ESMA updates Q&A’s relating to the Prospectus Regulation, AIFMD, MiFID and MiFIR

The European Securities and Markets Authority (“ESMA”) has recently updated its Questions and Answers (“Q&As”) in relation to various Regulations and Directives as provided hereunder:
1. Prospectus Regulation
The two new Q&As provide clarifications on the following issues in relation to the Prospectus Regulation:
a. The inclusion of pro-forma summaries in base prospectuses
Whereas the Prospectus Directive required a pro-forma summary to be included in the base prospectus, ESMA clarifies that the Prospectus Regulation does not provide for the possibility to include a pro-forma summary in a base prospectus.In this regard, ESMA notes that such pro-forma summaries do note present a comprehensive overview to the investors as significant parts of the pro-forma summary are incomplete or have not been determined at the time of the approval of the base prospectus.
b.The application of prospectus disclosure annexes to comparable securities
Where the securities are not the same but comparable to existing types of securities, the annexes which apply to those existing securities should be applied to the prospectus for comparable securities. However, ESMA clarifies that ultimately the the issuer and the competent authorities have to determine whether the additional information should be included in the prospectus and in case of uncertainty, issuers should contact their competent authority.
2. MiFID II and MiFIR
The Q&As on MiFID II and MiFIR investor protection and intermediaries topics provides new answers on:
a. Application of ex-post costs and charges disclosure requirements to be applied to the service of portfolio management
ESMA clarifies that in relation to annual ex-post costs and charges disclosures, firms are expected to provide ex-post cost information aggregated at least at the level of the portfolio, and clients should be informed that they can request an itemised breakdown. Furthermore, firms may provide more granular information per category of products with the same cost structure or even per financial instrument.
b. Relationship between Article 50(9) and Article 60 of the Commission Delegated Regulation (EU) 2017/576 (“Delegated Regulation”) in case of portfolio management
ESMA clarifies that if a firm decides to fulfill its ex-post costs and charges disclosure obligations under Article 50(9) by using the periodic statement required by Article 60, the information provided in this statement needs to also fulfill the requirements of Article 50(9) and (10), meaning that it would need to be expanded. In addition, if a firm complies with its obligations under Article 50(9) of the MiFID II Delegated Regulation together with its obligations under Article 60, and the periodic statement due under Article 60 is provided on a quarterly basis or more frequent, the firm is not exempted from providing the client with all the costs and charges incurred for the whole year. Therefore, although more frequent costs information may be provided, this does not remove the obligation to provide the client to be provided with costs information aggregated on an annual basis.
c. The application of national product intervention measures in case of services provided on a cross-border basis
In its new Q&A, ESMA clarifies that where two National Competent Authorities adopt product intervention measures which both apply in and from their Member State and that are different from each other, investment firms should comply with the product intervention measures as follows:
i. The product intervention matters that apply from the Member State in which they are authorised in case of cross-border provision of investment services and;
ii. The product intervention measures applicable in a Member State where the client is located.
Alternative Investment Fund Directive
ESMA has include one new Q&A on the Alternative Investment Fund Directive (“AIFMD”). The new Q&A provides clarifies the reporting requirements on liquidity stress tests for closed-ended unleveraged Alternative Investment Fund ("AIFs"). Indeed, Article 16(1) exempts closed-ended unleveraged AIFs from implementing liquidity risk management systems and from conducting liquidity stress tests.
Nonetheless, AIFMs are required to report results of liquidity stress tests for all their AIFs as part of their reporting to competent authorities. In this regard, ESMA clarifies that in relation to closed-ended unleveraged AIFs, given the mandatory character of field 280 of the AIFMD reporting template, AIFMs should indicate the question is Not Applicable and include that the relevant fund is a closed-ended unleveraged AIF. However, where an AIFM decides to conduct liquidity stress tests for unleveraged closed-ended AIFs, it should report the results of the liquidity stress tests in the same field.
Please feel free to contact us if you require any further information on the above-mentioned Q&As.