Turning ESMA into an extra supervisor for asset managers is unwarranted, a major distraction, and runs contrary to the EU competitiveness and simplification agendas
As the European Parliament and Council begin to discuss the Commission’s ambitious Market Integration & Supervision Package (MISP) more actively, EFAMA has shared its views on how the co-legislators can transform a well-intentioned proposal into an impactful regulatory reform.
While the EU Single Market works relatively well for asset managers, a patchwork of barriers still prevents them from fully tapping into it. These include different national requirements when distributing funds across borders, maintaining oversight of entities within the same group, and navigating the complexity of overlapping reporting frameworks. On the capital markets side, the competitive and diverse equity trading landscape in the EU requires greater transparency for its users.
EFAMA recommends the following, in order to simplify the current regulatory framework and move us closer to a real Savings and Investment Union:
We agree with the recent Parliamentary report from MEP Ferber that the MISP should include a competitiveness mandate for ESMA, to ensure that the authority adequately balances its investor protection and financial stability goals with the impact on market competitiveness when undertaking its non-supervisory work. The rulebook and customer journey need to be radically simplified, and ESMA has a key role to play here, alongside the European Commission.
When it comes to asset management, the focus should be on further enhancing EU supervisory convergence. The Commission's proposal to empower ESMA to conduct annual reviews of large asset managers and potentially suspend cross-border activities is not helpful, has no properly demonstrated benefit, and creates unnecessary complexity and legal uncertainty.
Granting ESMA direct supervision over asset managers, as proposed in the recent Parliamentary report from MEP Heinäluoma, would be even worse and only add additional layers of supervisory complexity. Instead of wasting time and energy trying to fix something that is not broken, market participants and supervisors need integrated fund reporting.
The MISP proposals streamlining cross-border fund distribution and harmonising UCITS rules across the EU are much welcome and only require limited technical changes.
On the contrary, harmonising management company rules is unnecessary, except for two reforms:
An opt-in derogation from the delegation regime should apply to all companies within a group. The currently proposed derogation for only EU entities within a group would create additional complexity for asset managers and negate the benefits of having Memoranda of Understanding between EU and non-EU supervisors.
The MISP should include a clear mandate for ESMA to develop an integrated fund reporting regime, remove duplicative reporting requirements (e.g., Article 7d EMIR), and introduce more realistic timelines for UCITS/AIFMD reporting.
The proposed introduction of an EU passport for depositaries must be regulated through robust safeguards to mitigate the associated risks. The Commission's proposal is surprisingly light on details, a situation that must be remedied before its introduction.
The MISP made a positive move by proposing to include venue attribution and five layers of pre-trade data in the upcoming EU consolidated tape. It is very disappointing to see the Parliamentary report by MEP Ferber recommending the removal of all enhancements to the consolidated tape. This is not in the interest of users of financial markets and goes against our common objective to increase the competitiveness of EU capital markets.
There should not be any major redesign of the equity market structure in Europe. This would be unjustified and detrimental for market participants and end investors.
To support innovation, the DLT Pilot Regime’s value thresholds should be removed.
Tanguy van de Werve, Director General at EFAMA, commented: "While many of the European Commission's proposals are on the right track, a few require a fundamental rethink, especially concerning supervision and delegation. Unfortunately, some of the European Parliament's and Member States' current suggestions reignite old debates instead of improving existing proposals. This does not bode well for the success of the SIU project.”
Susan Yavari, Deputy Director for Capital Markets & Digital at EFAMA, commented: "The European Commission has identified a key reform that would enhance the consolidated tape, and that is supported widely by market participants. Let’s not let the interests of a few block an important improvement to the long-awaited consolidated tape for equities in Europe. Market data transparency is a key feature of any deep and liquid capital market, let us go all the way with this new tool."
Marin Capelle, Senior Policy Advisor at EFAMA, commented:"The sources of national divergence that negatively impact asset managers are usually regulatory in nature rather than arising from differences in supervisory practices. The MISP will address a lot of this regulatory divergence. We then need to empower ESMA to remove cross-border barriers as they arise using existing convergence powers, not create an additional “super-supervisor” that can overrule national supervisory decisions."
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Notes to Editors
Read the Annex on an ESMA competitiveness mandate here.
For further information, please contact:
Hayley McEwen
Head of communications and membership development
