The European Securities and Markets Authority has published the results of its 2025 Common Supervisory Action on the compliance and internal audit functions of alternative investment fund managers and UCITS management companies. The EU-wide review found that most fund managers broadly meet key requirements under the Alternative Investment Fund Managers Directive and UCITS framework, but it also identified weaknesses in the independence of control functions, the quality and practical application of internal policies, and the way senior management and boards oversee those functions. All 27 European Union and three European Economic Area national competent authorities took part, using a common assessment framework and carrying out desk-based reviews supplemented by on-site inspections where appropriate. Policies and procedures were generally in place, but their quality and implementation varied significantly, including by firms' size, nature and complexity. The report highlights gaps in areas such as documentation, compliance risk assessments, monitoring and audit plans, follow-up of remedial actions, resourcing, and oversight of outsourced or group-provided compliance and internal audit tasks, while also setting out examples of good and poor practices across the sector. National competent authorities are expected to follow up on identified breaches and vulnerabilities through supervisory action and remediation requests, with most not currently envisaging enforcement action. ESMA said it will continue coordinating exchanges among national supervisors and related follow-up work to support supervisory convergence across the European Union funds sector.
European Securities and Markets Authority 2026-05-11
European Securities and Markets Authority publishes fund manager review finding governance weaknesses despite generally satisfactory AIFMD and UCITS compliance
The European Securities and Markets Authority has published the results of its 2025 Common Supervisory Action on the compliance and internal audit functions of alternative investment fund managers and UCITS management companies, finding broad compliance with core requirements but significant weaknesses in the independence, quality and practical application of control functions and related oversight by senior management and boards. The EU-wide review highlights gaps in documentation, compliance risk assessments, monitoring and audit plans, follow-up of remedial actions, resourcing and oversight of outsourced or group-provided tasks, and sets out examples of good and poor practices. National competent authorities will address breaches and vulnerabilities through supervisory action and remediation requests, while ESMA will continue to coordinate supervisory convergence work.