Earlier this month, as part of the Savings and Investments Union initiative, the European Commission (the “Commission”) unveiled its Market Integration and Supervision Package (“MIP”), a sweeping legislative proposal aimed at modernising and harmonising the EU’s asset management framework. This package represents one of the most significant regulatory updates in recent years, targeting long-standing fragmentation in rules and supervisory practices across EU Member States. By revisiting the UCITS and AIFMD Directives, the Cross-Border Distribution of Funds Regulation (“CBDFR”), and the ESMA Regulation, among others, the Commission is seeking to create a more integrated and efficient market for investment funds in the EU.

The proposals are designed to address known challenges including barriers to cross-border distribution and limited supervisory convergence and thereby unlock the full potential of the EU single market. Below we outline the changes with the greatest potential impact on funds and fund managers.

Marketing and Distribution

Under the current UCITS and AIFMD regimes, the procedures relating to marketing notifications, de-notifications and pre-marketing remain lengthy, complex and most notably, divergent. The package simplifies cross-border marketing by introducing a single notification process. Fund managers will notify only their home regulator, with the European Securities and Markets Authority (“ESMA”) operating a central data platform for document exchange between regulators. This will eliminate the need for multiple filings and reduce administrative burdens.

Marketing materials will be standardised through delegated acts, ensuring consistency and clarity for investors across the EU. Translation requirements will be limited to key documents, further streamlining the process. In addition, Member States will no longer be allowed to require a physical presence or local representatives for UCITS marketed cross-border – a change that removes a costly and unnecessary barrier.

Finally, it is proposed that the UCITS key investor information document (“KIID”) provisions will be removed from the UCITS Directive as where a PRIIPs key information document (“KID“) is made available to retail investors, the requirement to provide a UCITS KIID is fulfilled. This change contributes to the Commission’s goal of simplification without compromising investor protection.

EU Groups

Currently, the allocation of management functions to other entities within the same group as the UCITS management company or AIFM may be subject to the same delegation requirements as those applicable to third parties (such as due diligence, monitoring and resource assessments). To address this, the Commission has proposed a simplified framework for EU groups of UCITS management companies and AIFMs. Under this framework, entities within the EU group would be able to share and rely on each other’s human and technical resources and allocate functions within the group without being subject to the delegation requirements under the UCITS Directive and AIFMD.

ESMA Oversight

Perhaps the most controversial aspect of the package is the proposed expansion of ESMA’s supervisory powers. ESMA will conduct periodic reviews of large cross-border managers (those managing over €300 billion in assets and operating in multiple Member States) every three years. These reviews will assess compliance and risk management practices, reinforcing supervisory convergence.

ESMA will also gain new tools to address barriers to passporting and marketing. Where national regulators create obstacles, ESMA can mediate disputes and, as a last resort, suspend cross-border activities.

Management Companies

The package introduces a more uniform approach to authorisations and ongoing compliance for fund managers. ESMA will develop technical standards for authorisations, reducing the scope for divergent national practices. This means firms can expect more predictable and consistent approval and passporting processes across the EU.

Another key change is the alignment of UCITS rules with AIFMD requirements on material changes. UCITS managers will now need to notify regulators in advance of significant operational or structural changes, ensuring greater transparency and supervisory oversight.

Depositary Passport

The package also creates an EU-wide depositary passport, allowing UCITS and AIFs to appoint a depositary in any Member State, provided it is a CRD-authorised credit institution or MiFID investment firm.

Next Steps

The full suite of proposals must now be negotiated and approved by the European Parliament and the Council. The components are interconnected and together represent a cohesive set of reforms essential for establishing a genuine single market, so maintaining the unity of the package is deemed crucial. The Commission has committed to collaborating with the European Parliament, Member States, and other stakeholders to ensure the swift and effective implementation of these measures.

Conclusion

The MIP marks a decisive step toward a more integrated and competitive European asset management market. By harmonising rules, streamlining processes, and enhancing ESMA’s role, the proposals aim to reduce complexity and increase investor confidence. For fund managers, the changes should provide greater clarity and efficiency but may also bring enhanced scrutiny and compliance obligations. While the legislative process will take time, firms should plan to review their governance, delegation, and marketing arrangements in 2026 to help them prepare for the new regime.