Changes from report parliamentary committee draft to plenary report

Added(33) The requirements for third-country entities with access to the internal market should be aligned to the standards laid down in the last updated version of the Council conclusions ▌on the revised EU list on non-cooperative jurisdictions for tax purposes and Directive (EU) 2015/849 of the European Parliament and of the Council. In addition, non-EU AIFs or non-EU AIFMs that are subject to national rules and that are active in individual Member States should satisfy the requirement that they are not located in a third country that is deemed un-cooperative in tax matters at the time of the notification to competent authorities of the AIFM’s home Member State. A third country that has been continuously mentioned in the Annex II to those Council conclusions for a period of over three years should be considered to be mentioned in the Annex I to those conclusions.

RemovedArticle 1 – paragraph 1 – point 5 – point b, Article 15 – paragraph 4a – introductory part: 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 or commitments or overall subscriptions where the borrower is one of the following:

Added(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.

RemovedDirective 2011/61/EU

Added(35) To ensure the uniform application of the substance requirements for management companies of UCITS, it should be clarified that at the time of application for the authorisation, management companies should provide the competent authorities with information about the human and technical resources that they will employ to carry out their functions and, where applicable, supervise delegates. At least two senior managers should be employed or conduct the business of the management company on a full-time basis and be resident in the Union. To ensure that management companies comply with the requirements regarding conflict of interest and acting in the best interest of the UCITSs and their investors, management companies should ensures that at least one member of its governing body is a non-executive director.

RemovedArticle 1 – paragraph 1 – point 5 – point b, Article 15 – paragraph 4d – point aa (new): (aa) an entity within the same group as the AIFM;

Added(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.

RemovedDirective 2011/61/EU

Added(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.

RemovedArticle 1 – paragraph 1 – point 5 – point b, Article 15 – paragraph 4d – point b: (b) its depositary and delegates of its depositary;

Added(38) ▌

RemovedDirective 2011/61/EU

Added(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.

RemovedArticle 1 – paragraph 1 – point 5 – point b, Article 15 – paragraph 4e: deleted / (deleted)

Added(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.

RemovedDirective 2011/61/EU

Added(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 choose at least two LMT from the harmonised list set out in the Annex, with the exception of money market funds in accordance with Regulation (EU) 2017/1131 which may select only one liquidity management tool in addition to the possibility to suspend redemptions. When a management company takes a decision to activate or deactivate certain LMTs in situations of liquidity stress or in other defined circumstances, it should notify the supervisory authorities. This would allow supervisory authorities to better handle potential spill-overs of liquidity tensions into the wider market.

RemovedArticle 1 – paragraph 1 – point 5 – point b, Article 15 – paragraph 4 e a (new): 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”).

Added(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.

RemovedDirective 2011/61/EU

Added(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.

RemovedArticle 1 – paragraph 1 – point 6, Article 16 – paragraph 2a – subparagraph 1: An AIFM shall ensure that the 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 liquidity robustness.

Added(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.

RemovedDirective 2011/61/EU

Added(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.

RemovedArticle 1 – paragraph 1 – point 6, Article 16 – paragraph 2b: 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 one appropriate liquidity management tool from the list set out in Annex V, points 2, 3, 4, 5, 6 and 8, for possible use in the interest of the AIF’s investors. 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.

Added(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.

RemovedDirective 2011/61/EU

Added(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.

RemovedArticle 1 – paragraph 1 – point 6, Article 16 – paragraph 2c – subparagraph 1: An AIFM that manages an open-ended AIF may, in the interest of AIF investors, temporarily suspend the repurchase or redemption of the AIF shares or units or activate other liquidity management tools selected from the list set out in Annex V, points 2, 3, 4, 5, 6 and 8, where those tools are included in the fund rules or the instruments of incorporation of the AIFM.

Added(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.

RemovedDirective 2011/61/EU

Added(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.

RemovedArticle 1 – paragraph 1 – point 6, Article 16 – paragraph 2d – subparagraph 1: Where, in situations of liquidity stress, an AIFM activates or deactivates one of the liquidity management tools listed in points 1 to 4 of the list set out in Annex V it shall, without delay, notify the competent authorities of its home Member State.

Added(51) In order to improve supervisory cooperation and effectiveness, the competent authorities of the 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.

RemovedDirective 2011/61/EU

Added(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.

RemovedArticle 1 – paragraph 1 – point 6, Article 16 – paragraph 2d – subparagraph 2: 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.

Added(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.

RemovedDirective 2011/61/EU

Added(52b) In carrying out its functions under Directives 2009/65/EC and 2011/61/EU, ESMA should take a risk-based approach.

RemovedArticle 1 – paragraph 1 – point 6, Article 16 – paragraph 2f: deleted

Added(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,

RemovedDirective 2011/61/EU

AddedHAVE ADOPTED THIS DIRECTIVE

RemovedArticle 1 – paragraph 1 – point 6, Article 16 – paragraph 2f a (new): 2fa. ESMA shall develop draft regulatory technical standards on the criteria to be used by competent authorities for determining whether an AIF has demonstrated liquidity robustness for the purposes of paragraph 2a.

AddedAmendments to Directive 2011/61/EU

Change 2

ChangedDirective 2011/61/EU is amended as follows:

Change 3

RemovedArticle 1 – paragraph 1 – point 6, Article 16 – paragraph 2g: 2g. ESMA shall develop draft regulatory technical standards on criteria for the selection and use of suitable liquidity management tools by the AIFMs for liquidity risk management, including appropriate disclosures to investors, taking into account the capability of such tools to reduce undue advantages for investors that redeem their investments first, and to mitigate 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.

Added(1) in Article 4, paragraph 1 is amended as follows:

RemovedDirective 2011/61/EU

Added(a) point (ag) is replaced by the following:

RemovedArticle 1 – paragraph 1 – point 6, Article 16 – paragraph 2h: 2h. Power is delegated to the Commission to adopt the regulatory technical standards referred to in paragraphs 2fa and 2g of this Article in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.;

Added‘(ag) ‘professional 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/EC;’

RemovedDirective 2011/61/EU

Added(b) the following point (ap) is added:

RemovedArticle 1 – paragraph 1 – point 7 – point c a (new), Article 20 – paragraph 6 a (new): (ca) the following paragraph 6a is inserted: / ‘(6a) By way of derogation from paragraphs 1 to 6 of this Article, where the marketing function as referred in point (b) of Annex I, paragraph 2, is performed by one or several distributors which are not acting on behalf of the AIFM, pursuant to an agreement between the AIFM and that distributor or those distributors, such function shall not be considered to be a delegation subject to the requirements set out in paragraphs 1 to 6 of this Article.’

Added‘(ap) central securities 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*

RemovedDirective 2011/61/EU

Added* 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)’;