Changes from report parliamentary committee draft to plenary report

Added- 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;

Added- proposing, if needed, options for action by competent authorities or by legislators in respect of inappropriate or undue levels of such costs.

AddedThe report shall assess the potential impact of each such option.

AddedThat report may be combined with the report required in accordance with Article 12(3a) [AIFMD].

AddedCompetent 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.

AddedCompetent authorities shall provide data to ESMA to contribute to that report by ... [X months before the date specified in the first subparagraph].

Added2b. 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:

Added(a) criteria for the assessment by competent authorities whether the level of costs charged by management companies to investors in UCITS is appropriate;

Added(b) actions that those authorities should take in respect of inappropriate or undue levels of such costs.

AddedPower 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.’;

Added(c) the following paragraphs are added:

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.

Added3b. In order to ensure uniform conditions of application of this Article, ESMA shall develop draft regulatory technical standards to specify:

Added(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;

Added(b) criteria to be used by the relevant competent authorities to assess whether UCITS comply with their obligations under paragraph 3a.

AddedPower 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.’;

Added(4) the following Article 18a is inserted:

Added‘Article 18a

Added1. Member States shall ensure that at least the liquidity management tools set out in Annex IIA are available to UCITS.

Added2. After assessing the suitability in relation to the pursued investment strategy, the liquidity profile and the redemption policy, a management company shall select at least one appropriate liquidity management tool from the list set out in Annex IIA, points 2 to 7, and include in the fund rules or the instruments of incorporation of the investment company for possible use in the interest of the UCITS’ investors. Subject to Article 84, this shall not prevent a UCITS from using other tools from Annex IIA, points 2 to 8. The management company 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.

AddedBy way of derogation from the first subparagraph, a management 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.

Added3. ESMA shall develop ▌guidelines to▌ specify best practice as regards the characteristics of the liquidity management tools set out in Annex IIA.

Added4. 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.

Added5. 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.’;

Added(5) the following Articles 20a and 20b are inserted:

Added‘Article 20a

Added1. A management company 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 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.

Added1a. A management company shall regularly report to the competent authorities of its home Member State the following information regarding delegation arrangements concerning portfolio management or risk management functions and in particular with respect to each UCITS managed or marketed in the Union:

Added(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;

Added(ii) for each of the following, a description of the human and technical resources:

Added- employed by or committed to the management company for performing day-to-day portfolio or risk management tasks within the management company;

Added- employed by or committed to the delegate for performing those services on a delegated basis; and

Added- employed by or committed to the management company for monitoring and controlling the delegate;

Added(iii) information on the function delegated, the type of delegation (full or partial), and the date of the delegation agreement or contract;

Added(iv) where sub-delegation arrangements are in place, the same information in respect of the sub-delegates and the functions sub-delegated;

Added(v) the date of conclusion and expiration of the delegation and sub-delegation arrangements;

Added(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.

Added1b. 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.

Added1c. A management company shall, for each of the UCITS it manages, provide the following to the competent authorities of its home Member State:

Added(a) if relevant, information on tools used for managing the liquidity of the UCITS according to Article 84(2);

Added(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;

Added(c) the results of stress tests performed.

Added2. 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.

AddedESMA shall submit those draft regulatory technical standards to the Commission by [Please insert date = 36 months after the entry into force of this Directive].

AddedPower 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.

Added2a. Where necessary for the effective monitoring of systemic risk, the competent authorities of the home Member State may require additional reporting 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.

AddedIn exceptional circumstances and where required in order to ensure the stability and integrity of the financial system, ESMA after consulting the ESRB may request the competent authorities of the home Member State to impose additional reporting requirements.

Added3. ESMA shall develop draft implementing technical standards specifying:

Added(a) the format and data standards for the reports referred to in paragraphs 1, 1a and 1c of this Article which shall include in particular relevant legal identifiers;

Added(b) the reporting frequency and timing;

Added(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 within any Union reporting framework by any relevant competent authority, at Union or national level.

AddedWhen 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.

AddedESMA shall submit those draft implementing technical standards to the Commission by [Please insert date = 36 months after the entry into force of this Directive].

AddedPower 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.

Added3a. 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.

Added1. By [Please insert date = 24 months after the entry into force of this Directive], ESMA shall submit to the Commission a report for the development of an integrated supervisory data collection, which shall focus on how to:

Added(a) reduce areas of duplications and inconsistencies between the reporting frameworks in the asset management sector and other sectors of the financial industry and

Added(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.

Added(ba) improve the cost-benefit balance of the burden of information collection for the overall benefit of UCITS and of investors;

AddedIn 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.