The European Securities and Markets Authority (ESMA) has published a detailed opinion addressed to the European Parliament, the Council and the Commission setting out the necessary components for a common European framework for loan origination by investment funds, taking into account the different frameworks currently in place in several Member States.

Several EU Member States have set up bespoke frameworks for loan origination by funds domiciled in their country which means that funds operating cross-border need to comply with different requirements. The European Commission therefore intends to consult on establishing a common EU approach in the second quarter of 2016 and has asked ESMA to provide input on the key issues on which the consultation could focus.  

ESMA’s opinion is that a common approach at EU level would contribute to a level playing field for stakeholders, as well as reducing potential for regulatory arbitrage. This could in turn facilitate the take-up of loan origination by investment funds, in line with the objectives of the Capital Markets Union. 

The opinion sets out ESMA’s views on the following key areas:

  • authorisation of loan-originating funds and their managers;
  • authorisation of managers of loan-originating funds;
  • authorisation of loan-originating funds;
  • types of loan-originating funds;
  • types of Investors;
  • organisational requirements of managers of loanoriginating funds;
  • diversification, eligible investments and eligible debtors; and
  • systemic risk.


In December 2014, ESMA published a discussion paper on UCITS share classes in which it noted divergences in national practices as to permissible types of share classes. The responses to this discussion paper highlighted the need for ESMA to develop a common EU-wide approach to share classes.

ESMA has now published a further discussion paper which invites comments on a proposed set of high-level common principles relating to share classes, with investor protection as the main focus. 

The key common principles are:

  • Common investor objective – share classes of the same UCITS should have a common investment objective.
  • Non-contagion – managers of UCITS should implement procedures to ensure that risks associated with a particular share class will not adversely impact another share class.
  • Pre-determination – features of a particular share class should be pre-determined to allow investors to gain a complete overview.
  • Transparency – information on differences between share classes and risks (including contagion risks) should be made available to investors. 

The deadline for responses to this discussion paper is 6 June 2016. 


The Joint Committee of the European Supervisory Authorities (ESAs) (being ESMA, EBA and EIOPA) has released final draft Regulatory Technical Standards for Key Information Documents (KIDs) for retail investors in the EU. The draft is dated 31 March 2016.

The proposed KIDs will provide retail investors with simple and comparable information on investment products. The new rules, which come into force on 31 December 2016, are intended to contribute to enhancing confidence and strengthening the protection of EU consumers of banking, insurance and securities products. 

The new rules address the content and presentation of the KIDs including:

  • a common mandatory 3 page template for the KID; 
  • a summary risk indicator of seven classes;
  • a methodology to assign each Packaged Retail and Insurance-based Investment Product (PRIIP) to one of the seven classes contained in the risk indicator, and for the inclusion of additional warnings and narrative explanations;
  • requirements on performance scenarios and a format that must be followed for the presentation of these scenarios;
  • costs presentation including the figures that must be calculated and the format to be used;
  • specific layouts and contents for the KID for products offering multiple options that cannot effectively be covered in 3 pages; and
  • rules on revision and republication of the KID, to be done at least once each year.

Work has begun to produce supporting material as the ESAs are conscious that it will help PRIIP manufacturers and other stakeholders if supporting material is published on the details of the methodologies, for instance in the form of “FAQs” or “HowTo” guides.