ESMA findings from its CSA on compliance and internal audit in the funds sector

The European Securities and Markets Authority (ESMA) has published a final report with the results of its 2025 common supervisory action (CSA) on the compliance and internal audit functions of fund managers, conducted with national competent authorities (NCAs) across the EU and EEA. The review found that most fund managers broadly comply with key requirements under the Alternative Investment Fund Managers Directive (AIFMD) and Undertakings for Collective Investment in Transferable Securities (UCITS) frameworks; however, it identified weaknesses in governance, particularly regarding the independence of control functions, the quality and implementation of internal policies, and the effectiveness of senior management and board oversight. ESMA also noted significant variation in the quality and practical application of policies across firms, often linked to their size and complexity. The annex to the report contains examples of both good and poor practices. While the overall outcome was positive, ESMA encourages NCAs to follow up on identified breaches and vulnerabilities and to ensure timely remedial action, alongside continued supervisory engagement.

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