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ESMA's 2025 Agenda: A Deep Dive into Impacts for Investment Managers and Service Providers - Part 2

The European Securities and Markets Authority (ESMA) has set an ambitious agenda for 2025, with significant implications for investment firms across the EU. This blog post (Part 2 of our series) delves into ESMA's work program's key priorities and actions, focusing on the specific impacts on investment managers and investment service providers.



Investment Managers: Navigating a Shifting Landscape


ESMA's focus on investment management centres around strengthening the regulatory framework, promoting investor protection, and integrating sustainability. Here's what firms need to know:


  • Regulatory Updates: Stay informed about upcoming changes to AIFMD, UCITS Directive, MMF Regulation, and ELTIF Regulation. This includes new rules on liquidity management tools (LMTs) and loan-originating AIFs.

  • Sustainability Takes Center Stage: ESMA actively supervises the integration of sustainability risks and disclosures. Firms must ensure robust implementation of SFDR requirements and be prepared for scrutiny.

  • Cost Transparency: Increased scrutiny of fees and costs charged to investors is expected. Transparency and clear communication will be crucial for maintaining investor trust.

  • Marketing Compliance: ESMA continues to monitor marketing materials and communications. Firms must ensure compliance with relevant regulations and pay close attention to upcoming guidance on cross-border fund distribution.

  • Liquidity Management: Develop robust liquidity management tools and strategies for funds with potential liquidity risks.


Investment Service Providers: Prioritising Investor Protection and Market Integrity


ESMA's agenda for investment services emphasises investor protection, sustainability, and market integrity. Here's what firms need to consider:


  • Sustainability Integration: ESMA will ensure sustainability preferences are effectively integrated into suitability assessments.

  • Retail Investor Protection: Prioritise compliance with MiFID II/MiFIR and other relevant regulations to protect retail investors.

  • Prudential Requirements: Stay informed about developments in the prudential regime for investment firms, which may impact capital and risk management requirements.

  • Third-Country Regime: Be aware of potential equivalence assessments and cooperation agreements with non-EU authorities, which may impact cross-border operations.

  • Listing Act Compliance: Firms involved in research activities must prepare to comply with the Listing Act and ESMA's upcoming rules on issuer-sponsored research.


Beyond Investment Management & Services: Broader Impacts


ESMA's work program also outlines broader priorities that will impact all financial firms:


  • Effective Markets and Financial Stability: ESMA aims to foster market stability through a clear rulebook, international cooperation, and proactive risk monitoring.

  • Adequate Supervision: Expect more rigorous and consistent supervision, emphasising data quality and timely reporting.

  • Investor Protection: ESMA prioritises retail investor protection through consistent supervisory approaches and a robust regulatory framework.

  • Sustainable Finance: Firms must be vigilant about greenwashing risks and prepare for increased scrutiny of ESG disclosures.

  • Technological Innovation: Prioritize cybersecurity and operational resilience, ensuring compliance with DORA requirements.

  • Data and Technology: Expect more streamlined data reporting requirements and increased use of data and technology in supervisory processes.


Conclusion


ESMA's 2025 work program signals a year of heightened regulatory scrutiny and significant change for investment firms. By proactively addressing these priorities, firms can ensure compliance, mitigate risks, and strengthen their position in the evolving EU financial landscape.




 
 

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The posts listed on the 'What we think' webpages are our interpretation of regulatory developments we have been reading about. They should not be considered legal, regulatory or other advice. Contact us if you want to understand the impact of public policy, regulation and governance changes for you.

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