Summary of CySEC's Circular C422

Memo #64-2020

CySEC Circular No: C422
Date: 15/12/2020
Subject: ESMA Guidelines on performance fees in UCITS and certain types of AIFs
Purpose: To Inform Regulated Entities for ESMA Guidelines about performance fee models.

In Summary:

CySEC has issued the Circular C422 on 15/12/2020 to inform the UCITS Management Companies and Alternative Investment Fund Managers (AIFMs) that the European Securities and Markets Authority (‘ESMA’) issued on November 5, 2020, the official translations in all EU official languages (including translation in the Greek language), of its Guidelines on performance fees in UCITS and certain types of AIFs (‘Guidelines’) with reference number ESMA34-39-992 EN.

The purpose of these Guidelines is to ensure that performance fee models used, comply with the principles of acting honestly and fairly in conducting their business activities and acting with due skill, care and diligence, in the best interest of the fund that the Regulated Entities manage, in such a way as to prevent undue costs being charged to the fund and its investors. Also, they aim at establishing a common standard in relation to the disclosure of performance fees to investors.

The Guidelines apply from the 5th of January, 2021.

This Circular C422 also provides guidance about the compliance by Regulated Entities of any new funds created after 5 January 2021 or any funds existing prior to 5 January 2021 that introduce a performance fee for the first time after January 5, 2021.

In accordance with this Circular C422, Regulated Entities of funds with a performance fee existing before January 5, 2021 should apply these Guidelines in respect of those funds by the beginning of the financial year following 6 months from the application date of the Guidelines.

CySEC notes that it has adopted the Guidelines by incorporating them into its supervisory practices and therefore urges the Regulated Entities to take the necessary actions in order to ensure their compliance with the Guidelines.

You can find the ESMA's Guidelines on performance fees in UCITS and certain types of AIFs and translated versions on the following link: https://www.esma.europa.eu/document/guidelines-performance-fees-in-ucits-and-certain-types-aifs 

Read the CySEC Circular C422

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