On August 19, the European Securities and Markets Authority (ESMA) published a letter it sent to the European Commission on its proposed areas of recommendation for the upcoming review of the Alternative Investment Fund Managers Directive (AIFMD).

Since AIFMD’s implementation in 2011 and as a result of the COVID-19 pandemic, ESMA and EU financial regulators have identified areas of improvement to AIFMD. The review provides an opportunity for their recommendations to be enacted.

The key changes proposed by ESMA in the letter include:

1. harmonizing the AIFMD and the Undertakings for the Collective Investment in Transferable Securities (UCITS) regimes (including improving Annex IV reporting and aligning UCITS regulatory reporting with it);

2. increasing digitalized communication;

3. making additional liquidity management tools available to all AIFMs in all EU member states;

4. amending leverage calculation methodologies;

5. extending AIFMD supervision to sub-threshold alternative investment fund managers ((AIFMs), known as ‘small AIFMs’); and

6. recommending significant changes in AIFMD reporting regime and data use (including requiring all AIFMs and the funds that they manage to have their own Legal Entity Identifier (LEI, ISO 17442), and incorporating environmental, social and governance (ESG) metrics into mandatory reporting).

The letter is available here.