On August 31st, the Cyprus Securities and Exchange Commission (the “CySEC”) issued Circular C595 on ESMA Final Report on the 2022 Common Supervisory Action (‘CSA’) on Valuation (the “Circular”).
Via the issuance of the Circular, CySEC wishes to stress the attention of Investment Fund Managers* to the content of the Final Report On the 2022 CSA on valuation (ESMA34-45-1802) (the “Report”) published by the European Securities and Markets Authority (the “ESMA”), which resulted from the January 2022 CSA launched by ESMA with National Competent Authorities (the “NCAs”).
In respect to the content of the Report, please refer below to the main points raised, inter alia:
- Sections 2 and 3 explain the background of the exercise and the scope of the analysis and the minimum coverage thresholds.
- Sections 4 to 8 set out the CSA’s main findings based on the reports submitted to ESMA by NCAs on the CSA results in their jurisdictions, which cover among others, the following topics:
- The appropriateness of valuation policies and procedures.
- Valuation under stressed market conditions.
- Independence of the valuation function and use of third-party valuers.
- Early detection mechanisms for valuation errors and transparency to investors.
- Focus on Private Equity (PE) and Real Estate (RE) assets.
CySEC urged Investment Fund Managers to carefully consider the content of the Report against the performance of their activities so as to ensure compliance with the relevant regulatory framework.
Lastly, as noted by CySEC, a follow up circular might be issued at a later stage, should it be deemed necessary, focusing to a greater extend to the findings of the thematic reviews undertaken.
Should you require any further assistance and/or clarification in respect to the abovementioned, please do not hesitate to contact us.
*Investment Fund Managers:
iii. Cyprus UCITS Management Companies and Self-Managed Cyprus UCITS (“CUCITS MCs”)
iv. Cyprus Alternative Investment Fund Managers and Self-Managed Cyprus AIFs (“CAIFMs”)
