Financial Services

Funds Legal Update | 21 May 2019

Published on 21st May 2019

Welcome to Osborne Clarke's Funds Legal Update.


This week, we take a look at EMSA's current priorities including disclosure proposals regarding sustainable investments and sustainability risks.

We highlight the European Parliament's updated procedure file on Delegated Regulation supplementing EuSEF Regulation and the Council's next steps.

We also report on a speech by the Executive Director of Strategy and Competition at the FCA on the future of regulation.

ESMA speech on its current priorities

In a speech delivered by the Head of the Investors and Issuers Department, Evert van Walsum, on 13 May 2019, ESMA highlighted its current priorities which include the following:

  • The European Supervisory Authorities are beginning work on the mandated technical standards on disclosure following agreement between the European Parliament and the Council of the EU in relation to the European Commission's disclosure proposals regarding sustainable investments and sustainability risks.
  • ESMA has recently discovered that national practices on performance fees are sometimes inconsistent, creating the risk of differentiating levels of protection for the retail investor depending on the fund domicile. ESMA is working to put together a set of common principles in order to harmonise the approach taken to performance fees and their structure by EU regulators.
  • ESMA has initiated a broad review of the PRIIPs Delegated Regulation and expects to release a public consultation in Q3 2019. The review will cover proposals to review the performance scenarios section of the PRIIPs KID which have proven to generate over-optimistic results. The review will also cover issues around costs in terms of presentation and calculation.

European Parliament non-objection to Delegated Regulation supplementing EuSEF Regulation

On 15 May 2019, the European Parliament updated its Delegated Regulation procedure file supplementing the European Social Entrepreneurship Funds Regulation in relation to conflicts of interest social impact measurement and information to investors. The Commission adopted the Delegated Regulation in February 2019. The Council will now consider the Delegated Regulation and if it does not object, the regulation will come into force 20 days after it is published in the Official Journal of the EU. The regulation will apply six months after coming into force.

Conduct and conduct risk: FCA speech

In a speech delivered on 8 May 2019, Christopher Woolard, Executive Director of Strategy and Competition focused on what the FCA believes the "future of regulation" should look like. This is one of the cross-sector priorities in the FCA's Business Plan for 2019/20 and the FCA regards the Principles as the fundamentals of FCA regulation. Different views on them exist; although Woolard does not believe the Principles should be up for continual debate, he believes it is the right time to consider how they function.

One theme conveyed in the speech is that technology will change the way the FCA regulates, and not just the markets that it regulates. Some of the work the FCA is involved with around technology includes:

  • The use of machine learning techniques to identify firms or individuals who could pose a risk to the FCA's objectives.
  • Participation in the Global Financial Innovation Network (GFIN), which is an international network of 35 regulators who share knowledge and will explore how technology can drive new products, services and firms in consumers interest, and how to reduce the compliance burden.
  • The FCA strengthening its in-house skills in areas like cyber security, data science and technology and looking to grapple with ethical and social questions new technologies bring up. For example, how does the FCA ensure algorithmic decision-making is bias-free? One interesting question the FCA will explore is: "how 'explainable' should these technologies and their outputs be to consumers?"

You can read the speech "Financial Conduct in a Restless World" here.

AIC revamps sectors

On 8 May 2019, the Association of Investment Companies (AIC) revamped its investment company sectors and created a new list comprising 13 new sectors, 15 renamed sectors and left 31 unchanged sectors. This reorganisation will take effect on 28 May 2019 and is intended to allow investors to find and compare companies with similar characteristics easily. Several of the new sectors reflect the greater numbers of investment companies investing in alternative assets. You can read the AIC press release here.

If you would like to discuss any of these developments, please get in touch with one of the experts listed below.

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* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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