Key takeaways

• On 20 September 2017, the European Commission published a proposal for a new regulation which, if adopted, would give the European Securities and Market Authority (ESMA) new powers to intervene in European financial supervision by national regulators.  This may be the first step towards a more centralized European financial supervisory system.
• According to the proposals, ESMA would oversee all material delegations to non-EU managers. ESMA’s assessment would be required before national regulators could authorise or register newly established AIFMs that intend to delegate portfolio management to non-EU managers.
• ESMA would be entitled to intervene and ask national regulators to reject an application for authorisation if ESMA believes that the firm is in breach of EU rules on delegation.
• ESMA would monitor compliance on an ongoing basis and AIFMs would have to report any new delegation arrangements. In addition, ESMA would become the direct competent authority for certain investment funds with an EU label, such as European venture capital funds (EuVECA) and European long term investing funds (ELTIF).
• If the new rules are implemented, their success in ensuring that European rules are consistently applied will depend on how ESMA handles its new role in practice.