09/06/17

ESMA Updates its Q&As (Again!) on the UCITS and AIFM Directives

On 24 May 2017, the European Securities and Markets Authority (ESMA) updated its Q&As on the application of the UCITS Directive (UCITS Q&A) and the AIFMD (AIFMD Q&A). These follow the previous updates that were made on 6 April 2017.

In both the UCITS and AIFMD Q&As, ESMA addresses the question of whether the relevant investment fund (i.e. a UCITS or an AIF), which is subject to the clearing obligation of the European Market Infrastructure Regulation (EMIR), can utilise the exemption for intragroup transactions. ESMA advised that the exemption must be construed narrowly. Indeed, ESMA indicated that a UCITS or an AIF can only use the exemption for intragroup transactions if it has been established to form part of the same group as the counterparty to the OTC derivative contract and if it fulfils all the EMIR criteria for intragroup transactions. As few UCITS or AIFs fulfil these criteria, ESMA has indicated that, in most cases, it will not be possible to rely on such an exemption.

With respect to the reporting template for AIF-specific information, ESMA was asked how AIFMs should report information on the breakdown between retail and professional investors when this information is not available. ESMA advised that AIFMs should include ‘0’ and indicate in the assumption boxes that such information is not available.

In the UCITS Q&A, which had been updated on 6 April 2017, ESMA was asked whether a UCITS management company that wishes to pursue cross-border activities through the UCITS management company passport had to identify a specific UCITS in which it wants to pursue the aforementioned activities in the notification letter. In the update to the AIFMD Q&A dated 24 May 2017, ESMA was asked a similar question for an AIFM that wants to manage, by way of the AIFMD passport, AIFs domiciled in another EU member state.

If specific AIFs cannot be identified at the time of the notification, ESMA indicated that the AIFs may be identified by the investment strategies contained in annex IV of the Commission Delegated Regulation (EU) No. 231/2013. An AIFM may also refer to its scope of authorisation if it has only been authorised to manage certain types of investment strategies.

If the AIFM can identify specific AIFs, their names, national identifiers (if available) and investment strategies should be included in the programme of operations.

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