January 21, 2021
On 7 January 2021, the Joint Committee of the European Supervisory Authorities (“ESAs”) wrote to the European Commission, requesting “urgent” clarification on several important areas of uncertainty in the application of Regulation (EU) 2019/2088 on sustainability-related disclosures in the financial services sector (the “SFDR”) prior to the application of the majority of its requirements on 10 March 2021.
One such area raised, which will be of particular importance to a number of fund managers, is whether the SFDR will apply to non-EU alternative investment fund managers (“AIFMs”) when marketing funds in the EU under applicable national private placement regimes.
Application to non-EU AIFMs
To date, the industry has generally taken the view that non-EU AIFMs will be caught by the product level disclosure requirements of the SFDR, when marketing their funds in the EU. This is primarily as a result of the cross-reference in the SFDR to Article 4(1)(b) of the Alternative Investment Fund Managers Directive (2011/61/EU), which itself includes non-EU AIFMs.
The posing of this question by the ESAs, however, casts doubt on the presumption by many non-EU AIFMs that they will fall within the scope of the SFDR. The industry will be watching very closely in the coming days and weeks to see how the European Commission responds. In the interim, this uncertainty clearly presents a challenge for non-EU AIFMs, which will need to think about whether to continue with implementation for now, on the assumption that they will be caught, so as not to be on the “back foot” should the European Commission confirm they are within scope.
Other key priority areas identified
The ESAs have also asked for clarification in relation to a further four areas (set out below at a high level):
It is, to say the least, far from ideal that there is so much uncertainty surrounding the application of the SFDR so close to 10 March. This is particularly the case given that these areas are by no means peripheral – there will, for instance, be a significant number of non-EU AIFMs holding their breath at the moment. The industry will be waiting with great interest to see how the European Commission responds.
Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these developments. If you wish to discuss any of the matters set out above – whether issues raised or potential solutions – please contact the Gibson Dunn UK Financial Services Regulation team:
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