The European Securities and Markets Authority (ESMA) has opened its consultation on draft guidelines and technical standards under the revised Alternative Investment Fund Managers Directive (AIFMD) and the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive.
The draft regulatory technical standards define the constituting elements of liquidity management tools (LMTs), with further guidelines on the LMTs of UCITS and open-ended AIFs. These guidelines are in place to support managers in the selection and calibration of their LMTs with consideration to their investment strategy, liquidity profile and the fund’s redemption policy.
With the draft standards and guidelines, ESMA aims to promote convergent application of the two directives for both UCITS and open-ended AIFs. This will better equip EU fund managers to handle the liquidity of their funds in anticipation of market stress, the association explained.
ESMA will also clarify the functioning of specific LMTs, it assured, including side pockets — a process which currently varies across the EU.
Responses to the consultations will be accepted until 8 October, with the final RTS and guidelines expected to be released by 16 April 2025.
Verena Ross, chair of ESMA, commented: “The revised AIFMD and UCITS Directive have introduced long-awaited provisions on the availability and use of LMTs. ESMA is now consulting on how to apply these provisions in practice. These new rules being proposed are in line with the latest global standards provided by the FSB and IOSCO, and will contribute to the strengthening of the EU regulatory and supervisory regime for investment funds.
“By having the right implementing rules in place, we can make the EU framework for investment funds both more resilient and more efficient, supporting the development of attractive, effective and stable EU capital markets.”
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