1. AIFMD & UCITS DEVELOPMENTS

1.1 Adoption of AIFMD II (This is a further update to section 1.1 of the quarterly report covering the fourth quarter of 2023 as well as of the monthly report covering February 2024)

On 26 March 2024, Directive (EU) 2024/927 of the European Parliament and of the Council of 13 March 2024 amending AIFMD (2011/61/EU) and the UCITS Directive (2009/65/EC) relating to delegation arrangements, liquidity risk management, supervisory reporting, provision of depositary and custody services, and loan origination by AIFs ("AIFMD II") was published in the official journal of the EU (the "OJ").

On 26 March 2024, EFAMA published a Q&A answering a number of key questions on the revised AIFMD and UCITS Directives namely:

  • why were the current AIFMD/UCITS regimes reviewed?
  • what are the major changes the review process introduced?
  • in light of these changes, will these frameworks remain successful?

Next steps

ESMA is now mandated to develop the following standards and guidelines:

  • draft regulatory technical standards to specify the characteristics of liquidity management tools by 16 April 2025;
  • draft regulatory technical standards on the characteristics of open-ended loan-originating AIFs by 16 April 2025;
  • guidelines on the selection and calibration of liquidity management tools by 16 April 2025;
  • guidelines to specify the circumstances in which the name of a UCITS or AIF is unfair, unclear or misleading by 16 April 2026. Those guidelines shall take into account relevant sectoral legislation and such sectoral legislation setting standards for fund names or marketing of funds takes precedence over those guidelines;
  • guidelines providing indications to guide the competent authorities in their exercise of their powers to activate or deactivate the liquidity management tools where there are risks to investor protection or financial stability that, on a reasonable and balanced view, necessitate such activation or deactivation by 16 April 2026;
  • draft regulatory technical standards on reporting obligations by 16 April 2027; and
  • the recitals to AIFMD II note that ESMA should update its guidelines on sound remuneration policies under AIFMD and the UCITS Directive as regards aligning incentives with ESG risks in remuneration policies.

AIFMD II will enter into force on 15 April 2024. Member States are required to adopt and publish, by 16 April 2026, the laws, regulations and administrative provisions into national legislation necessary to comply with AIFMD II, with the exception of new reporting requirements which apply from 16 April 2027 and subject to transition provisions for existing loan origination funds.

Walkers' asset management and investment funds team have published an advisory entitled 'AIFMD II - A Closer Look' which assesses the key changes which will impact full-scope EU alternative investment fund managers ("AIFMs") and the next steps in the implementation of AIFMD II.

1.2 Delegated and implementing regulations on cross-border notifications under AIFMD and UCITS Directive published in OJ (This is a further update to section 1.6 and 2.4 of the quarterly report covering the fourth quarter of 2023))

On 25 March 2024, the following technical standards as regards notification to national competent authorities of cross-border activities have been published in the Official Journal of the EU:

  • Commission Delegated Regulation (EU) 2024/911 of 15 December 2023 supplementing Directive 2009/65/EC of the European Parliament and of the Council with regard to regulatory technical standards specifying the information to be notified in relation to the cross-border activities of management companies and UCITS (C/2023/8703). This Regulation shall apply from 25 June 2024.
  • Commission Implementing Regulation (EU) 2024/910 of 15 December 2023 laying down implementing technical standards for the application of Directive 2009/65/EC of the European Parliament and of the Council with regard to the form and content of the information to be notified in respect of the cross-border activities of UCITS, UCITS management companies, the exchange of information between competent authorities on cross-border notification letters, and amending Commission Regulation (EU) No 584/2010 (C/2023/8700). This Regulation shall apply from 14 July 2024.
  • Commission Delegated Regulation (EU) 2024/912 of 15 December 2023 supplementing Directive 2011/61/EU of the European Parliament and of the Council with regard to regulatory technical standards specifying the information to be notified in relation to the cross-border activities of managers of AIFMs (C/2023/8706). This Regulation shall apply from 25 June 2024.
  • Commission Implementing Regulation (EU) 2024/913 of 15 December 2023 laying down implementing technical standards for the application of Directive 2011/61/EU of the European Parliament and of the Council with regard to the form and content of the information to be notified in respect of the cross-border activities of AIFMs and the exchange of information between competent authorities on cross-border notification letters (C/2023/8707). This Regulation shall apply from 14 April 2024.

The delegated acts are directly applicable and the Central Bank will now update its cross-border processes and published notification letters on its website to adapt to the new requirements laid down in the delegated and implementing regulations by the respective application dates.

2. CENTRAL BANK UPDATES

2.1 Regulatory and Supervisory Outlook 2024 and 'Dear CEO' letter

On 29 February 2024, the Central Bank published a new Regulatory and Supervisory Outlook 2024 ("RSO") – its first annual report setting out the Central Bank's view on the key trends and risks facing the financial sector, along with the regulatory and supervisory priorities it has set in the context of those risks. The Central Bank also published a letter Governor Makhlouf wrote to the Minister for Finance setting out his views on the macro-financial environment, the financial services landscape and the Central Bank's financial regulation priorities for the year ahead, including:

  • Working with the Department of Finance on priority policy areas including, the completion of the 2030 Funds Review;
  • Putting in place a revised and modernised Consumer Protection Code to ensure consumers are protected in a more digitalised financial services sector (with consultation paper 158 published on 7 March 2024);
  • Continuing to progress work both internationally and domestically to address systemic risks from the non-bank sector and deepening their analysis and understanding of macroprudential risks in this sector;
  • the implementation of both DORA and MiCA;
  • Implementing the Individual Accountability Framework (including within its supervision of firms) and supporting external stakeholders to embed the new standards; and
  • development of policy work and supervisory expectations on the use of artificial intelligence ("AI") in financial services.

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