1 Legal & Regulatory

1.1 UCITS Update

There have been a number of developments over the quarter:


UCITS performance fees

The Securities and Markets Stakeholder Group of the European Securities and Markets Authority ("ESMA") on 14 November 2019 welcomed ESMA's consultation on performance fees in UCITS as part of its key supervisory priorities. The SMSG advises ESMA to gather more data and analyses regarding the use and the effects of performance fees. It encourages ESMA to finalise these guidelines to allow for pan-European convergence in the field of performance fee calculation. The SMSG agrees with the framework proposed by ESMA and the strong link with the IOSCO principles.


On 12 December 2019 ESMA issued its second Pan-EU Overview on the Use of Supervisory Sanctions for UCITS covering the year 2018. While the number of national competent authorities ("NCAS") issuing sanctions remains stable at 15, compared to the previous report for the period 2016-2017, the total number of sanctions issued has decreased based on a year on year comparison.

1.2 AIFMD Update

There have been a number of recent developments in relation to the Alternative Investment Fund Managers Directive 2011/61/EU ("AIFMD"):


On 4 December 2019 ESMA added one new Q&A on AIFMD reporting to NCAs on liquidity stress tests for closed-ended unleveraged AIFs in accordance with Article 24(2) of AIFMD. For closed-ended unleveraged AIFs, given the mandatory character of field 280 of the AIFMD reporting template, AIFMs should indicate the question is "Not Applicable" and at least report in this field the fact that the relevant fund is a closed-ended unleveraged AIF. However, where an AIFM decides to conduct liquidity stress tests for unleveraged closed-ended AIFs, it should report the results of the liquidity stress tests in the same field.

1.3 Brexit Update

The exit date for the UK to leave the EU was pushed out to 31 January 2020 in October 2019 to allow time to agree withdrawal terms.

As a result the deadline for opting into the UK Temporary Permissions Regime or TPR for inbound passported firms and funds or for amending existing TPR notifications has been extended until 30 January 2020. In the case of TPR amendment notifications, the UK FCA must be informed by 15 January of the intention to file the amendment notification.

ESMA also issued a statement noting that the date for Brexit in all its published measures and actions, including public statements, issued regarding the possibility of a no-deal Brexit scenario, should now be read as 31 January 2020.


On 6 November 2019 Luxembourg's financial regulator, the Commission de Surveillance du Secteur Financier (the "CSSF"), issued press release 19/54 on mandatory notifications in the context of Brexit. In this press release, the CSSF extended the deadline for submission of Brexit notifications in the event of a hard Brexit to 15 January 2020.

For more information see our client update, Luxembourg Update: CSSF Mandatory Notifications Deadline Extended

1.4 Sustainable Finance - The Disclosure Regulation and Other Measures

Regulation (EU) 2019/2088 on sustainability‐related disclosures in the financial services sector lays down harmonised rules for financial market participants including AIFMs, UCITS management companies and investment firms authorised under MiFID II (providing portfolio management or investment advice). It provides for transparency with regard to the integration of sustainability risks and the consideration of adverse sustainability impacts in their processes, as well as the provision of sustainability-related information on financial products. It came into force on 29 December 2019 and, with some exceptions, will apply from 10 March 2021.

Initial website and pre-contractual disclosure requirements will apply from 10 March 2021. Periodic reporting requirements will apply from 1 January 2022. Certain financial product specific pre-contractual disclosures will apply from 30 December 2022.

The European Supervisory Authorities are now required to develop technical standards on the content, methodology and presentation of information relating to the disclosure requirements.

For more information see our client update, New ESG Disclosure Requirements for EU Funds and Asset Managers

In a related development the Low Carbon Benchmarks Regulation (EU) 2019/2089 came into force 10 December 2019 (see "Benchmark Regulation" below for more information). Further on 17 December 2019 the EU Parliament reached agreement with the EU Council on new criteria to determine whether an economic activity is environmentally sustainable. The EU taxonomy will provide investors with clarity on which activities are considered environmentally and socially sustainable. The agreement reached will now have to be approved first by the two committees involved and by a plenary vote.

1.5 AML and Beneficial Ownership


The European Union (Money Laundering and Terrorist Financing) Regulations 2019 amended the Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 ("CJA") from 18 November 2019. They require a designated persons to have appropriate internal procedures for their employees to report a CJA contravention through a specific, independent and anonymous channel, proportionate to the nature and size of the designated person. They also create a criminal offence of failing to inform a competent authority such as the Central Bank of Ireland ("Central Bank") where certain persons are convicted of CJA or other offences relating to other financial activities. They also confirm that competent authorities should apply a risk based approach to supervision and ensure that their employees have access to information on ML/TF risks and that competent authorities who supervise designated persons have a duty to cooperate with competent authorities in other EU Member States.

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