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CSA on compliance and internal audit functions of UCITS ManCos and AIFMs
The European Securities and Markets Authority (ESMA) launched a common supervisory action (CSA) with national competent authorities on compliance and internal audit functions of UCITS management companies and AIFMs.
The CSA will be conducted throughout 2025 and aims to assess the extent to which UCITS management companies and AIFMs have established effective compliance and internal audit functions with the adequate staffing, authority, knowledge, and expertise to perform their duties under the AIFM and UCITS Directives.
Compliance and internal audit functions are designed to ensure that the internal control mechanisms to monitor, identify, measure, and mitigate any possible risks of non-compliance with the applicable rules are in place. Therefore, ensuring that the entities have robust internal controls is crucial to avoid investor detriment and preserve financial stability.
The work will be done using a common assessment framework developed by ESMA, which sets out the scope, methodology, supervisory expectations, and timeline on how to carry out a comprehensive supervisory action in a convergent manner. Following the launch of the CSA, the Central Bank of Ireland (CBI) has initiated its review of the compliance and internal audit functions of Irish UCITS management companies and AIFMs by issuing a questionnaire to selected entities. See Irish practice developments for further information.
During the year, NCAs will share knowledge and experiences through ESMA to foster convergence in how they supervise the compliance of UCITS management companies and AIFMs with the relevant rules.
ESMA will publish a final report with the results of the exercise in 2026.
Priorities of the 2024-2029 European Commission
The European Commission (Commission) has set an ambitious agenda to simplify and improve EU policies and laws, aiming to enhance competitiveness, reduce regulatory burdens, and ensure effective implementation of EU legislation.
EU Competitiveness Compass
The Competitiveness Compass is a strategic framework guiding the Commission's work for the next five years. It builds on the recommendations from the Draghi report on ‘The future of European competitiveness’, published in September 2024. Key actions include:
For a comprehensive list of the proposed measures, please refer to the full report.
European Savings and Investments Union (SIU)
In her Political Guidelines 2024-2029, President von der Leyen announced the proposal for a European Savings and Investments Union (SIU), combining the Capital Markets Union (CMU) and Banking Union (BU), building on their past achievements. The SIU aims to leverage private savings in support of the Commission’s objectives and to “focus action on supporting people to save better, fostering capital for innovation, unlocking digital finance, ensuring the competitiveness of the financial sector and harnessing sustainable finance”. A communication on the SIU strategy is expected in Q1 2025.
A call for evidence (CfE) has been issued, highlighting the following potential initiatives for the SIU:
Stakeholders are invited to provide feedback on advancing the SIU, based on progress with the CMU and BU, and the areas detailed above. The CfE will close on 7 March 2025.
The European Securities and Markets Authority (ESMA) held a conference focused on the key actions necessary to further integrate European capital markets and build the SIU.
European Commission 2025 Work Programme
The 2025 Work Programme includes 25 new legislative proposals, and sets out how the Commission will deliver on the Political Guidelines 2024-2029. The 2025 Work Programme follows the newly launched Competitiveness Compass and aligns with its Communication on implementation and simplification. This document outlines the Commission’s strategy to make the implementation of EU rules easier in practice, reduce administrative burdens and simplify EU rules. These objectives will be achieved primarily by omnibus packages, aimed to simplify key pieces of legislation. The Commission has invited the European Parliament and the Council to consider fast-tracking these simplification packages without re-opening other parts of the legislation. This approach aims to provide companies with swift regulatory clarification.
Key initiatives for the asset management sector include:
Among other points of interest, the Commission’s communication on implementation and simplification includes that it aims to tackle gold plating to ensure a more uniform regulatory environment across the EU, and that it plans to engage more effectively with stakeholders through regular implementation dialogues.
ESMA’s 2026-2028 program
ESMA published its 2026-2028 programming document. Section I highlights ESMA's planned work on:
In her foreword, Natasha Cazenave, ESMA's Executive Director, explains that the years 2026-2028 will be a period of transformation for ESMA, as several new supervisory mandates are added to its remit and ambitious IT projects such as the European single access point (ESAP) are developed. She states that, during 2026-2028, ESMA will continue to deliver on the priorities and thematic drivers set out in its 2023-2028 strategy while providing technical support to the European Commission as it rolls out its priorities for the new legislative cycle.
ESRB report on a monitoring framework for systemic liquidity risks in financial system
The European Systemic Risk Board (ESRB) published a report on a monitoring framework for systemic liquidity risks in financial system. The report:
Simplifying the EU Taxonomy
The EU Platform on Sustainable Finance (PSF) published a report setting out recommendations to the European Commission to simplify and improve the effectiveness of taxonomy reporting.
The report presents a set of evidence-based recommendations to simplify taxonomy reporting and enhance its effectiveness. Key areas for improvement include simplification, data access and coherence with other regulations. The report makes four core recommendations:
T+1: proposal to amend CSDR
The European Commission proposes to shorten the settlement period for EU transactions in transferable securities from two days to one. The Commission is proposing a targeted amendment to the Central Securities Depositories Regulation (CSDR). This aligns with ESMA’s report discussed here.
The proposal sets 11 October 2027 as the appropriate date for the transition to T+1 settlement. The proposal sets a maximum duration for the settlement cycle (T+1) while allowing market participants to settle their transactions faster, at T+0.
DORA
The European Commission clarified the scope of the definition of “ICT services” in Article 3(21) of the Digital Operational Resilience Act (DORA). You can read more here.
In a letter to the chair of the joint committee of the European Supervisory Authorities, the European Commission notified the ESAs that it is rejecting the draft RTS on subcontracting ICT services supporting critical or important functions under the DORA. You can read more here.
You can read about DORA here.
LEIs: ESMA publishes the results of the survey on legal entities identifiers
ESMA published the results of the survey it conducted in October 2024 on legal entities identifiers (LEIs) following the publication of the opinion on the European Commission’s rejection of draft implementing technical standards on the registers of information under the DORA that was issued by the European Supervisory Authorities.
Survey results show:
ESMA will organise a follow up workshop to discuss possible future actions.
For more information on these topics please contact any member of A&L Goodbody's Asset Management & Investment Funds team.