On 11 February 2016, ESMA published its 2016 supervisory convergence work programme (SCWP) detailing the activities and tasks it will carry out to promote sound, efficient and consistent supervision across the EU. ESMA published its 2016 regulatory work programme in table form alongside the SCWP.
This launches the implementation of ESMA's 2016-2020 Strategic Orientation, which reflects a significant change of direction towards more activities in the field of supervisory convergence (and less focus on the single rulebook). The work programme will contribute towards a number of aims including the effective implementation of rules, the co-ordination of supervisory activity, the development of effective supervisory approaches, and the identification of barriers to convergent supervision.
The supervisory convergence work programme sets a timeframe for the finalisation of guidelines concerning the application of the remuneration principles set out under Article 14b of the UCITS Directive of Q1 2016. It also states that consideration will be given to issues relating to the development of common approaches to the rules on eligible assets in the UCITS Directive.
More generally on investment management, section 5.3 of the SCWP states;
"42. The main focus of work in 2016 is to support the sound, efficient and consistent application of the AIFMD. When AIFMD was first applied in 2013, many of the entities it covered had previously been unregulated. As a result, it has taken some time to build experience of practical supervision, including in cross-border situations, and as experience has grown, new questions on the practical application of the legislation have continued to emerge. There are also important provisions which have not yet taken effect, in relation to the passporting of non-EU AIFMs and AIFs.
43. Priority activities in this area will therefore include:
- Regular updates of the AIFMD Q&A to answer questions from external stakeholders and NCAs on such issues as reporting, depositaries and scope;
- Improvement of the availability and quality of data on AIFMs and AIFs and starting to use analytical reports to identify and assess potential issues;
- Follow-up to the consultation on asset segregation under AIFMD;
- Development of a common procedure for the operation of the powers to impose leverage limits on an AIFM or group of AIFMs envisaged under Article 25;
- Development of cooperation procedures in the context of the AIFMD non-EU passport (Article 37) allowing for smooth cooperation between the NCAs and ESMA. This work can be considered as a follow-up to the advice delivered in July on the extension of the AIFMD passport to non-EU jurisdictions to the European Commission;
- Information gathering and sharing of experiences on supervisory actions in relation to liquidity management tools;
44. In addition, work will continue to support the consistent application of the UCITS framework, with activities in this area including the finalisation of guidelines concerning the application of the remuneration principles set out under Article 14b of the UCITS Directive in Q1 2016. Consideration will also be given to issues relating to the development of common approaches to the rules on eligible assets in the UCITS Directive.
45. Some work is envisaged which will support both these areas of focus, in particular:
- A thematic study on the operation of home and host responsibilities under AIFMD and UCITS with a view to clarifying the respective responsibilities of the NCAs and promoting the smooth operation of the EU passports for marketing and management; this is a high priority in view of the significance for the delivery of a fully functioning and efficient Capital Markets Union;
- In 2015 we (ESMA) have been analysing the phenomenon known as 'closet indexing' which would occur where funds are being distributed as being actively managed in accordance with the terms of their legal and marketing documents while they are instead tracking indices. This is misleading for the investors on the investment product they are buying and it prevents them to make an informed decision, based among other on the appreciation of the level of fees charged by such funds, in line with the investment strategy implemented. ESMA will continue to facilitate co-ordinated action by NCAs in relation to this issue in 2016, with the aim of achieving consistent outcomes for investors.
46. We (ESMA) plan to have a common supervisory priority in 2017 on the identification and tracking of delegation arrangements under AIFMD. It is possible that some preparatory work for this will be required at the end of 2016."
Overall, the priority areas for 2016 identified by ESMA are:
- Preparing for the sound, efficient and consistent implementation and supervision of the MiFID II Directive and MiFIR, and finalising the data and IT infrastructure needed to support the effective implementation and supervision of MiFID 2/MiFIR and the Market Abuse Regulation.
- Facilitating the sound and consistent supervision of OTC derivatives markets and in particular of EU central counterparties (CCPs).
- Supporting the effective application of the European Commission's Capital Markets Union plan.
ESMA will monitor the implementation of the 2016 supervisory convergence work programme, and the priorities may be readjusted depending on developments during 2016. The supervisory convergence work programme can be used to inform ESMA's risk-based approach to its annual work programme and its supervisory convergence work programme for future years.