Investment Funds – CSA on UCITS Liquidity Risk Management
On 24 March 2021, ESMA published the results of the 2020 Common Supervisory Action (“CSA”) on UCITS Liquidity Risk Management (LRM).
According to ESMA, overall most UCITS managers have demonstrated that they have implemented and applied sufficiently sound LRM processes. However, in a few cases, some adverse supervisory findings were identified, particularly linked to documentation, procedures and methodology. In some cases, the liquidity assessment before investing should be strengthened, as well as the data reliability verification and the internal control framework. ESMA sets out a number of next steps, including:
Market participants should critically review their LRM frameworks to ensure that none of the adverse supervisory findings are to be found in their LRM frameworks.
NCAs will undertake follow-up action in individual cases to ensure that all regulatory breaches as well as any other shortcomings or weaknesses identified are remedied.
Some NCAs have also indicated that they need to further interact with some UCITS managers, through on-site visits or desk-based reviews of the latest documents provided, to complete their supervisory analysis.