ESMA updates Q&As on the application of the AIFMD and UCITS Directive

On 14 June 2023, ESMA published updated Q&A documents on the application of:

• the UCITS Directive, and
• the AIFMD.

Q&As on the UCITS Directive

New Q&As have been added on:

• the management of alternative investment funds (AIFs) and pension schemes by UCITS management companies;
• the de-notification of marketing arrangements for UCITS; and
• the scope of activities passported by UCITS management companies.

The management of AIFs and pension schemes by UCITS management companies

This question asks whether, according to Article 6(2) of the UCITS Directive, UCITS management companies are allowed to manage AIFs as registered AIFMs under Article 3 of AIFMD.

ESMA indicates that UCITS management companies are allowed to manage AIFs as AIFMs registered under Article 3 AIFMD because Article 6(2) of the UCITS Directive allows for management companies to manage other collective investment vehicles, for which the management company is subject to prudential supervision. As registered AIFMs are subject to the prudential supervision under AIFMD and sub-threshold AIFMs are registered by their home competent authorities, they are both considered prudentially supervised within the meaning of Article 6(2) of the UCITS Directive.

The de-notification of marketing arrangements for UCITS

This question seeks clarification on whether UCITS wishing to de-notify the arrangements previously made for marketing their units have to comply with the obligations set out in Article 93a(1) of the UCITS Directive when there are no investors in a host Member State.

ESMA confirms that if there are no investors in a host Member State, UCITS wishing to de-notify the arrangements previously made for marketing their units, will still have to comply with all the obligations set out in Article 93a(1) of the UCITS Directive, making sure that there are no investors uninformed about the UCITS’ market exit, that all marketing is publicly terminated and any marketing arrangements with third parties are terminated or modified to prevent any further marketing of the de-notified UCITS.

The scope of activities passported by UCITS management companies

The third UCTIS question asks whether a management company that intends to pursue the activities for which it has been authorised in a host Member State, can passport only the administration or marketing functions referred to in Annex II of the UCITS Directive in that host Member State, without also passporting investment management functions?

ESMA clarified that UCITS management company intending to manage UCITS established in another Member State, either directly or through the creation of a branch in another Member State, is required to communicate to the competent authorities of its home Member State a program of operations referring to the services it intends to provide. That requirement cannot be interpreted otherwise than referring to investment management foremost, whereas auxiliary services remain as such auxiliary and are to be performed only in relation to the management of a UCITS.

Q&As on the AIFMD

New Q&As have been added on:

• notifications of AIFs (Section II);
• notification of AIFMs (Section IV); and
• calculation of leverage (Section VII).

Notifications of AIFs

This question asks for clarification regarding when an investment strategy is developed by a third party (the fund initiator), and whether the obligations set out in Article 30a of the AIFMD are applicable to this third party?

ESMA confirms that such third party is subject to the conditions for pre-marketing set out in Article 30a AIFMD.

Notification of AIFMs

The second AIFMD question seeks clarification on whether registered AIFMs referred to in Article 3(2) of the AIFMD, (which do not qualify as EuSEF or EuVECA managers), are subject to the obligation to notify pre-marketing according to Article 30a(1) of the AIFMD?

ESMA clarifies that they are not, unless required otherwise under national rules.

Calculation of Leverage

The final new question asks whether when calculating the leverage of an AIF whose core investment policy is to invest in real estate directly or indirectly, the AIFM should include the exposure contained in financial or legal structures involving third parties controlled by that AIF as referred to in Article 6(1) and (3) of Delegated Regulation (EU) 231/2013?

ESMA confirms that an AIFM must include the exposure contained in financial or legal structures involving third parties controlled by the AIF when calculating the leverage of such AIF, where these structures are specifically set up to directly or indirectly increase the exposure at the level of the AIF.