UCITS/AIFs: Supervision of costs and fees

On 6 January 2021, ESMA launched a common supervisory action ("CSA") with national competent authorities (“NCAs”) on the supervision of costs and fees of UCITS. The CSA follows and will take into account the Supervisory Briefing on the supervision of costs published by ESMA in June 2020.

The CSA's aim is to assess the compliance of supervised entities with the relevant cost-related provisions in the UCITS framework and the obligation of not charging investors undue costs. The CSA will also cover entities employing Efficient Portfolio Management (EPM) techniques to assess whether they adhere to the requirements set out in the UCITS framework and ESMA Guidelines on ETFs and other UCITS issues.

In this context, in a Communiqué dated 5 March 2021, the CSSF indicated that the first phase of the CSA will consist of asking a sample of Luxembourg-based UCITS management companies (“UCITS ManCos”) to complete a dedicated questionnaire for all UCITS managed, i.e. Luxembourg-domiciled UCITS and foreign-domiciled UCITS. The questionnaire is available on the eDesk Portal.

As a reminder, in the Supervisory Briefing on the supervision of costs published in June 2020, ESMA stated that NCAs should:

• require that UCITS ManCos and AIFMs develop and periodically review a structured pricing process addressing the specific aspects/elements listed in point 19 of the Supervisory Briefing; and
• incorporate the review of the UCITS ManCos/AIFMs' pricing processes in their activity at different stages and in case of materialisation of undue costs charged to investors, NCAs should assess the possibility to request different actions including (but not limited to) investor compensation (where allowed under national provisions) or reduction of fees.

The first phase of the CSA in Luxembourg only concerns UCITS ManCos.