On February 26, 2024, the EU Council adopted new regulations under the Capital Markets Union (CMU) framework, marking a significant milestone in the European Union's efforts to enhance the regulatory landscape for alternative investment fund managers (AIFMs) and "plain-vanilla" European Union (EU) investment funds, in the form of the Undertakings for Collective Investments in Transferable Securities regulatory framwework (UCITS). These regulations, designed to bolster investor protection, ensure financial stability and stimulate investment within the EU, introduce key provisions aimed at strengthening the supervision of AIFMs and facilitating the creation of simplified investment funds. The key provisions of these regulations are:

1. Alternative Investment Fund Managers (AIFMs):

  • Strengthening the regulation and supervision of AIFMs.
  • Setting out conditions to prevent AIFMs from becoming "letter-box entities" by:
    • Imposing required maintenance of the necessary expertise and resources at the level of the AIFM to effectively supervise delegated tasks and manage associated risks.
    • Mandating that the AIFM must have the necessary ability to make key decisions, which fall under senior management responsibility, and to implement general investment policy and strategies.
    • Requiring compulsory retention by the AIFM of contractual rights to inquire, inspect, access, or give instructions to delegates.
    • Limiting the ability to delegate investment management functions to a level that is not substantially exceeding those performed by the AIFM itself.
  • Setting out qualitative assessment requirements of the extent of any delegation of the AIFs that are managed, taking into consideration factors such as asset types, the risk profile, the investment strategies, etc..

2. "Plain-Vanilla" EU Investment Funds (UCITS Funds):

  • Promoting of the creation of plain-vanilla investment funds within the EU under the form of UCITS.
  • Simplifying the rules applicable to those UCITS Funds with an aim to stimulate investment in Europe.

The directive will now be published in the European official Journal and will enter into force 20 days later. Member states will have 24 months after the entry into force to enact the rules into national legislation.



Contacts

Geoffroy Hermanns
Geoffroy Hermanns
Partner
Email
geoffroy.hermanns@nortonrosefulbright.com
T: +352 (28) 5739805
Claire Guilbert
Claire Guilbert
Partner
Email
claire.guilbert@nortonrosefulbright.com
T: +352 621 747 650

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