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ESMA responds to request for support on reverse solicitation under the CBDF Regulation

Jenny Ljunghammar, Co-Head FinReg

Author: Jenny Ljunghammar, Co-Head FinReg

05 January 2022

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Area: Cross-border distribution

ESMA responds to request for support on reverse solicitation under the CBDF Regulation

ESMA is considering using reporting requirements to collect information on reverse solicitation across the EU.

An interesting letter from ESMA was published yesterday on reverse solicitation. ESMA has stated that it may consider contacting directly market participants such as asset managers, depositories or account holders via national and European trade associations to obtain information on reverse solicitation. ESMA is also considering the introduction of new reporting requirements allowing it to collect information on reverse solicitation across the EU.

On 3 January 2022, ESMA published a letter dated 17 December 2021 from Verena Ross, Executive Director of ESMA to John Berrigan, Director General, Directorate-General for Financial Stability, Financial Markets and Capital Markets Union, European Commission (the ESMA Letter) in response to a request for support in relation to Article 18 of Regulation 2019/1156 (the CBDF Regulation) dated 24 September 2021 (the Request for Support). 
 
Article 18 of the CBDF Regulation obligates the European Commission to submit a report to the European Parliament on reverse solicitation and its impact on the passporting regime.
 
In the ESMA Letter, ESMA stated the following in response to the Request for Support:

As a result of the survey, ESMA stated that: 

  • survey was conducted amongst NCAs relating to the use of reverse solicitation by asset managers and the impact on passporting activities
  • Almost all of NCAs have no readily available information on the use of reverse solicitation either via asset managers or investor associations.
  • In Italy, Consob reported that in 2020, 25% of total subscriptions in funds gathered by Italian asset managers were done on the basis of reverse solicitation (in 99% of the cases, these subscriptions were made by Professional Investors).
  • In Cyprus, CySEC reported that 30% of UCITS management companies and 50% of AIFMs use reverse solicitation.
  • Several NCAs believe that reverse solicitation is used in practice to circumvent the rules of the third-country and EU passport regimes which raise concerns in respect of investor protection and may also create an unlevel playing field between EU asset managers and Non-EU asset managers.

As a result of the survey, ESMA stated that: 

  • The European Commission may consider contacting directly market participants such as asset managers, depositories or account holders via national and European trade associations to obtain information on reverse solicitation.
  • ESMA is also considering the introduction of new reporting requirements allowing it to collect information on reverse solicitation across the EU.

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