ESMA publishes final draft RTS and guidelines on Liquidity Management Tools for Funds

The European Securities and Markets Authority (ESMA) has published its final draft regulatory technical standards (RTS) relating to liquidity management tools (LMTs) under the Alternative Investment Fund Managers Directive (AIFM) and the Undertakings for the Collective Investment in Transferable Securities Directive (UCITS). The draft RTS will apply to Alternative Investment Fund Managers managing open-ended Alternative Investment Funds (AIFs) and UCITS. The final draft RTS under the AIFMD are detailed in Annex IV of the report, while those under the UCITS Directive are outlined in Annex V. The draft RTS have been submitted to the European Commission (EC) for adoption, which has three months to decide whether to adopt them.

ESMA has also published its final guidelines for national competent authorities and fund managers on LMTs of UCITS and open-ended AIFs, providing guidance on how managers should select and calibrate LMTs for liquidity risk management and mitigating financial stability risks. The guidelines, set out in Annex III of the report, will now be translated into the official EU languages and published on ESMA's website. National competent authorities and financial market participants must make every effort to comply with the guidelines. Within two months after the date of publication on ESMA's website, national competent authorities must notify ESMA whether they comply or do not comply, together with their reasons for not complying (if applicable). Financial market participants are not required to report on compliance. The Guidelines will apply upon the application date of the RTS on the characteristics of the LMT's. ESMA previously consulted on both the draft guidelines and draft RTS in July—for further background please see our update.

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