Throughout August you will have seen a number of regulators publishing updated circulars, opinions and notices in relation to the application of the ESMA Guidelines on stress test scenarios under the Money Market Fund Regulation (EU) 2017/1131 (MMFR). Including regulators such as the: MFSA, CMVM, Central Bank of Ireland, FSMA & CSSF.
In this month’s round-up, of particular interest, nearly two years after its publication, the EU’s new regulatory framework facilitating the cross-border distribution of collective investment schemes applied from 2nd August. With this we saw several regulators announce the transposition of the new rules.
In 2019, the Bank of England (BoE) and Financial Conduct Authority (FCA) launched a joint review into vulnerabilities associated with the liquidity mismatch. The review built on the FPC’s 2015 assessment; the FCA’s 2019 Policy Statement on funds investing in inherently illiquid assets; and the work by the FSB and the International Organization of Securities Commissions (IOSCO).
Liquidity risk in managed funds has been a prominent and increasing concern of regulators globally, particularly in the past two years, in the wake of some high-profile liquidity events. The New Zealand Financial Market Authority (FMA), following a familiar trend we’ve seen recently from many regulators, has published a liquidity risk management report.
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.
IOSCO has launched a Thematic Review on the implementation of Liquidity Risk Management Recommendations. The Thematic Review aims to assess the extent to which the Recommendations have been implemented through member regulatory frameworks.
Welcome to the first monthly regulatory round-up of 2021. Each month we will be summarising the key announcements and regulatory developments impacting the fund industry. The past month brought developments on a range of issues, from updated FAQs and guidelines impacting UCITS and AIFMs, to consultations…
Throughout the year regulators have focused on liquidity, and as this year draws to a close, that focus shows no signs of diminishing. “Asset managers need to step up their efforts to ensure the liquidity of their funds is adequately managed and that they are prepared for future shocks” – that was the closing remarks from Steven Maijoor’s Keynote Address at EFAMA’s Investment Management Forum which heavily focused on liquidity risk.
Last month it was great to see a number of key liquidity developments finally enter into force, including: ESMA’s new guidelines on liquidity stress testing in UCITS and AIFs, The FCA’s new rules for certain open-ended funds investing in inherently illiquid assets; and Article 37 MMF Reporting for both Q1 and Q2.
The big month of liquidity finally arrived where we saw a number of liquidity developments come to fruition at the end of the month, including: ESMA’s new guidelines on liquidity…