Changes from plenary report to adopted text

RemovedDRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION

AddedP9_TA(2024)0064

Removedon 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

AddedAmendments to the Alternative Investment Fund Managers Directive (AIFMD) and to the Directive relating to undertakings for collective investment in transferable securities (UCITSD)

Removed(COM(2021)0721 – C90439/2021 – 2021/0376(COD))

AddedCommittee on Economic and Monetary Affairs

Removed(Ordinary legislative procedure: first reading)The European Parliament,

AddedPE732.549

AddedEuropean Parliament legislative resolution of 7 February 2024 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 – C9-0439/2021 – 2021/0376(COD))

Added(Ordinary legislative procedure: first reading)

AddedThe European Parliament,

– having regard to the Commission proposal to Parliament and the Council (COM(2021)0721),

– 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),

Removed– having regard to the opinion of the Committee on Legal Affairs on the use of delegated acts,

– having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

Removed– having regard to the opinion of the European Central Bank of 3 October 2022,

Added– having regard to the provisional agreement approved by the committee responsible under Rule 74(4) of its Rules of Procedure and the undertaking given by the Council representative by letter of 9 November 2023 to approve Parliament’s position, in accordance with Article 294(4) of the Treaty on the Functioning of the European Union,

Changed– 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;

Change 1

Removed2. Approves its statement annexed to this resolution;

2. Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

3. Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Change 2

RemovedAMENDMENTS BY THE EUROPEAN PARLIAMENT*

AddedP9_TC1-COD(2021)0376

Removedto the Commission proposal

AddedPosition of the European Parliament adopted at first reading on 7 February 2024 with a view to the adoption of Directive (EU) 2024/… 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, the provision of depositary and custody services and loan origination by alternative investment funds

Removed---------------------------------------------------------

RemovedDIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

Removedamending 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

(Text with EEA relevance)

Change 3

RemovedTHE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Added(As an agreement was reached between Parliament and Council, Parliament's position corresponds to the final legislative act, Directive (EU) 2024/927).

RemovedHaving regard to the Treaty on the Functioning of the European Union, and in particular Article 53(1) thereof,

RemovedHaving regard to the proposal from the European Commission,

RemovedAfter transmission of the draft legislative act to the national parliaments,

RemovedHaving regard to the opinion of the European Economic and Social Committee,

RemovedActing in accordance with the ordinary legislative procedure,

RemovedWhereas:

Removed(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 loan-originating 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.

Removed(2) A robust delegation regime, an equal treatment of custodians, coherence of supervisory reporting through the removal of duplications and redundant 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, in the areas of delegation, asset safekeeping, supervisory reporting and liquidity risk management.

Removed(2a) The alternative asset industry collectively invests over EUR 1,5 trillion in Europe. Union institutional investors invest over EUR 370 billion in alternative assets managers. The Union alternative asset industry provides over EUR 250 billion to European businesses in private credit and European investors are responsible for 30 % of global capital allocated to the whole industry but there is still room to grow by providing European institutional investors with greater choice and enhancing the competitiveness of Europe’s capital markets.

Removed(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).

Removed(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.

Removed(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.

Removed(4) To ensure legal certainly 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.

Removed(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, AIFMs 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 delegates. At least two senior managers should be employed or conduct the business of the AIFM on a full-time or a full-time equivalent basis and be resident in the Union. To ensure that AIFMs comply with the requirements regarding conflict of interest and acting in the best interest of the AIFs and their investors, AIFMs should ensure that at least one member of their governing body is a non-executive director.

Removed6. ▌

Removed7. ▌

Removed(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.

Removed(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.

Removed(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-originating AIFs by promoting regulatory arbitrage and varying levels of investor protection. Common rules should also be laid down to establish an efficient internal market for loan-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 risks and macro prudential risks that loan originating AIFs could pose and spread to the broader financial system. The rules applicable to AIFMs managing loan-originating funds should be harmonised in order to improve risk management across the financial market and increase transparency for investors.

Removed(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.

Removed(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.

Removed(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.

Removed(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.

Removed(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).

Removed(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.

Removed(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.

Removed(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.