they carry out assessments of value for the funds they operate. Between July 2020 and May 2021, the FCA visited a sample of AFMs and found that most had not implemented the assessment of value arrangements that the FCA expects in order to achieve compliance with the FCA’s rules. Many had not implemented assessments meeting the minimum consideration requirements and several practices fell short of the FCA’s expectations.
The FCA’s key findings included:
- applying assessment of value rules: some firms assessed value in the abstract, rather than weighing up the value delivered against the costs and charges investors pay to invest in the fund;
- assessment of service quality: many firms considered service quality only at a firm level rather than by fund and unit class, even when variations in service levels between funds and unit classes were likely;
- assessment of performance: the FCA found that sometimes fund performance was assessed using measures that do not reflect a fund’s investment policy and strategy; and
- general assessment of AFM costs: many firms incorrectly implemented the requirement in COLL 6.6.21R(3) which concerns assessment of AFM costs and, rather than seeing this as a consideration of fees and charges incurred by investors in the context of costs incurred by the AFM in operating the fund, firms compared total fund charges with those of competitors’ funds.
In light of its findings, the FCA expects more rigour from AFMs when assessing value in funds and expects all AFMs to consider the findings from its review and use them to assess their own assessment of value processes. The FCA intends to review firms again within the next 12 to 18 months and will assess how well firms have reacted to its feedback. It will consider other regulatory tools if it finds that firms are not meeting the standards that the FCA expects.
Multi-firm review: Authorised fund managers’ assessments of their funds’ value
Statement
