Category: Asset Management

Frankfurt, May 2025 – Germany’s Federal Financial Supervisory Authority (BaFin) is emphasizing the importance of the newly mandated register of information under the Digital Operational Resilience Act (DORA). The register, which must be maintained by all financial entities, aims to identify concentration and dependency risks arising from the use of ICT third-party service providers. According to BaFin, the register enhances transparency for both companies and supervisors, helping detect critical ICT providers and sector-wide vulnerabilities. This development follows a 2024 dry run coordinated by the European Supervisory Authorities (ESAs), which revealed data quality issues now being addressed through revised validation rules.

Financial entities must submit their first complete register to BaFin by 28 April 2025, with contract data referencing 31 March 2025. The register must include all direct and indirect ICT providers supporting critical functions and comply with identification standards using LEI or EUID codes.

To avoid duplicate reporting, BaFin will revise its existing MVP procedure for outsourcing reports to integrate DORA-related data, simplifying compliance for affected institutions.

BaFin will continue to support institutions through workshops and updates on its dedicated info page.

Source: BaFin, summarized by Lucht Probst Associates

LONDON – A new report from the House of Commons Environment Committee highlights the critical need for a robust natural capital strategy to protect the UK’s economic future. With the country facing severe environmental degradation, the Committee calls for stronger regulatory frameworks to attract private sector investment into ecosystem restoration.

Current voluntary schemes, like nature credit markets, are deemed insufficient to meet the Government’s environmental targets. The Committee stresses the importance of compliance obligations and regulatory clarity to drive meaningful private investment in natural capital. This echoes broader trends in the asset management industry, where firms are increasingly seeking reliable, transparent instruments to back sustainability efforts. The London Stock Exchange’s Green Economy Mark and firms like Lucht Probst Associates (LPA), which specialise in ESG data and digital finance solutions, are already paving the way for institutional involvement in sustainable markets. However, the lack of a coherent land use framework and concerns over low-quality nature credits remain major barriers.

With regulatory certainty, the Committee believes that natural capital could become a key asset class for institutional investors. The UK Government now has two months to respond, but asset managers will be watching closely for signals of long-term market stability.

The European Securities and Markets Authority (ESMA) has issued its technical advice to the European Commission in support of the Listing Act, aiming to simplify listing requirements, facilitate access to public capital markets, and strengthen market integrity across the EU.

The advice addresses key aspects of the Market Abuse Regulation (MAR), including the identification of key moments for public disclosure, the limits to delayed disclosure of inside information, and the methodology for identifying trading venues with significant cross-border activity. In relation to the Markets in Financial Instruments Directive (MiFID), ESMA has reviewed the criteria for multilateral trading facilities, particularly concerning their classification as SME Growth Markets.

The European Commission is expected to adopt the relevant delegated acts by July 2026.

Further details are available on the ESMA website:

ESMA News Release

Frankfurt, 29 April 2025 – LPA Lucht Probst Associates

The European Securities and Markets Authority (ESMA) has published its Final Report on new Regulatory Technical Standards (RTS) outlining how investment firms must establish and assess the effectiveness of their order execution policies under MiFID II. The initiative aims to enhance order execution quality and reinforce investor protection across EU financial markets.

The newly finalised RTS set out detailed requirements for:

• The development of an investment firm’s order execution policy, including the classification of financial instruments and the selection of execution venues;
• Procedures and criteria for regularly monitoring and assessing the effectiveness of order execution arrangements;
• Execution of client orders through proprietary trading;
• Handling of specific client instructions in the context of order execution.

The publication follows a comprehensive consultation process launched by ESMA in July 2024. A total of 43 responses were received from market participants, significantly informing the finalisation of the technical standards.

The Final Report has now been submitted to the European Commission for adoption. Under Article 10 of Regulation (EU) No 1095/2010, the Commission is expected to decide on the adoption of the standards within three months.

LPA Lucht Probst Associates welcomes the new RTS as an important step towards a harmonised and transparent framework for order execution across European financial markets. The standards offer legal clarity for investment firms and strengthen long-term investor confidence.

Further information and access to the full ESMA report can be found here:

👉 ESMA News – Final Report on Order Execution Policies

Frankfurt am Main, 28 April 2025 – On 24 April 2025, the European Securities and Markets Authority (ESMA) published its annual risk assessment of leveraged alternative investment funds (AIFs) alongside its first in-depth analysis of risks in UCITS funds employing the absolute Value-at-Risk (VaR) model. Both analyses underscore the growing need for professional risk and leverage management in the fund sector – a focus that is also central to LPA Lucht Probst Associates.

Rising Risks from Leverage in AIFs and UCITS

ESMA finds that while the majority of EU investment funds make only limited use of leverage, certain groups – notably hedge funds and a subset of UCITS – demonstrate significantly elevated leverage risks. Hedge funds exhibit the highest levels of leverage, despite representing a relatively small portion of the market. Furthermore, real estate (RE) funds are facing pressures in some jurisdictions, driven by declining property prices and fund outflows.

Particular attention is drawn to a small but significant group of UCITS funds employing the absolute VaR approach: around 2% of these funds present risk profiles more akin to hedge funds, characterised by complex derivative exposures, high gross leverage, and heightened sensitivity to market movements. Notably, these funds manage larger assets than the entire EU hedge fund sector combined, amplifying their potential systemic relevance.

Effective Risk Management Becomes Critical

The ESMA’s findings highlight that fund managers, especially those employing leverage and complex derivatives, must increasingly address regulatory expectations and supervisory scrutiny. Timely and precise risk identification, as well as effective management, are paramount to safeguarding both investor interests and regulatory compliance.

LPA Supports Asset Managers with Innovative Solutions

At LPA Lucht Probst Associates, we offer comprehensive support to asset managers navigating these challenges. Through our platform Capmatix Regulations, we enable the automated and consistent implementation of regulatory requirements, including risk reporting, leverage disclosures, and stress testing.

Our solutions help asset managers to:

• Monitor risks arising from leverage and complex derivative exposures transparently and automatically,
• Ensure compliance with regulatory reporting standards (e.g., AIFMD, UCITS),
• and Establish early warning systems for liquidity and market risks.

Our solution delivers end-to-end data management, accurate reporting, and proactive risk control fully aligned with the latest regulatory standards. Through automated look-through capabilities and intelligent data enrichment (CIC, NACE, LEI), we ensure maximum transparency and seamless compliance — not only meeting today’s ESMA expectations but empowering asset managers to stay ahead of tomorrow’s regulatory landscape.

Conclusion

ESMA’s latest analysis once again demonstrates that professional leverage and risk management are no longer optional – they are essential for the future viability of fund managers. With LPA’s solutions, asset managers can meet regulatory demands efficiently whilst achieving operational excellence.

The UK’s Financial Conduct Authority (FCA) has unveiled plans for significant regulatory reforms aimed at enhancing the competitiveness and appeal of London as a leading centre for asset management.

On 7 April 2025, the FCA published proposals to substantially ease the regulatory burden on managers of alternative investment funds, including private equity and hedge funds. The initiative forms part of a broader strategy to strengthen the UK’s position in global financial markets following increasing international competition.

At the heart of the proposals is a dramatic increase in the threshold for so-called “full-scope” regulation — from the current level of approximately £100 million in assets under management to £5 billion. This recalibration would see a large number of fund managers reclassified as medium-sized firms, thereby exempting them from certain stringent regulatory requirements. These include, for example, the obligation to appoint depositories and to obtain additional authorisations from the FCA.

The FCA emphasised that this move reflects its commitment to a more proportionate regulatory framework — one that fosters innovation while maintaining high standards of investor protection and market integrity. Ashley Alder, Chair of the FCA, underlined in a recent speech that the regulator is working to recalibrate its rules for alternative investment fund managers to better reflect the specific conditions of the UK market. Importantly, the reforms seek to preserve the UK’s global connectivity and reputation for robust oversight.

Stakeholders are invited to submit feedback on the proposals by 9 June 2025, marking the start of a formal consultation process. The FCA stressed that this initiative demonstrates its ongoing commitment to review and modernise its regulatory framework to safeguard both investor protection and the long-term competitiveness of the UK financial services industry.

The European Banking Authority (EBA), in collaboration with the Joint Committee of the European Supervisory Authorities (ESAs), has published a comprehensive analysis of the functioning of the Securitisation Regulation (Regulation (EU) 2017/2402, SECR). This study evaluates the effectiveness of the regulation since its implementation in 2019 and provides valuable insights into its impact on the European securitisation market. The primary objective of the analysis is to identify successes, existing challenges, and potential areas for improvement. The report thus serves as a crucial foundation for the ongoing evaluation of the regulatory framework by the European Commission and could influence future legislative adjustments.

Key Findings of the Analysis

1. Market Resilience and Stability
   The analysis demonstrates that SECR has significantly contributed to the resilience of the European securitisation market without substantially impairing financial flows to the real economy. It underscores the importance of the securitisation market for the European Capital Markets Union and the long-term goal of establishing a robust savings and investment market.
2. Implementation of the STS Framework
   The STS (Simple, Transparent, Standardised) framework has facilitated greater standardisation of securitisation transactions. The analysis indicates that the regulatory requirements for risk retention, due diligence, and disclosure are generally effective, although there remains room for improvement in their practical application.
3. Challenges in Definition and Implementation
   Some market participants have expressed uncertainties regarding the definition of securitisation, particularly concerning single-tranche structures and credit fund transactions. Additionally, regulatory fragmentation within the EU has led to inconsistencies in the enforcement of requirements.
4. Need for Improved Transparency Requirements
   The analysis highlights the continued need for enhancements in transparency requirements, particularly in the area of private securitisations. The supervisory authorities recommend stronger harmonisation and clearer guidelines to provide market participants with better orientation.

Recommendations for Regulatory Adjustments

• Coherent Supervisory Practices: Uniform and well-defined supervisory practices should reduce existing regulatory inconsistencies between member states, thereby enhancing legal certainty.
• Clarification of the Securitisation Definition: A more precise definition could prevent market distortions and reduce regulatory uncertainties.
• Enhanced Disclosure Requirements for Private Securitisations: Improved transparency requirements could strengthen market integrity and enable investors to conduct more informed risk assessments.

The findings of this study are expected to play a pivotal role in shaping future regulatory developments in the European securitisation market.

To stay informed about the latest changes, practical use cases, and hands-on recommendations, we recommend our RegWatch newsletter. Our Legal & Compliance experts provide valuable insights on a regular basis—feel free to sign up!

The European Securities and Markets Authority (ESMA) is committed to cooperation and transparency, ensuring strong stakeholder engagement with those affected by its activities. In line with its regulatory mandate, ESMA conducts public consultations on proposed technical standards and guidelines, providing an overview of planned consultations to help stakeholders prepare in advance.

Overview of Planned Consultations in 2025:

• AIFMD Review – Integrated reporting under AIFMD/UCITS review (Q2 2025)
• EMIR 3 – RTS on simulation tools and transparency by CCPs and CMs (Q2 2025)
• EMIR 3 – RTS on client clearing fees and cost of clearing at different CCPs (Q2 2025)
• EMIR 3 – RTS on CCPs admission criteria (Q2 2025)
• EMIR 3 – RTS on the clearing thresholds (Q2 2025)
• FASTER Directive – RTS on methodology for the calculation of market capitalisation and market capitalisation ratio (Q2 2025)
• Investor Protection – Joint EBA/ESMA Guidelines on the assessment of suitability of management bodies and key function holders (Q2 2025)
• Listing Act – ITS on insider list (Q2 2025)
• MiFID/R Review – Non-equity transparency (derivatives) (Q2 2025)
• Sustainable Finance – RTS on Green Bond Regulation (Q2 2025)
• Sustainable Finance – ESG rating regulation – RTS on registration, separation of business, and methodological disclosures for ESG Rating Providers (Q2 2025)
• EMIR 3 – CCP requirements (Q3 2025)
• EMIR 3 – RTS on extension of interoperability links to derivatives (Q4 2025)
• EMIR 3 – RTS on post-trade risk reduction services (Q4 2025)
• Investor Protection – Technical advice to the European Commission on investor protection topics (Q4 2025)

As regulatory changes continue to evolve, LPA remains your best RegTech partner to stay ahead of these developments. With cutting-edge solutions and expert guidance, LPA helps you navigate regulatory shifts efficiently and seamlessly.