EUROPEAN UNION: ESMA Publishes Final Report on 2022 CSA on Valuation

Tuesday May 30 2023

The European Securities and Markets Authority (ESMA) published the final report on 2022 Common Supervisory Action (CSA).

To ensure supervisory convergence in relation to the sample size and the overall coverage of the CSA across Member States, minimum coverage thresholds in terms of number of UCITS and open-ended AIF managers, as well as Assets under Management (AuM) of managers of UCITS and open-ended AIFs established in each jurisdiction were agreed.

All NCAs have met the criteria for the minimum coverage of managers of UCITS and open-ended AIFs across all the EU/EEA Member States, with some NCAs even increasing the expected coverage and including closed-ended AIFs marketed to retail investors.

NCAs followed the approach set out in the CSA assessment framework in relation to the selection of the sample. Accordingly, they focused on the following categories of fund managers investing in “less-liquid” assets:

a) unlisted equities;

b) unrated bonds;

c) Corporate Debt (CD);

d) Real Estate (RE);

e) High Yield (HY) bonds;

f) Emerging Markets (EM) equities or bonds;

g) listed equities not actively traded;

h) bank loans.

Furthermore, NCAs were given discretion on the selection of the sample and on the identification of the asset classes that needed more urgent scrutiny in their jurisdictions to be able to focus on managers with potentially high valuation risks, taking into account the size in terms of AuM (with a preference for covering both entities with large AuM, as well as smaller/mid-sized players to have a representative sample), type and number of investors (both retail and professional) as well as investors’ geographical location, potentially including cross-border cases.

ESMA welcomes the efforts made by NCAs in meeting the minimum coverage thresholds and in selecting a diversified sample of entities in the scope of the CSA exercise, taking into account the criteria identified in the CSA assessment framework.

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