On 6 February 2020, the European Securities and Markets Authority (ESMA) announced its strategy on sustainable finance, setting out how the European Supervisory Authority will place sustainability at the core of its activities by embedding environmental, social and governance (ESG) factors at the forefront of its work. The key priorities for ESMA highlighted in the strategy include: completing the regulatory framework on transparency obligations via the Regulation on sustainability related disclosures in the financial services…

On 5 February 2020, the European Systemic Risk Board (ESRB) published a letter to John Berrigan, Director General for Financial Stability, Financial Services and Capital Markets Union at the European Commission, regarding shortcomings of the current framework of the Alternative Investment Fund Managers Directive (AIFMD). The letter highlights areas for improvement in AIFMD reporting ahead of the AIFMD review to further enhance national competent authorities’ abilities to monitor vulnerabilities in investment funds. The ESRB estimates…

On 31 January 2020, the European Securities and Markets Authority (ESMA) published a letter to the European Commission in response of its request for technical advice on general equivalence criteria for prospectuses drawn up under the laws of third countries under Article 29(3) of the Prospectus Regulation. After careful analysis of its mandate, ESMA concludes that the operation of an equivalence regime under Article 29 of the Prospectus Regulation would raise serious practical challenges. One…

On 20 January 2020, the FCA published a Dear CEO letter to asset managers setting out the key areas of harm asset managers pose to their customers and markets in which they operate. Overall, the FCA has observed that standards of governance, particularly at the level of the regulated entity, generally fall below its expectations. The FCA’s supervision strategy addressing those key areas are set out below: liquidity management. Where the FCA identifies potential liquidity…

On 13 January 2020, the FCA published a new webpage setting out its findings on how asset management firms select and use risk modelling and other portfolio management tools. The basis for the review was to identify and manage relevant risks in the industry and assess how asset management firms utilised the tools and models at their disposal to respond to system failures or service interruptions. The FCA found that the sample of firms tested…

On 20 December 2019, the European Securities and Markets Authority (ESMA) published a report on EU issuers’ use of alternative performance measures (APMs) and their compliance with the ESMA APM guidelines. The report highlights that the use of APMs is widespread in all sectors and within all regulated documents. Significant diversity exists in the number and type of APMs used, as well as in their labels and definitions. ESMA calls on issuers to improve their…

On 13 December 2019, the International Organization of Securities Commissions (IOSCO) published a final report, Recommendations for a Framework Assessing Leverage in Investment Funds, setting out a two-step process aimed at achieving a meaningful and consistent assessment of leverage-related risks of a fund or group of funds. Step 1 provides an approach to how regulators using exposure metrics in various contexts and situations filter and select a subset of investment funds for further analysis.…