January started off the new year with several important regulatory developments in the investment funds and asset management industry. The most notable developments include: The proposed amendments to Form PF…
In early 2020, the European Securities and Markets Authority (ESMA) launched a Common Supervisory Action (CSA) on UCITS liquidity risk management (LRM). The purpose of this exercise was to simultaneously conduct coordinated supervisory activities in 2020 and to assess whether UCITS managers comply with their liquidity management obligations.
ESMA has published the results of the 2020 Common Supervisory Action (CSA) on UCITS liquidity risk management (LRM). UCITS are characterised by the offer to investors of on-demand liquidity. Article 84(1) states that UCITS shall repurchase or redeem its units at the request of any unit-holder. If the assets held within the fund cannot be sold quickly to meet redemption requests, there could be severe issues in paying redeeming investors. This can be exacerbated in times of stress when investors may look to redeem en masse whilst the market for the assets is drying up.
Yesterday, ESMA announced that it will be launching a Common Supervisory Action (CSA) with national competent authorities (NCAs) on the supervision of costs and fees of UCITS across the European Union. The CSA aims to assess the compliance of supervised entities with the relevant cost-related provisions in the UCITS framework, and the obligation of not charging investors with undue costs.
During the CSA, national competent authorities will take into account the supervisory briefing on the supervision of costs published by ESMA in June 2020.