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ESMA consults on rules for publishing standardised information to facilitate cross-border distribution of funds

The European Securities and Markets Authority (ESMA) has launched a consultation on the standardised information (forms and templates) that national regulators in Europe should use to publish information on their websites to facilitate cross-border distribution of Undertakings for Collective Investments in Transferable Securities (UCITS) and other funds.

Improving the cross-border distribution of funds across the European Union forms part of the EU's efforts to enhance the capital markets union. Among the potential barriers to wider distribution identified by the European Commission (which consulted on the issue in 2016) were marketing restrictions and distribution costs and regulatory fees.

In July 2019, Directive 2019/1160 amending the UCITS directive and Alternative Investment Fund Managers Directive (AIFMD) with regard to cross-border distribution of collective investment undertakings and Regulation 2019/1156 on facilitating cross-border distribution of collective investment undertakings were published in the EU's Official Journal. These two texts aim to coordinate more closely the conditions applicable to fund managers operating in the internal market and to facilitate the cross-border distribution of the funds.

Among other things, the regulation stipulates (in Article 5) that national regulators should publish and maintain certain information on their websites relating to marketing requirements and inform ESMA of the weblinks to it. ESMA's consultation relates in part to that content.

Publication of marketing requirements

ESMA said that publication of marketing requirements by national regulators on their websites was intended to help fund managers in deciding to engage in marketing activities in a country as well as enhance investor protection by making such information more accessible. Accordingly, from a stakeholder point of view, the proposals should be viewed from the perspective of whether the proposed scope and format of the information would serve that purpose.

The consultation paper covers ESMA's proposed requirements in relation to:

The scope of the information to be published – ESMA said it was desirable to have complete and precise information. It said the information should cover a member state's rules on the marketing of domestic funds in that country or, where applicable, in a host member state and host member states' rules on marketing of funds established in a home member state. ESMA suggested that reference could also be made to other applicable bodies of domestic law (such as consumer protection laws) that might apply to marketing to retail investors.

The format of the publication – ESMA said that the standardised format of the publication should be flexible and focus on highlighting the requirements applicable to each type of fund. Rather than stipulating the form of publication (such as text or table format), it has proposed a general requirement that national regulators clearly identify the applicable requirements.

The main characteristics of the summaries of marketing requirements – ESMA said that it took the view that it should not restrict the format of the required summary of marketing requirements. It said that the main focus of its requirements should be on ensuring that the summary was concise, clear, easy to read, and provided sufficient information to understand the main requirements for marketing in the member state.

Publication of information on regulatory fees and charges

The consultation paper also covers the requirement (under Article 10) to publish information on regulatory fees and charges imposed in relation to oversight of cross-border activities. It covers the following requirements:

The scope of the information to be published – ESMA said it took the view that Article 10 should be interpreted as requiring publication of all existing regulatory fees and charges levied by national regulators in relation to any cross-border activities within their jurisdiction, whether inwards or outwards. As in some countries no fees or charges were imposed in relation to certain activities, ESMA said that the information published should make it clear that there are no other fees or charges other than those listed.

The format of publication – ESMA said it was preferable for publication to be made in a harmonised way such as a table with accompanying explanatory text. It said that such a table should be easy to read and should at the minimum provide:a detailed breakdown of the different type of applicable regulatory fees and charges, including the amount to be paid as either a fixed fee or a percentage; details of the type of activity to which the fee relates; information on the legal basis for levying the fee; details on the periodicity of the fee, as applicable; and the person or entity who is liable for paying the fee.

Next steps

The consultation remains open for comments until June 30, 2020. ESMA is required under the regulation to submit its proposed rules to the European Commission by February 2, 2021.

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