On 16 February 2015, the European Securities and Markets Authority (ESMA) published its “final report on technical advice on the delegated acts of the European Social Entrepreneurship Funds (EuSEF) and European Venture Capital Funds (EuVECA) Regulations”.
These Regulations became applicable on 22 July 2013.
The aim of the EuSEF Regulation is to support the provision of finance to social businesses (*) in the EU. The aim of the EuVECA Regulation is to increase the amount of funds available in the EU for venture capital. The Regulations achieve these outcomes, in part, by giving registered EuVECA and EuSEF managers, with assets under management of less than the €500 million AIFMD threshold, an EEA marketing passport if
they (a) comply with a number of conduct of business and other conditions; and (b) restrict the category of eligible fund investors to MiFID professional clients and high-net worth individuals.
The EuSEF Regulation provides for delegated acts specifying:
- The types of goods and services, or the methods of production for goods and services, embodying a social objective, taking into account: (a) the different kinds of qualifying portfolio undertakings; and (b) those circumstances in which profits may be distributed to the owners of and investors in these undertakings, to ensure that distributions do not undermine the undertaking’s social objectives;
- The types of conflicts of interest that EuSEF managers need to avoid;
- The procedures to be used to measure the social impacts to be achieved by qualifying portfolio undertakings; and
- The content and procedure for giving information for investors.
The EuVECA Regulation provides for delegated acts specifying the types of conflicts of interest that EuVECA managers need to avoid.
ESMA has already contributed to the implementation of these Regulations. On 13 February 2014, it submitted draft implementing technical standards to the Commission; and its website hosts the Central Databases of registered EuSEF and EuVECA managers.
The Commission asked ESMA for its advice on the preparation of the delegated acts on 27 May 2014. The deadline by which the Commission expected ESMA to deliver the advice was 30 April 2015. The final advice takes into account the views expressed by stakeholders during the public consultation that ran from 26 September until 10 December 2014, the open hearing with experts organised by ESMA on 10 November 2014 and the opinion of the Securities and Markets Stakeholder Group of ESMA.
The Commission will now prepare the EuVECA and EuSEF delegated acts using ESMA’s technical advice.
(* For these purposes, “social businesses” are undertakings whose primary objective is to achieve social impacts rather than generate profits for shareholders.)