Part one: How the requirements continue to challenge fund managers, and what can be done about it

As the financial sector regulators of EEA jurisdictions begin to enforce post-Brexit formalities on UK fund managers, the EEA reporting framework itself has undergone a round of enhancements. Consequently, the UK and EEA fund managers alike found the 2023 year-end round of transparency reporting to be more challenging than usual.

Sluggish post-Brexit regulatory changes

Since 1 February 2020, when the UK officially left the EU, the UK has been classed as a third country from the perspective of EU regulations. However, whether due to transitional provisions – formalised or otherwise – or just administrative oversight, very few EEA regulators have changed the way they treat UK fund managers for reporting. EEA fund managers report only to their Home State regulator – a massive administrative advantage compared to a third country fund manager, which must report to the regulator of every EEA jurisdiction in which its funds are registered for marketing. Until recently, UK fund managers were treated like any other EEA fund manager, but it seems that, slowly and steadily, regulators are pivoting their approach and are beginning to require transparency information. This may seem trivial, but the regulatory differences that have emerged between UK and EEA since Brexit and the technological disparity across EEA regulators means fulfilling this requirement should not be underestimated.

EU technical reporting changes

In November 2023, the European Securities and Markets Authority (“ESMA”) updated its AIFMD reporting technical standards. The principal change among which was to make a large number of reporting fields – which had hitherto been optional – mandatory for all reporting funds, whether or not they are relevant. Those firms which were on top of the changes found this challenging, navigating new data sources and working to standardise the regular delivery of the same. Those that were less organised found that post-submission queries from regulators created unexpected demands on time and resources in an effort to correct submissions on the back foot.

This was compounded for UK fund managers. UK AIFMD reporting had not undergone an equivalent change, and so reporting to EEA jurisdictions was, at best, different to UK reporting, but at worst brand new, when one considers some EEA regulators’ newfound penchant for regulating them as outsiders, as explained above.

Read part two of our ‘Navigating the Annex IV reporting maze’ series or reach out to Michael Chambers for more information.