Changes from report parliamentary committee draft to plenary report

Added(b) the costs borne by retail investors are justified and proportionate, in the context of the overall value delivered to unit-holders and having regard to the characteristics of the AIF, including its investment objective, policy, strategy, expected returns, level of risks and other relevant characteristics.

Added1c. Member States shall ensure that AIFMs are responsible for the effectiveness and quality of their pricing process. The pricing process shall be clearly documented, shall clearly set out the responsibilities of the management bodies of the AIFM in determining and reviewing the costs borne by investors, and shall be subject to periodic review. The assessment of costs shall be based on objective criteria and methodology, and shall include a comparison to market products, such as AIFs with similar characteristics in terms of investment objective, strategy, level of risks and other relevant characteristics.

Added1d. Member States shall require AIFMs to assess ▌annually whether undue costs have been charged to AIF or its unit holders.

AddedMember States shall require AIFMs to reimburse investors without undue delay, where undue costs have been charged to the or its AIF unit-holders, or where costs have been miscalculated to the detriment of the AIF or its unit-holders.

AddedMember States shall require AIFMs to report to the competent authorities, of their home Member State, to the competent authority of the home Member State of the AIF, where applicable, to the depositary and to the financial auditors of the AIFMs and the AIF, where applicable, situations where undue costs have been charged to the AIF or its unit-holders.

Added1e. Member States shall require AIFMs to assess at least annually the conditions mentioned in paragraph 1b, point (b). The assessment shall take into account the criteria set out in the pricing process▌.

Added▌

Added1f. ESMA shall organise and conduct a peer review, no later than four years after the entry into force of Directive (EU) [OP Please introduce the number of this amending Directive], in cooperation with national competent authorities regarding the implementation of the obligations described in this Article.”;

Added(b) paragraph 3 is replaced by the following:

Added‘3. The Commission shall adopt, by means of delegated acts in accordance with Article 56 and subject to the conditions of Articles 57 and 58, measures specifying the criteria to be used by the relevant competent authorities to assess whether AIFMs comply with their obligations under paragraph 1 of this Article and measures to ensure that the AIFM complies with the duties set out in paragraphs 1 to 1e of this Article, in particular to:

Added(a) specify the minimum requirements for the pricing process to prevent undue costs from being charged to the AIF and its unit-holders, in particular, by:

Added(i) ensuring that costs are correctly identified and quantified, and comply with the condition set out in paragraph 1a, point (a);

Added(ii) identifying which costs can be charged to the AIF and its unit-holders taking into account the level of the costs and the nature of the costs by reference to a list of eligible costs that meet the conditions set out in paragraph 1a, points (b) and (c), and the conditions under which competent authorities may authorise on a case-by-case basis costs which are not included in the list of eligible costs but that meet the conditions set out in paragraph 1a, points (b) and (c);

Added(iii) identifying potential conflict of interests and measures to mitigate the occurrence of conflicts of interest;

Added(iv) establishing a procedure to determine the level of compensation in case undue costs have been charged to investors; establishing a procedure which will be triggered when the amount unduly charged is material and exceeds a threshold to be determined on the basis of existing guidelines from national competent authorities on indemnification procedures.

Added(b) provide for criteria to determine whether costs are justified and proportionate in accordance with paragraph 1b, point (b)▌.’;

Added(c) the following paragraph 4 is added:

Added'4. By …[OP: please insert the date = five years from the date referred to in Article 7(2) of this Directive] after consulting ESMA, the Commission shall submit a report to Council and Parliament on the implementation of this Article. The report shall evaluate at least the following:

Added(a) whether this Article has had a positive impact on the costs and performance of AIF offered to retail investors and to which extent;

Added(b) whether the assessment set out in paragraph 1e is proportionate in terms of complexity and costs incurred by AIFMs.’;

Added(ba) whether there could be other mechanisms to address high costs incurred by investors at Union level, including legislative and non-legislative measures.’;

Added(2) in Article 24(2), the following point (f) is added:

Added‘(f) information on the costs borne by investors and performance of the AIF, at the level of each AIF or at the level the AIF’s share classes where those share classes have different cost structures.’;

Added(3) in Article 46(2), the following points are added:

Added‘(ea) in accordance with Articles 69a of the Directive 2014/65/EU, carry out regular checks of the alignment of the qualitative and quantitative features of the UCITS on the market with the relevant benchmarks and, when necessary, take corrective actions;

Added(n) without prejudice to any reimbursement made pursuant to Article 12(1d), require that investors be compensated where undue costs have been charged to AIF or its unit-holders, or where costs have been miscalculated to the detriment of the AIF or its unit-holders, while taking into account that procedures for compensation are to be proportionate to the amount unduly charged, in particular from a technical and operational standpoint.’;

Added(4) in Article 56(1), the following sentence is inserted after the first sentence:

Added‘The powers to adopt delegated acts referred to in Article 12 shall be conferred on the Commission for a period of 4 years from [OJ: insert date of entry into force of the amending Directive].’;

AddedTransposition

Added1. Member States shall adopt and publish, by … [OP please insert the date = 12 months after the date of entry into force of this Directive] at the latest, the laws, regulations and administrative provisions necessary to comply with this Directive. They shall forthwith communicate to the Commission the text of those provisions.

Added2. They shall apply those provisions from … [OP please insert the date = 18 months after the publication in the Official Journal of the European Union of the delegated acts referred to in Articles 89 of Directive 2014/65/EU, Article 38 of Directive 2016/97, Article 112a(2) of Directive 2009/65/EC and Article 56 of Directive 2011/61/EC].

Added3. When Member States adopt those provisions, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made.

Added4. Member States shall communicate to the Commission the text of the main provisions of national law which they adopt in the field covered by this Directive.

AddedEntry into force

AddedThis Directive shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

AddedAddressees

AddedThis Directive is addressed to the Member States.

AddedDone at Brussels,

AddedFor the European Parliament For the Council

AddedThe President The President

AddedIn Annex II to Directive 2014/65/EU, section II.1 is amended as follows:

Added(1) the fourth subparagraph is replaced by the following:

Added‘The fitness test applied to managers and directors of entities authorised under the present Directive or other EU Directives in the financial field could be regarded as an example of the assessment of expertise and knowledge. In the case of small entities, the person subject to that assessment shall be the person authorised to carry out transactions on behalf of the entity.’;

Added(2) subparagraph 5 is amended as follows:

Added(-1) the first indent is replaced by the following:

Added‘— the client has carried out transactions, in significant size, on the relevant market on a regular basis,

AddedESMA shall develop draft regulatory technical standards to determine the frequency and the size of the transactions that need to be carried out for relevant market categories.

AddedESMA shall submit those draft regulatory technical standards to the Commission by [OJ: insert date 6 months after the date of entry into force of this amending Directive].

AddedPower is delegated to the Commission to adopt those regulatory technical standards in accordance with Articles 10 to 14 of Regulation (EU) No 1095/2010.’;

Added(1) the second and third indents are replaced by the following:

Added‘- the size of the client’s financial instrument portfolio, defined as including cash deposits and financial instruments exceeds EUR 250 000 on average during the last 3 years,’;

Added- the client works or has worked in the financial sector or in another sector in relation to the investment decision or has undertaken capital market activities requiring to buy and sell financial instruments and/or to manage a portfolio of financial instruments for at least one year in a professional position, which requires knowledge of the transactions or services envisaged.’;

Added(2) the following indent is added:

Added‘ - the client can provide the firm with proof of a recognised education or training that evidences his/her understanding of the relevant transactions or services envisaged and his/her ability to evaluate adequately the risks. This criterion shall not be combined exclusively with the criteria on the size of the client’s financial portfolio.’;

Added(3) the following subparagraphs are added:

Added‘Where the client is a legal entity, as a minimum, two of the following criteria shall be met:

Added- balance sheet total: EUR 10 000 000

Added- net turnover: EUR 20 000 000

Added- own funds: EUR 1 000 000

AddedThe investment firm shall assess that the legal representative of that legal entity or the person responsible for the investment transactions on behalf of that legal entity, understands the relevant transactions or services envisaged, is capable of making investment decisions in line with the legal entity’s objectives, needs and financial capacity and is able to evaluate adequately the risks.’.