ESMA confirms changes to notification letters for cross-border UCITS and AIFs

• Europe

• Investment funds and asset management
• Financial services - Asset managers and funds

31-01-2023

On 15 December 2022 the European Securities and Markets Authority (“ESMA”) published their final report on draft regulatory technical standards (“RTS”) and implementing technical standards (“ITS”) on notifications for cross-border marketing to host state National Competent Authorities (“NCAs”) and management of AIFs and UCITS in the EU.

Background

On 17 May 2022, ESMA published a consultation paper regarding draft RTS and ITS specifying the information to be provided by UCITS management companies and AIFMs to home and host state NCAs before undertaking cross border marketing.  See  our previous briefing, “ESMA proposes changes to notification letters for cross-border UCITS and AIFs”.

Annex III of the consultation paper contains draft RTS specifying details of envisaged marketing strategies, activities and targets in a host member state by a management company or AIFM.  Annex IV contains draft ITS, including five template notification letters to be provided to NCAs.

In the final report ESMA scaled back the notification letter disclosure requirements, removing obligations that went beyond the existing practices and requirements of the UCITS Directive and AIFMD that could create unintended barriers to the cross-border distribution of funds and higher costs for investors.

Key changes

Although the notification letters will remain largely the same, there are some key changes, including:

• Legal entity identifier (“LEI”) codes of the management company/AIFM/internally managed AIF are mandatory
• contact details and contact point for the transmission of the invoice or the communication of any applicable regulatory fee or charges can be for a singular person or a department responsible for application within the management company/AIFM/internally managed AIF
• ISIN of share class(es) for UCITS and AIFs are only required if available
• information on the duration of the UCITS/AIFM/internally managed AIF and AIFs are only required if available
• information on the management company/AIFM/internally managed AIF national identification code is only required if available

Overall, these changes should allow management companies and AIFMs to commence managing and marketing AIFs and UCITS at an earlier stage.

Clarifications

Following concerns raised from responses to the draft report that the technical standards go beyond existing practices and requirements, ESMA have made some key clarifications:

• only material modifications require a notification to the relevant NCA
• in respect of information on AIFs to be marketed in host Member States, there is no expectation for AIFs to identify only the share classes that will actually be marketed in the host Member State. However, all share classes of the AIF should be indicated to enable the NCA to identify the AIF structure

Next Steps

The European Commission will decide whether to adopt ESMA’s final report by 15 April 2023.

How Eversheds Sutherland can help

Since June 2016, our International Funds Net (FundsNet) team, lawyers and consultants have advised various institutions on passporting UCITS and AIFs across the EU27. We would be happy to navigate the proposed changes with you and help with your passporting needs. View our FundsNet guide here for more information.