Global Trustee and Fiduciary Services Bite-Sized Issue 1 2024

Global Trustee and Fiduciary Services Bite-Sized | Issue 1 | 2024 16 QUICK LINKS BENCHMARKS REGULATION CSDR CYBERSECURITY DEFI DIGITALISATION DORA ELTIF FSB FUND LIQUIDITY MONEYMARKET FUNDS OPERATIONAL RESILIENCE SUSTAINABLE FINANCE/ESG ASIA EUROPE IRELAND NORTH AMERICA UNITED KINGDOM EUROPE ESMA: The Average Cost of Retail Investment Products Declines but Significant Differences Across EUMember States Remain On 18 December 2023 the European Securities and Markets Authority (ESMA) published its Sixth Market Report on the costs and performance of EU retail investment products. In this annual report ESMA finds that the average costs of investing in key EU retail financial products has declined by the end of 2022. However, cost heterogeneity persisted across EUMember States. The key findings in the report are: • UCITS Costs: Costs have declined, but investors should continue to consider fund fees carefully in their investment decisions. Despite costs of active equity funds decreasing, this category of funds remained more expensive than passive funds and ETFs, such that their net performance was on average lower in comparison. • Investment value and value-for-money: Investors paid around 2,000€ in costs for an investment in UCITS of 10,000€ over ten years. The returns of the market led to a net value of 14,850€ after this period, and to a net real value of 13,500€, when inflation is taken into account. • ESG UCITS: ESG funds underperformed on average their non-ESG equivalents in 2022, a likely consequence of the energy crisis. However, ESG funds still outperformed their non-ESG equivalents on the three-year investment horizon. In 2022, ongoing costs of ESG funds were lower than or similar to the ongoing costs of non-ESG equivalents. • Alternative Investment Funds (AIFs): The market for AIFs remained dominated by professional investors with the share of retail investors reaching around 14% at the end of 2022. Retail investors invested mainly in funds of funds, “other” AIFs and real estate funds. Among those three categories of funds, real estate funds were the only category with positive gross and net returns in 2022. However, real estate markets face significant challenges since 2022, which is likely to affect the performance of real estate funds going forward, given the further increase of interest rates in 2023. • Structured Retail Products (SRPs): Costs, largely charged in the form of entry costs, rose in 2022 for a majority of product types and issuers, although they vary substantially by payoff type and country. The analysis of performance scenarios shows that the returns of one in eight SRPs would be negative even in a moderate scenario. Link to ESMA’s Sixth Market Report here IRELAND Central Bank Concludes Public Consultation on Enhanced Administrative Sanctions Procedure On 13 December 2023, the Central Bank of Ireland (Central Bank) published a Feedback Statement and consolidated Guidelines relating to the enhanced Administrative Sanctions Procedure (ASP). The ASP is the Central Bank’s primary tool for carrying out investigations and inquiries, and imposing administrative sanctions if it determines that firms or individuals that it supervises have breached financial services legislation. The ASP Consultation set out the Central Bank’s proposed approach to important changes introduced directly by the Central Bank (Individual Accountability Framework) Act 2023 (the IAF Act), and additional changes to reflect the Central Bank’s experience of using the ASP for over a decade. While much of the ASP remains the same, the IAF Act changed the ASP in several ways. In some circumstances, the Central Bank can now take direct enforcement actions against individuals, and where a settlement is agreed and is based on admissions, a High Court order is required to confirm the sanctions imposed. Other practical changes include allowing for earlier disclosure of documents to subjects of investigations; and the Central Bank has now published the methodologies for determining monetary penalties.