March 21, 2023

Volume XIII, Number 80


March 20, 2023

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ESMA Recommends Key Changes to the AIFMD

On 19 August 2020, the European Securities and Markets Authority (“ESMA”) published a letter (“Letter”) received by the European Commission (“Commission”) making  several recommendations with regard to the Commission’s upcoming review of the Alternative Investment Fund Managers Directive 2011/61/EU (“AIFMD”).

Since the implementation of the AIFMD, EU financial regulators have identified areas of improvement to the AIFMD. The Commission’s impending review provides an opportunity for the recommendations to be considered in more depth and in due course, potentially enacted.

Proposed key changes…

Key changes proposed by ESMA in its Letter to the Commission include:

  • harmonizing certain aspects of the AIFMD and the Undertakings for the Collective Investment in Transferable Securities (2009/65/EC) (“UCITS”) regimes, to avoid divergences in regulatory outcomes without justification;

  • increasing the use of digitalised communication;

  • making additional liquidity management tools available to all AIFMs in all EU member states;

  • amending leverage calculation methodologies;

  • a new framework under the AIFMD for loan origination funds, which will be of interest to managers of credit funds, in particular;

  • changes to delegation arrangements, including limits on the use of delegation, the application of AIFMD standards to delegates (including where such delegates are outside the EU) and an extension of activities caught by the delegation rules;

  • increased scrutiny and scope of regulation applicable to “host AIFMs”;

  • further clarification and consistency applied with regard to the definition of a “professional investor” in relation to which the AIFMD marketing passport is available, even if a new definition of “semi-professional investor” is introduced;

  • a harmonised and consistent approach to “reverse solicitation”;

  • extending the scope of AIFMD supervision to sub-threshold alternative investment fund managers; and

  • changes to the AIFMD reporting regime and data use.

Next steps…

ESMA has highlighted that it encourages the Commission to support the areas identified in the Letter in order to improve the effectiveness and soundness of the AIFMD. The above considerations are likely to be useful to the Commission when carrying out its review of the AIFMD, however, there will likely be some “push-back” to some of these proposals from the asset management industry and from certain EU Member States – particularly with regard to the proposals relating to delegation arrangements.

From a UK perspective, many sponsors will be using or seeking to use delegation arrangements as part of their post-Brexit planning and it will be important to such firms that any amendments made to the delegation regime do not have an adverse impact on such arrangements.

While ESMA’s proposals are intended to enhance regulatory supervision and investor protection, business arrangements will also need to be preserved so as to allow the investment management industry to continue to operate effectively and provide investors with the advantages afforded by the European regulatory framework.

© 2023 Proskauer Rose LLP. National Law Review, Volume X, Number 241

About this Author

Kirsten Lapham FInancial Services Attorney Proskauer Rose Law Firm, United Kingdom

Kirsten Lapham is a partner specialising in financial services regulation. She advises a broad range of both institutional and individual clients on a variety of financial services regulatory and compliance issues. Her practice has a specific emphasis on the regulatory issues arising under the AIFMD, and MiFID II for a range of EU and indirectly impacted firms outside of the EU.

Experience in this area includes advising multiple clients on the EU marketing and registration regimes and overlaying local regulatory considerations, such as the U.K. retail distribution...

John Verwey, UK, European Level, Finance, Attorney, Proskauer Rose Law Firm
Special Regulatory Counsel

John Verwey is a special regulatory counsel in the Corporate Department and a member of the Private Investment Funds Group.

John advises on a wide number of regulatory issues at a national UK and European level, including firm authorisations, change in control, market abuse, Electronic Money Regulations, Payment Services Regulations and client money rules. He represents a variety of clients that range from private equity firms and insurance intermediaries to global investment banks and sovereign wealth funds. 

A particular area of focus for John is the implementation of...


Michael Singh is an associate in the Corporate Department and a member of the Private Funds Group. Mr. Singh graduated from the University of South Wales in 2012.

Amar Unadkat Corporate Lawyer Proskauer Rose Law Firm

Amar Unadkat is an associate in the Corporate Department and a member of the Private Funds Group.

Amar advises on a variety of regulatory issues including AIFMD, PSD II and MiFID II, both in the UK and at European level.

His clients include investment fund managers, FinTech companies, wealth management businesses, crowdfunding businesses (including P2P lending platforms), banks and funds seeking to market to investors