Tuesday May 17 2022
News Source: Fund Regulation
Focus: Liquidity Risk Management
Country: European Union
The European Securities and Markets Authority (ESMA) is issuing this Public Statement to promote convergence in relation to actions taken to manage the impact of the Russian invasion of Ukraine on investment fund portfolios exposed to Russian, Belarusian and Ukrainian assets.
It concerns in particular the obligations of the following fund managers:
- Authorised external Alternative Investment Fund Managers (AIFMs) and internallymanaged Alternative Investment Funds (AIFs) subject to the AIFMD
- EuVECA managers subject to the EuVECA Regulation
- EuSEF managers subject to the EuSEF Regulation
- UCITS management companies and self-managed UCITS investment companies (together ‘UCITS managers’) subject to the UCITS Directive.
to manage investment funds in the best interest of investors, have adequate liquidity management systems in place and ensure fair valuation of assets.
More precisely, this Public Statement is aiming at recalling some general principles that can be derived from Union law that are of relevance to the management of the impact of the Russian invasion of Ukraine on investment fund portfolios. This includes appropriate actions to deal with valuation issues in case of exposures to Russian, Belarusian and Ukrainian assets, including where the use of liquidity management tools (LMTs), specifically side pockets, may be warranted.
ESMA is conscious of the fact that the use of LMTs is not yet fully harmonised in Union law and still largely subject to national law. In this context, the AIFMD review package put forward by the European Commission provides for proposed legislative amendments to the AIFMD and UCITSD with a view to harmonising the definitions and use of LMTs across Member States.
ESMA also takes note that the asset valuation and fund accounting rules are not harmonised in Union law and are also largely subject to national law.
It is important to highlight that the selection of the most suitable LMTs as well as the valuation to be applied to affected assets falls under the responsibility of the fund manager which shall act in the best interest of all investors.
In accordance with Article 31(2) of the ESMA Regulation, ESMA is issuing this Public Statement to promote convergence in the way market participants and national competent authorities (NCAs) respond to these adverse events and to provide clarity to fund managers.
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