EC adopts two Delegated Regulations under AIFMD and UCITS framework on LMTs

The European Commission has adopted two Delegated Regulations: (i) Delegated Regulation supplementing the Alternative Investment Fund Managers Directive (Directive 2011/61/EU) (AIFMD) and; (ii) Delegated Regulation supplementing the Undertakings for Collective Investment in Transferable Securities Directive (Directive 2009/65/EC) (UCITS). These regulations lay down regulatory technical standards (RTS) specifying the characteristics of liquidity management tools (LMTs), following the recent amendments made to AIFMD and UCITS by Directive (EU) 2024/927.

The RTS aim to harmonise the characteristics of LMTs across the EU for open-ended AIFs and UCITS, enhancing investor protection and financial stability. The harmonised list of tools, which are set out in the annexes to the Directives, include: suspension of subscriptions, repurchases and redemptions; redemption gates; extension of notice periods; redemption fees; swing pricing; dual pricing; anti-dilution levy; redemption in kind; and side pockets. Under the amended Directives, managers must select at least two appropriate LMTs from this list for potential use, considering the fund's investment strategy, liquidity profile and redemption policy. The Council of the EU and the European Parliament will scrutinise the Delegated Regulations. If neither object, they will enter into force 20 days after publication in the Official Journal of the European Union and apply from 16 April 2026. The RTS also establish a transitional period of application for existing funds constituted before this date.

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