1 Legal & Regulatory

1.1 UCITS Update

There have been a number of developments over the quarter:

On 3 April 2020 the European Securities and Markets Authority ("ESMA") published a final report containing guidelines on performance fees in UCITS and certain types of AIFs – see "ESMA Guidelines on Performance Fees" below for more detail.

On 4 June 2020 ESMA published a supervisory briefing on the supervision by national competent authorities ("NCAs") of costs applicable to UCITS and AIFs. For more information see "New ESMA Guidance on Fund Costs Reporting" below and our client update, Introducing the Pricing Process: New ESMA Guidance on Fund Costs Reporting

1.2 AIFMD Update

There have been a number of recent developments in relation to the Alternative Investment Fund Managers Directive 2011/61/EU ("AIFMD"):

On 3 April 2020 ESMA published a final report containing guidelines on performance fees in UCITS and certain types of AIFs – see "ESMA Guidelines on Performance Fees" below for more detail.

On 4 June 2020 ESMA published a supervisory briefing on the supervision by NCAs of costs applicable to UCITS and AIFs. For more information see "New ESMA Guidance on Fund Costs Reporting" below and our client update, Introducing the Pricing Process: New ESMA Guidance on Fund Costs Reporting

On 10 June 2020 the European Commission published a report to the European Parliament and Council of the EU assessing the application and scope of AIFMD. It finds that AIFMD has improved the monitoring of risks to the financial system and the cross-border raising of capital for investments in alternative assets and AIFMs are operating with more transparency for investors and supervisors.

The report also identifies areas where AIFMD could be further improved such as further enhancing utility of the AIFM passport; discusses streamlining reporting requirements and concludes that the national private placement regimes which permit access of third country AIFMs and/or AIFs to the markets of individual member states, play an important bridging role while the AIFMD passport for the third country entities has not been activated yet by means of a delegated act.

The Commission is still assessing whether there is a need for any proposals, including amendments to AIFMD. The next step in the AIFMD review process is a public consultation which is planned for autumn 2020.

1.3 COVID-19 – Central Bank, CSSF and ESMA Statements

Ireland

On 9 June 2020 the Central Bank of Ireland ("Central Bank") updated it s COVID - 19 Regulated Firms FAQ . On 16 June 2020 it published a statement setting out its expectations as regards due diligence arrangements and periodic on-site visits to outsourcing service providers and delegates in the context of COVID-19.

Luxembourg

The CSSF published the latest iteration of its COVID-19 FAQ on 19 June 2020 and a range of other relevant circulars and press releases, the most relevant of which are:

CSSF Circular 20/740

On 10 April 2020 the CSSF published CSSF circular 20/740 on financial crime and AML/CFT implications during the COVID-19 pandemic which gives guidance to all professionals subject to the AML/CFT supervision of the CSSF ("Professionals") in relation to money laundering (“ML”) and terrorist financing (“TF”) risks and AML/CFT implications of the COVID-19 pandemic and should be read in conjunction with related guidance on COVID-19 issued by the EU, international and national authorities as well as related CSSF AML/CFT guidance (e.g. CSSF Circular 19/732 and CSSF Circular 17/661 ).

Professionals must continue putting in place and maintaining effective systems and controls to ensure that Luxembourg's financial system is not abused for ML/TF purposes. The circular addresses: (i) new and emerging ML/TF threats resulting from COVID-19; (ii) possible areas of particular vulnerability for the financial sector; (iii) mitigating actions that require particular focus for supervised professionals and (iv) the CSSF's approach to AML/CFT supervision during this period.

AML/CTF in the Collective Investment Sector

On 4 May 2020 the CSSF released a presentation on AML/CFT supervision in the Collective

Investment Sector (“CIS”) which complements CSSF Circular 20/740 and provides sector-specific detail on this circular. Supervised CIS entities may use the document as part of their training process for staff working remotely to create awareness of the implications of the pandemic in the fight against ML and TF.

It elaborates on the particular ML and TF threats and vulnerabilities posed by COVID-19 for CIS entities; suggests AML and CTF mitigation measures which may be implemented by CIS entities in the context of the current remote working environment and identifies the ML and TF typologies and red flags which may arise during the pandemic.

Extension of Deadlines for the Financial Sector

On 18 March 2020 the Luxembourg government declared a state of emergency for three months. Further to this th e law of 12 May 2020 on the extension of certain deadlines provided for in the sectorial laws of the financial sector during the state of emergency (“Law”) and th e law of 22 May 2020 extending the deadlines for filing and publication of annual accounts, the consolidated financial statements and related reports during the state of emergency (“General Law”) came into force on 12 May 2020 and 29 May 2020 respectively.

The Law applies to a range of regulated entities including credit institutions, securitisation vehicles, SICARs, SIFs and UCIs to whom certain filing obligations pertain and gives them a three month extension on certain preparation, publication and filing obligations. The General Law applies generally to all Luxembourg companies and partnerships and extends certain deadlines during this period, including the filing and publication of annual and consolidated accounts as well as the holding of AGMs.

Both apply only to deadlines that had not expired by 18 March 2020 and financial years ending during and by the end of the three month state of emergency. CSSF regulated entities not covered by the Law or the General Law should refer to the CSSF' s COVID - 19 FAQ in which the CSSF indicated that, for the annual and half yearly reports required under the UCITS Directive and AIFMD, it will follow the ESMA public statement of 22 April 2020.

EU

On 15 June 2020 ESMA published a revised work programme for 2020. ESMA's key priorities for 2020 are implementing new mandates, supervisory convergence, risk assessment, developing the single rulebook and direct supervision. It originally published its 2020 work programme in October 2019 but in March 2020 it reallocated resources away from its planned work into its response to the pandemic. Until June 2020 ESMA's focus has been on maintaining markets that are open and orderly and that allow prices to adjust and liquidity to be provided.

To respond to the repercussions of COVID-19 on the financial markets, each activity in the original programme was assessed against criteria of relevance for the market and urgency, as well as impact on stakeholders. On that basis, it was classified into high, medium or low priority. The results of the assessment are provided in the revised work programme, which includes the changes in relation to new items added as high priority and elements that are delayed or removed from the programme.

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Originally published 23 July, 2020

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