Investment Management Client Alert January 2026

ESMA Publishes Report on LMT Guidelines

On 18 December 2025, the European Securities and Markets Authority (ESMA) published a report on the revised guidelines on liquidity management tools (LMTs) for UCITS and open-ended AIFs. The amendments are intended to bring the guidelines in line with the regulatory technical standards (RTS) adopted by the EU Commission on 17 November 2025. 

Changes have also been made to the provisions for redemption gates. Fund managers of open-ended AIFs (without retail investors and with a limited number of professional investors) should consider using investor-level redemption gates (alone or in combination with fund-level gates) in order to reduce the risk of certain investors gaining an advantage by exiting the fund early.

For anti-dilution tools (ADTs), the guidelines previously stipulated that both explicit and implicit transaction costs for subscriptions, redemptions, and repurchases should be included in the estimated liquidity costs. However, implicit transaction costs for ADTs should now only be taken into account if this is consistent with the investment strategy and on a best effort basis. Explicit transaction costs must always be included.

The revised guidelines will apply from the date of entry into force of the RTS on 16 April 2026. A transition period of 12 months applies to existing funds.

Mercosur Agreement Signed

On 17 January 2026, the European Union and some of the Mercosur countries signed a partnership agreement (EMPA) and an interim trade agreement (iTA). This agreement creates the world's largest free trade area, with the aim of abolishing most mutual customs duties, simplifying import processes, and strengthening intellectual property protection.

Among other things, the agreement removes trade barriers in the services sector, particularly for digital and financial services, and gives European banks and insurance companies easier access to South American markets, as well as granting EU asset managers a kind of right of establishment. It also aims to ensure protection and transparency for investments. Financial institutions based in Mercosur will also gain better access to European capital markets.

Following the signing of the EMPA, the European Union and Mercosur will now initiate their respective procedures for ratifying the agreement. At the same time, the ITA is undergoing an EU ratification process.

ESAs sign MoU on DORA with UK Financial Regulators

On 14 January 2026, the European Supervisory Authorities (ESAs) signed a memorandum of understanding (MoU) with the Bank of England, the Prudential Regulation Authority, and the Financial Conduct Authority. The aim of the MoU is to improve cooperation between the authorities in the supervision of critical information and communication technology (ICT) third-party providers under the Digital Operational Resilience Act (DORA).

Among other things, the MoU includes the exchange of information and the coordination of supervisory activities between the authorities responsible for supervising third-party providers. A prerequisite for the exchange of information is that the confidentiality and professional secrecy rules of the United Kingdom are equivalent to the requirements under DORA.

Factsheet With Information for Finfluencers

The European Securities and Markets Authority (ESMA) and national financial market supervisory authorities have created a factsheet for individuals who disseminate content on financial products and financial services in social media (finfluencers), providing an overview of legal obligations and conduct requirements. Among other things, this factsheet points out that finfluencers are fundamentally responsible for the content they post and that the content posted must be true, fair, clear, and not misleading. Furthermore, clear and understandable disclosure is required if finfluencers receive money, gifts, or other benefits for an advertised financial product or if they themselves have invested in this product or could benefit from it. Finally, the factsheet also points out that the dissemination of investment recommendations or advice may be an activity subject to authorization. The factsheet has been published on the ESMA website.

New BaFin Guidance on AI

On 18 December 2025, the German Federal Financial Supervisory Authority (BaFin) published nonbinding guidance on information and communication technology (ICT) risks associated with the use of AI in financial companies. The Digital Operational Resilience Act (DORA) and the EU AI Regulation (Regulation (EU) 2024/1689) are two frameworks that financial companies must take into account when using AI. Financial companies are now to receive assistance in implementing regulatory requirements under DORA when using AI, thereby enabling them to manage their ICT risks effectively.

The guidance considers the entire life cycle of AI systems with the aim of identifying vulnerabilities at an early stage and managing them appropriately. The guidance is intended to make it clear that the use of AI requires close links between specialist departments, information technology, information security, data protection, risk management, and governance structures. In addition to the BaFin guidance and DORA, financial companies must also take into account the EU AI Regulation for the sustainable use of AI and a holistic approach.