On 4 December, the European Commission released the Market Integration & Supervision package (MISP) under the Savings & Investments Union (SIU). The Commission describes it as “a comprehensive package of measures designed to remove barriers and unlock the full potential of the EU single market for financial services.” The MISP comprises 2 Regulations and 1 Directive that together amend 19 existing pieces of EU legislation.

1. One of the Regulations proposes to transform the Settlement Finality Directive (SFD) and the Financial Collateral Directive (FCD) into regulations.
2. The second, more prominent Regulation touches on a variety of files, including the ESMA Regulation, EMIR, MiFIR, CSDR, SFTR, CBDFR, CCPR, DLT Pilot Regime, MiCA, Securitisation Regulation, Credit Ratings Agencies Regulation, ESG Ratings Regulation, EU Green Bonds Regulation and Benchmarks Regulation.
3. The proposed Directive amends the UCITS Directive, the AIFMD, and MiFID. The CBDF is also subject to amendments but that is not contained here in the proposed Directive but instead as part of the other proposal as it’s a Regulation.

The MISP revisits the recently updated AIFMD and UCITS Directive, moving provisions previously added to those directives by the CBDF Directive to a proposed revised CBDF Regulation, and revisiting some of the new delegation disclosure and supervision requirements.

Passporting & Cross-Border Operations:

As regards passporting, marketing, pre-marketing and notification requirements, a new “passporting upon authorisation” regime would grant UCITS and AIFs (through their AIFMs) immediate EU single market access to their chosen Member States upon authorisation. The MISP removes the host Member State notification requirements, inserting a new process putting the onus on the home Member State NCA, which has to share marketing documentation with the host Member State NCA and through a new ESMA documentation platform, described as a “one-stop-shop.”

Delegation:

The AIFMD and UCITS Directives are also proposed to be amended to introduce the concept of an EU group of management companies or AIFMs, which shall include authorised management companies, AIFMs, credit institutions and investment firms. This amendment also clarifies that where an AIFM or UCITS management company rely on other EU entities within their EU group to carry out their activities, such arrangements would not qualify as a delegation and would not be subject to the requirements on the delegation of functions, other than the requirement to inform the home Member State NCA of the AIFM or UCITS management company that functions or services are performed by other entities within the EU group.

This development comes after the AIFMD review concluded that the delegation model should be maintained and that extra substance and reporting requirements be imposed on funds/fund managers. The European Commission has stated that their proposed changes here are intended to simplify operations and are not intended to draw a distinction between intra-EU and 3^rd country delegation.

Supervision:

Changes to the existing supervisory models are regarded as the most substantive and controversial elements of the MISP. Under the MISP, ESMA would become the direct supervisor for the most "significant" cross-border market infrastructures (i.e., central counterparties (“CCPs”), CSDs, trading venues) and CASPs, with specific thresholds outlined in relevant sectoral legislation. As regards asset managers, ESMA would play a role in fostering supervisory convergence. A strict reading of the MISP would indicate that ESMA could become the de facto supervisor of funds/fund managers if it were adopted as currently drafted.

Significantly, the AIFMD and the UCITS Directives are proposed to be further amended to empower ESMA to identify and pursue actions to address diverging, duplicative, redundant and deficient supervisory actions hindering the operations of asset managers and depositaries pursuing their activity on a cross-border basis or providing services on a cross-border basis. Under this new approach, ESMA would have the power to intervene when it deems that NCAs do not effectively apply EU rules. ESMA could also directly suspend the cross-border activities of an asset manager or depositary in certain cases. Empowering ESMA with these abilities is expected to be sensitive for Member States and negotiations are expected to be difficult here.

Large groups of asset managers (i.e., those with assets under management of €300 billion or more and with operations in more than one Member State) would be subject to “enhanced supervision” including a detailed annual review, among other measures.

Digital Assets:

The MISP contains significant proposals impacting the distributed ledger technology (“DLT”) ecosystem, including key upgrades to the EU DLT Pilot Regime; a single EU regulator for crypto asset service providers (“CASPs”); revisions to Central Securities Depositaries (“CSDs”) rules to allow provision of CSD services using DLT.

Institutional Negotiation Dynamics:

Negotiations both in Council between Member States and in the European Parliament are expected to be very contentious and time-consuming given the inherently sensitive nature of reducing the power of national regulators and empowering ESMA with the ability to overrule them. The Cypriot Presidency of the Council (which took over on 1 January 2026) has stated their aim of having a first reading on all elements of the MISP within their 6-month Presidency while the European Parliament has identified early 2027 as a possible timeframe for finalizing their internal position. As a result, end-2027 is seen as a possible timeframe for finalizing negotiations overall.

Please contact Danny O'Connell with any questions regarding these requirements.

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  Jennifer Wood

  Managing Director, Global Head of Asset Management Regulation & Sound Practices

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  Danny O'Connell

  Director, EU and International Regulatory and Tax Policy

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  Adam Jacobs-Dean

  Managing Director, Global Head of Markets, Governance and Innovation