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ESMA launches a Common Supervisory Action with NCAs on the supervision of costs and fees charged by UCITS

28 January 2021

The European Securities and Markets Authority (ESMA) has advised that it is launching a Common Supervisory Action (CSA) with National Competent Authorities (NCAs) on the supervision of costs and fees in UCITS. The aim of the CSA is to assess the compliance by UCITS and their managers with the relevant cost-related provisions in the UCITS framework, and the obligation of not charging investors with undue costs. The CSA concerning the review of costs and fees charged by UCITS will be conducted during 2021.

Under the CSA, NCAs such as the Central Bank of Ireland or the Commission de Surveillance du Secteur Financier, will assess the compliance primarily by UCITS and their managers with the relevant cost-related provisions in the UCITS framework. The assessment includes compliance with the obligation to not charge investors undue costs.

The CSA will also cover entities employing Efficient Portfolio Management (EPM) techniques to assess whether they adhere to the requirements set out in the UCITS framework and ESMA Guidelines on ETFs and other UCITS issues.

The work under the CSA will be carried out on the basis of a common methodology developed by ESMA. It will take into account ESMA’s supervisory briefing of June 2020 on the supervision of costs in UCITS and AIFs, which set out various principles that should be observed by managers to ensure undue costs are not charged to investors.

Throughout 2021, NCAs will share knowledge and experiences through ESMA to ensure supervisory convergence in how they supervise cost-related issues, and ultimately enhance the protection of investors across the EU.

According to ESMA, ensuring greater convergence in the supervision of costs is key to improving investors’ confidence in financial markets and reducing costs associated with obtaining financial products.

The findings of the CSA will be of particular interest to UCITS and their managers. We continue to monitor developments and any outcome of the CSA or any further communication from ESMA and/or the Central Bank of Ireland in this regard.

If you would like to discuss the above or have any questions, please contact a member of our Investment Funds team.


The content of this article is provided for information purposes only and does not constitute legal or other advice.

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